FEEDBACK TUTORIAL LETTER 
 
 
1st  SEMESTER 2018 
 
 
TEST 1 MEMO 
 
SUPPLY CHAIN MANAGEMENT 
SCM711S 
 
 
 
 
 

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 Centre for Open and Lifelong Learning (COLL)

Course Name: Supply Chain Management

Course Code: SCM711S
Type of Assessment: Test 1 Memorandum
Test Date: 18 April 2018

Total Marks: 50
Duration: 2 Hours
Marker/Tutor: Ms Ester Kalipi

Instructions:

 Answer all 3 (three) questions clearly.

 Questions must be numbered correctly.

 Questions must be answered in a separate answer sheet.

 This test paper consist of section A and B

 This test paper consists of 4 pages including the cover page.

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SECTION A (MULTIPLE CHOICE & TRUE/FALSE QUESTIONS) (15 Marks)

Question 1.1 – 1.5 consist of multiple choice questions, while question 1.6 consist of
True/False questions.

Question 1

Write the number and the corresponding letter of the correct answer, e.g. 1.1. a. Each
questions allocated 2 marks. (2x5 = 10 Marks)

1.1. ____ refers to the raw materials, component parts, and supplies bought from outside
organizations to support a company’s operations.
a) Inbound logistics
b) Procurement
c) Materials management
d) Supply management
e) None of the above
1.2. Procurement’s historical focus in many organizations was to ____.
a) incur minimal supply disruptions
b) use a limited number of suppliers
c) minimize loss and damage
d) achieve the lowest possible cost
1.3. Procurement and ____ are viewed as synonymous terms.
a) materials management
b) supply management
c) purchasing
d) inbound logistics
1.4. Which of the following is not a potential procurement objective?
a) supporting organizational goals and objectives
b) managing the supply base
c) developing strong relationships with other functional groups
d) supporting operational requirements
e) all are potential procurement objectives
1.5. ____ Materials refer to stock that exceeds the reasonable requirements of an
organization.
a) Waste
b) Obsolete
c) Scrap
d) Excess

1.6. State whether the following statements are true or false:

Write the letter and the answer e.g. a. True. Each statement has 1 Mark. (1x5 = Marks)
a) Scrap materials are no longer serviceable, have been discarded, or are a by-product of
the production process. (True)

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 b) Obsolete materials have no economic value. (False)
c) The major factors influencing locational decisions are markets and resource
availability. (True)
d) Inventories are stocks of goods and materials that are maintained for many purposes.
(True)
e) Inventory carries its greatest costs after value has been added through manufacturing
and processing. (True)
Sub-total: 15 Marks
SECTION B (STRUCTURED QUESTIONS) (35 Marks)
Question 2
2.1. What is purchasing? What is its relevance to logistics? 5 Marks
Purchasing refers to the raw materials, component parts, and supplies bought from outside
organizations to support a company’s operations.
Purchasing is the acquisition of material of the right quality, in the right quantity, from the
right source, delivered to the right place at the right time.
It is closely related to logistics since acquired goods and services must be entered into the
supply chain in the exact quantities and at the precise time they are needed.
2.2. Discuss 5 potential purchasing objectives. 5 Marks
The text provides five potential procurement objectives that could be discussed. They are
supporting organizational goals and objectives; managing the purchasing process effectively
and efficiently; managing the supply base; developing strong relationships with other
functional groups; supporting operational requirements.
2.3. Discuss five stages of the purchasing process/cycle. 10 Marks

 Stage one: Recognition of need

This stage is the identification and recognition that the organization needs a product and a
purchase is required to fulfil the need. This stage answers to what is needed, when needed,
how much need, when delivery should be made, who will pay and how often it is needed.

 Stage two: Defining the specification

This stage requires documenting and generating a formal technical document detailing issues
such as the design, technical and quality standards, a bill of quantities and or an inventory of
components and materials.

 Stage three: Make or buy decision

This stage involves assessing whether it is economically prudent to fulfil the need internally
i.e. make or to fulfil through external suppliers i.e. buy.

 Stage four: Identification of sources of supply

This stage requires scanning the supply market in order to identify potentially suitable and
competent sources of supply that can meet the acceptance criteria of the specified
requirements. The following activities must take place in this stage:
a) Selection of suppliers
 Supplier survey

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  Supplier investigation and assessment
 Supplier choice
b) Awarding the contract
c) Expediting
d) Receipt and payment

 Stage five: Establishing relationship with a supplier

This stage requires developing and maintaining a win-win relationship with the suppliers,
leading to collaboration in further joint improvement efforts.
Sub-total: 20 Marks
Question 3
3.1. Distinguish among cycle, safety and Seasonal Stock. 6 Marks
Cycle (base) stock refers to inventory that is needed to satisfy normal demand during the
course of an order cycle.
Safety (buffer) stock refers to inventory that is held in addition to cycle stock to guard against
uncertainty in demand and/or lead time.
Seasonal inventory – Stock herd to cater for predictable variability in demand.
3.2. List five value-added activities that can be performed by warehouses and distribution
centers. 5 Marks
These value-added activities include:
 assembly,
 custom labeling,
 light manufacturing,
 product testing,
 repackaging, and
 Reverse logistics considerations
3.3. Mention four components of the Supply chain facilities? 4 Marks
 Location
 Capacity
 Operations processing methodology
 Warehousing methodology
Sub-Total: 15 Marks
Total: 50 Marks