Test Bank for Purchasing and Supply Chain Management, 7th Edition, Robert M.

Monczka, Robert

Test Bank for Purchasing and Supply Chain

Management, 7th Edition, Robert M. Monczka, Robert
B. Handfield, Larry C. Giunipero James L. Patterson

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Chapter 7: Supplier Evaluation and Selection

True / False

1. Most purchasing experts will agree that there is only one best way to evaluate and select suppliers.
a. True
b. False
ANSWER: False

2. The degree of effort associated with supplier selection is inversely related to the importance of the required good or
service.
a. True
b. False
ANSWER: False

3. Progressive purchasing groups increasingly anticipate rather than react to supplier selection needs.
a. True
b. False
ANSWER: True

4. The complexity and value of a required purchase does not influence the extent to which a buyer evaluates potential
supply sources.
a. True
b. False
ANSWER: False

5. A major source of information on potential supply sources comes from current or existing suppliers.
a. True
b. False
ANSWER: True

6. Using existing suppliers, because it is easier and quicker, is always the best long-term approach.
a. True
b. False
ANSWER: False

7. Designation as a preferred supplier means that a supplier consistently satisfies the performance and service standards
defined by the buyer and responds to unexpected changes.
a. True
b. False
ANSWER: True

8. Databases allow the purchaser to quickly identify suppliers potentially qualified to support a requirement and may
contain information on current products, the supplier’s future technology roadmap, process capability ratios, and past
performance.
a. True
b. False
ANSWER: True
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Chapter 7: Supplier Evaluation and Selection

9. One argument against rotating buyers too frequently between product lines or types of purchases is that a buyer may
lose the expertise built up over the years.
a. True
b. False
ANSWER: True

10. Suppliers seldom use trade journals to advertise their products or services.
a. True
b. False
ANSWER: False

11. Trade shows are seldom an ineffective way to gain exposure to a large number of suppliers at one time.
a. True
b. False
ANSWER: False

12. Today, buyers seldom use the Internet to help locate potential sources that might qualify for further evaluation.
a. True
b. False
ANSWER: False

13. The popularity of JIT and quick replenishment systems favor using fewer local suppliers.
a. True
b. False
ANSWER: False

14. Supplier size does become a factor when one firm decides to leverage its purchases from one or a few suppliers.
a. True
b. False
ANSWER: True

15. A buying firm frequently wants the seller to become more dependent on its business.
a. True
b. False
ANSWER: False

16. Traditionally, purchasing from competitors would limit information sharing between the parties.
a. True
b. False
ANSWER: True

17. Supply departments that are building diversity into their supply base will often deal with a decreased number of small
suppliers.
a. True

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Chapter 7: Supplier Evaluation and Selection

b. False
ANSWER: False

18. Local suppliers are less responsive to the buying firm’s changing needs and cannot economically make frequent
smaller deliveries.
a. True
b. False
ANSWER: False

19. Many purchasers prefer to focus on suppliers who have the “capability to do the job” regardless of size.
a. True
b. False
ANSWER: True

20. Purchasers always want to select suppliers who are profitable and growing.
a. True
b. False
ANSWER: True

21. Certain suppliers who may present the lowest cost seldom present greater risks.
a. True
b. False
ANSWER: False

22. Traditional purchasers understand the risk/reward tradeoff and are prepared to manage it better to attain overall lower
costs.
a. True
b. False
ANSWER: False

23. An in-depth evaluation of all potential supply sources should be conducted for every purchase.
a. True
b. False
ANSWER: False

24. Purchasers often perform a first cut or preliminary evaluation of potential suppliers to narrow the list before
conducting an in-depth formal evaluation.
a. True
b. False
ANSWER: True

25. Most purchasers fail to perform at least a cursory financial analysis of prospective suppliers.
a. True
b. False
ANSWER: False
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Chapter 7: Supplier Evaluation and Selection

26. Before committing time to evaluate a supplier further, suppliers should satisfy certain entry qualifiers.
a. True
b. False
ANSWER: True

27. Although many sources exist to discover information about a potential supplier, visiting the actual facility provides the
most complete way to ensure an accurate assessment of the supplier.
a. True
b. False
ANSWER: True

28. Supplier site visits are relatively inexpensive and require minimal buyer time in travel and information collection.
a. True
b. False
ANSWER: False

29. Using third-party information can be a timely and effective way to gain insight into potential suppliers.
a. True
b. False
ANSWER: True

30. The selection criteria used in a high-technology purchase will be the same as those used for a distributor.
a. True
b. False
ANSWER: False

31. Many suppliers do not have a sophisticated cost accounting system and are unable to assign overhead costs to products
or processes.
a. True
b. False
ANSWER: True

32. As some suppliers view cost data as highly proprietary, buyers will often develop reverse pricing models that provide
estimates of the supplier’s cost structure during the initial supplier evaluation.
a. True
b. False
ANSWER: True

33. Few purchasers expect potential suppliers to have adopted quality systems based on ISO 9000 criteria.
a. True
b. False
ANSWER: False

34. The supplier’s selection of a production process does little to define its required technology, human resource skills,
and capital equipment requirements.
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Chapter 7: Supplier Evaluation and Selection

a. True
b. False
ANSWER: False

35. Sustainable carbon footprint reductions should be measured at product suppliers but not at service suppliers.
a. True
b. False
ANSWER: False

36. Professional purchasers should become familiar with financial ratios because they can provide quick and valuable
insights into a supplier’s financial health.
a. True
b. False
ANSWER: True

37. A supplier’s willingness to move beyond a traditional purchasing relationship should be part of the evaluation process
for items and services where a longer-term relationship might be beneficial.
a. True
b. False
ANSWER: True

38. The format of a supplier evaluation should not provide any flexibility across different types of purchase requirements.
a. True
b. False
ANSWER: False

39. A well-defined supplier evaluation scoring system takes criteria that may be highly subjective and develops a
quantitative scale for measurement.
a. True
b. False
ANSWER: True

40. Purchasers should set minimum acceptable performance requirements for a supplier to meet before they become part
of the supply base.
a. True
b. False
ANSWER: True

41. Most purchase contracts address areas that are similar.

a. True
b. False
ANSWER: True

42. Progressive supply managers work with their legal group to develop preestablished contract language that can be cut
and pasted during a supplier negotiation.

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Chapter 7: Supplier Evaluation and Selection

a. True
b. False
ANSWER: True

43. Progressive firms are working to increase the length of their purchase contracts.
a. True
b. False
ANSWER: False

Multiple Choice

44. Which of the following is not a commonly accepted source of information regarding potential supply sources?
a. Trade journals.
b. Sales representatives.
c. Television advertising.
d. Informational databases.
e. Internet searches and social media.
ANSWER: c

45. Which of the following information is not generally maintained in a supplier informational database?
a. Current products.
b. Supplier’s future technology roadmap.
c. Process capability ratios.
d. Advertising campaign information.
e. Past performance.
ANSWER: d

46. The _____ buys from the OEM and resells, therefore incurring a transaction cost, and it must make a profit.
a. vendor
b. customer
c. preferred supplier
d. single source supplier
e. distributor
ANSWER: e

47. _____ is a program that distributors market to manage their customers’ inventory for them.
a. Just-in-time
b. Supplier managed inventory
c. Self-managed inventory
d. Countertrade
e. Preferred supplier inventory
ANSWER: b

48. Which of the following is not one of the criteria used to determine whether to buy direct vs. using a distributor?
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Chapter 7: Supplier Evaluation and Selection

a. Size of the purchase.

b. Manufacturer’s policies regarding direct sales.
c. Storage space available at the purchaser’s facility.
d. Distance between the manufacturer and the distributor.
e. Extent of services required.
ANSWER: d

49. _____ are more responsive to the buying firm’s changing needs and can economically make frequent smaller
deliveries.
a. Local suppliers
b. International suppliers
c. Global suppliers
d. National suppliers
e. There is no relationship with the location of the supplier and customer responsiveness.
ANSWER: a

50. Although _____ provides optimum leverage and power over the supplier, _____ provides improved assurance of
supply.
a. multiple sourcing….single sourcing
b. single sourcing….multiple sourcing
c. sole sourcing….single sourcing
d. multiple sourcing….sole sourcing
e. There is no difference in the number of suppliers for these benefits.
ANSWER: b

51. A _____ is one that consistently satisfies the performance and service standards defined by the buyer and responds to
unexpected changes.
a. certified supplier
b. sole source supplier
c. partnered supplier
d. preferred supplier
e. disqualified supplier.
ANSWER: d

52. A _____ has had its quality systems extensively audited by the buying firm and are capable of consistently meeting or
exceeding the buyer’s quality needs.
a. certified supplier
b. disqualified supplier
c. single source supplier
d. partnered supplier
e. None of these answers.
ANSWER: a

53. A _____ is limited to a select group of suppliers who provide critical high value items to the firm.
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Chapter 7: Supplier Evaluation and Selection

a. disqualified supplier
b. sole source supplier
c. preferred supplier
d. single source supplier
e. partnered supplier
ANSWER: e

54. A _____ is a supplier who no longer meets the buying organization’s standards and will not be considered for future
business until its problems are corrected.
a. preferred supplier
b. disqualified supplier
c. certified supplier
d. single source supplier
e. sole source supplier
ANSWER: b

55. _____ is the process of identifying potential negative events, assessing the likelihood of their occurrence, heading off
these events before they occur or reducing the probability that they will occur, and making contingency plans to mitigate
the consequences if they do occur.
a. Supplier selection
b. Supplier evaluation
c. Supplier categorization
d. Global sourcing
e. Risk management
ANSWER: e

56. _____ is defined as the continual monitoring of the strength of suppliers’ financial condition to ensure their ability to
meet the purchaser’s performance requirements for products or services.
a. Operational risk management
b. Sole sourcing
c. Financial risk management
d. Multiple sourcing
e. None of these answers.
ANSWER: c

57. _____ focuses on the continued ability of the supplier’s human, intellectual, and physical capital to meet the buying
firm’s requirements with respect to quality and delivery.
a. Operational risk management
b. Global sourcing
c. Logistics risk management
d. Total quality management
e. Financial risk management
ANSWER: a

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Chapter 7: Supplier Evaluation and Selection

58. A/An _____ involves sending a preliminary survey to suppliers.
a. request for quotation
b. request for information
c. purchase order
d. order release
e. All of these answers.
ANSWER: b

59. A/An _____ is a basic component that suppliers must possess before they proceed to the next phase of the evaluation
and selection process.
a. core competency
b. technology roadmap
c. Internet website
d. entry qualifier
e. triple bottom line
ANSWER: d

60. All of the following are examples of entry qualifiers that suppliers must possess before they proceed to the next phase
of the evaluation and selection process except _____.
a. appropriate sales and marketing activities
b. financial strength
c. proven manufacturing or service capability
d. capable and supportive management
e. adequate facilities
ANSWER: a

61. Which of the following is not an example of questions that should be asked when evaluating a supplier’s management
capability?
a. Has management committed the supplier to TQM and continuous improvement?
b. Does management promote a customer-focused philosophy?
c. What is the willingness of employees to contribute to improved operations?
d. Does management put a priority on supply chain management?
e. What is the history of labor/management relations?
ANSWER: c

62. Which of the following is not an example of points that should be considered when evaluating a supplier’s employee
capabilities?
a. The degree to which employees are committed to quality and continuous improvement.
b. The overall skills and abilities of the workforce.
c. Employee morale.
d. Workforce turnover.
e. Disclosure of environmental infractions.
ANSWER: e

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Chapter 7: Supplier Evaluation and Selection

63. All of the following are examples of commonly used environmental performance criteria except _____.
a. disclosure of any environmental infractions
b. attainment of ISO 9000 certification
c. existence of formal hazardous and toxic waste reduction programs
d. programs to control or eliminate ozone-depleting substances
e. attainment of ISO 14000 certification
ANSWER: b

64. Which of the following is not a risk of selecting a supplier in poor financial condition?
a. The supplier is unwilling to share its technical expertise with the purchaser.
b. The supplier will go out of business.
c. The supplier may not have the resources to invest in plant, equipment, or research that is necessary for longer-
term technological or other performance improvements.
d. The supplier may become too financially dependent on the purchaser.
e. Financial weakness is usually an indication of other underlying problems.
ANSWER: a

65. Which of the following key financial ratios is calculated as Current assets/Current liabilities?
a. Inventory turnover.
b. Debt to equity.
c. Current ratio.
d. Total asset turnover.
e. Quick ratio.
ANSWER: c

66. Which of the following key financial ratios is calculated as Profit after taxes/Sales?
a. Current debt to equity.
b. Fixed asset turnover.
c. Return on assets.
d. Days sales outstanding.
e. Net profit margin.
ANSWER: e

67. Which of the following key financial ratios is calculated as Sales/Total assets?
a. Fixed asset turnover.
b. Total asset turnover.
c. Current ratio.
d. Return on assets.
e. Interest coverage.
ANSWER: b

68. Which of the following is not an example of a question that should be asked when evaluating a supplier’s production
scheduling and control systems?
a. Does the supplier use a requirements planning system as part of an ERP system to ensure the availability of
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Chapter 7: Supplier Evaluation and Selection

required components or meet service requests on a timely basis?

b. What lead time does the supplier’s production scheduling and control system require?
c. What is the supplier’s on-time delivery performance history?
d. Does the supplier’s scheduling system support a purchaser’s delivery requirements?
e. What safeguards are in place to protect the confidentiality of electronic transfers?
ANSWER: e

69. All of the following are examples of questions that should be asked when evaluating a supplier for longer-term
relationship potential except _____.
a. Has the supplier indicated a willingness or commitment to a longer-term relationship?
b. Will the supplier engage in joint problem solving and improvement efforts?
c. What is the supplier’s on-time delivery performance?
d. Is the supplier willing to come to us first with innovations?
e. Is the corporate culture similar between the two parties?
ANSWER: c

70. All of the following are characteristics of an effective quantitative supplier evaluation survey except _____.
a. the survey should include the performance categories considered important to the evaluation and selection
process
b. the survey process should be as objective as possible
c. it is mathematically straightforward
d. the buyer should attempt to measure every possible variable every time it is used
e. the format of the evaluation should provide some flexibility across different types of purchase requirements
ANSWER: d

71. A/An _____ is a discrepancy, nonconformance, or missing requirement that will have a significant negative impact on
an important area of concern in an audit statement.
a. deficiency
b. performance problem
c. entry qualifier
d. unacceptable outcome
e. challenge
ANSWER: b

72. A/An _____ is a minor departure from an intended level of performance, or a nonconformance that is easily resolved
and does not materially affect the required output.
a. discrepancy
b. problem
c. defect
d. unacceptable outcome
e. deficiency
ANSWER: e

73. _____ involves the identification of the steps, activities, time, and costs involved in a process.
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Test Bank for Purchasing and Supply Chain Management, 7th Edition, Robert M. Monczka, Robert

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Chapter 7: Supplier Evaluation and Selection

a. Data warehousing
b. Co-location
c. Process mapping
d. Supply base optimization
e. TQM
ANSWER: c

74. A _____ is responsible for understanding in depth entire families or groups of purchased goods and services.
a. third party
b. general buyer
c. preferred supplier
d. long-term buyer-supplier relationship
e. commodity team
ANSWER: e

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