Test Bank Chapter 6: Procurement Multiple Choice Questions (Correct Answers Are Bolded)

TEST BANK
CHAPTER 6: PROCUREMENT
Multiple Choice Questions (correct answers are bolded)
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
[LO 6.1: To compare procurement, purchasing, and supply management; Moderate; Concept;
AACSB Category 3: Analytical thinking]
2. Procurement costs often range between ___________ and ___________ percent of an

organization’s revenues.
a. 60; 80
b. 50; 70
c. 40; 60
d. 30; 50
[LO 6.1: To compare procurement, purchasing, and supply management; Moderate;

Application; AACSB Category 3: Analytical thinking]
3. 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
[LO 6.1: To compare procurement, purchasing, and supply management; Moderate; Synthesis;
4. Procurement and ___________ are viewed as synonymous terms.
a. materials management
b. supply management
c. purchasing
d. inbound logistics
1
Copyright © 2018 Pearson Education, Inc.
[LO 6.1: To compare procurement, purchasing, and supply management; Easy; Concept;
5. ___________ involves an increased focus on identifying and using data internally and across a
supply chain so that a company can consolidate its purchasing power for enhanced value.
a. Supply management
b. Strategic sourcing
c. Supply chain management
d. Procurement
6. Which of the following is not a potential benefit associated with procurement cards (p-cards)?
a. There is a reduced number of invoices.

b. Users can make purchases in a more timely fashion.
c. Suppliers can be paid in a more timely fashion.
d. They can be used in non-domestic markets.
[LO 6.1: To compare procurement, purchasing, and supply management; Difficult; Synthesis;
7. Which of the following is not a potential procurement objective?
a. minimizing procurement costs

b. supporting organizational goals and objectives
c. managing the supply base
d. supporting operational requirements
[LO 6.2: To review procurement objectives; Moderate; Synthesis; AACSB Category 3:

Analytical thinking]
8. A focus on satisfying internal customers is associated with which procurement objective?
a. managing the supply base

b. supporting operational requirements
c. supporting organizational goals and objectives
d. managing the purchasing process effectively and efficiently

9. The selection, development, and maintenance of supply sources is associated with which
procurement objective?
2
a. managing the purchasing process effectively and efficiently
b. supporting operational requirements
c. developing relationships with other functional groups
d. managing the supply base

10. Buying the right products, at the right price, from the right source, at the right specifications,
in the right quantity, and for delivery at the right time to the right internal customer is associated
with what procurement objective?
a. managing the supply base

b. managing the purchasing process effectively and efficiently
c. supporting operational requirements
d. supporting organizational goals and objectives

11. What is the first step in supplier selection and evaluation?
a. Prepare a request for proposal.

b. Prepare a procurement budget.
c. Identify possible suppliers.
d. Identify the need for supply.
[LO 6.3: To review supplier selection and evaluation approaches; Moderate; Application;
12. With respect to the supplier selection and evaluation process, ___________ looks at both the
internal and external environment within which the supply decision is to be made.
a. Identify the need for supply.

b. Identify suppliers.
c. Perform a situation analysis.
d. Evaluate suppliers.
13. What is the final step in the supplier selection and evaluation process?
a. Provide feedback.
b. Select suppliers.
3
c. Implement the decision.
d. Evaluate the decision.
14. Multiple sourcing uses more than one supplier in hopes of increased competition, improved
market intelligence, and ___________.
a. greater supply risk mitigation

b. lower costs per unit
c. increased cooperation
d. increased communication
15. Single sourcing consolidates purchase volume with a single supplier in hopes of increasing
cooperation and communication in the supply relationship as well as ___________.
a. greater supply risk mitigation

b. increased amounts of competition
c. improved market intelligence
d. lower costs per unit
16. Which of the following statements is false?
a. Supplier selection and evaluation generally involves multiple criteria.

b. The evolution of business practices and philosophies may require new supplier
selection criteria.
c. Selecting suppliers is the final step of the supplier selection and evaluation
process.
d. Some supplier selection criteria may be contradictory.
[LO 6.3: To review supplier selection and evaluation approaches; Difficult; Synthesis; AACSB
Category 3: Analytical thinking]
17. Which of the following would not be part of a supplier audit?
a. supplier’s structure
b. supplier’s resources
c. supplier’s scorecard
d. supplier’s financial and risk health
4
18. Kraljic’s Portfolio Matrix ___________.
a. provides a framework for evaluating warehousing decisions

b. is used by many managers to classify corporate purchases in terms of their
importance and supply complexity
c. allows managers to evaluate whether to add, or not add, product lines
d. is synonymous with the total cost of ownership
[LO 6.4: To review Kraljic’s Portfolio Matrix; Moderate; Concept; AACSB Category 3:
19. Bottleneck, leverage, and strategic are categories associated with ___________.
a. Kraljic’s Portfolio Matrix

b. Supplier Audit Matrix
c. Supplier Development Matrix
d. Global Procurement Matrix
[LO 6.4: To review Kraljic’s Portfolio Matrix; Moderate; Application; AACSB Category 3:
20. A degree of aggressive procurement involvement not normally encountered in supplier

selection refers to ___________.
a. supply management
b. supplier development
c. materials management
d. physical supply
21. Supplier development is synonymous with ___________.
a. supplier selection and evaluation

b. procurement
c. materials management
d. reverse marketing
5
22. Which of the following is not a reason that purchasers are adopting a more proactive and
aggressive role in the procurement process?
a. There are myriad inefficiencies associated with suppliers initiating marketing efforts
toward purchasers.
b. They are achieving a competitive advantage in the supply chain.
c. An excess number of suppliers currently exists.
d. Purchasers may be aware of important benefits that are not known to the supplier.
[LO 6.4: To review Kraljic’s Portfolio Matrix; Difficult; Synthesis; AACSB Category 3:
23. Which of the following is false?
a. In the factor-input strategy, an organization is seeking low-cost or high-quality sources

of supply.
b. Global procurement refers to buying components and inputs anywhere in the world.
c. Planning is the first step in global procurement.
d. A market access strategy emphasizes procurement from geographically close
countries.
[LO 6.5: To establish issues associated with global procurement; Difficult; Synthesis; AACSB
24. What is the first step in a global sourcing development model?
a. planning
b. specification
c. situation analysis
d. problem recognition
[LO 6.5: To establish issues associated with global procurement; Moderate; Application;
25. ___________ is often a major shortcoming of many global procurement plans.
a. Confiscation
b. Specification
c. Implementation
d. Evaluation
26. What concept refers to when firms consider all the costs that can be assigned to the
acquisition, use, and maintenance of a purchase?
6
a. activity-based costing
b. cost trade-offs
c. the systems approach
d. total cost of ownership
[LO 6.5: To establish issues associated with global procurement; Easy; Application; AACSB
27. Procuring products from suppliers close to one’s own facilities refers to ___________.
a. agglomeration
b. near-sourcing
c. sustainability
d. outsourcing
[LO 6.5: To establish issues associated with global procurement; Easy; Application; AACSB
28. Which of the following is not a dimension associated with socially responsible procurement?
a. profit
b. safety
c. the environment
d. human rights
[LO 6.6: To identify social and environmental aspects of sustainable procurement; Moderate;
Synthesis; AACSB Category 3: Analytical thinking]
29. With respect to gift giving and gift receiving, a ___________ refers to money paid before an
exchange.
a. kickback
b. agglomeration
c. bribe
d. dovetailing
[LO 6.6: To identify social and environmental aspects of sustainable procurement; Easy;
Concept; AACSB Category 3: Analytical thinking]
30. With respect to gift giving and gift receiving, a ___________ refers to money paid after an
exchange.
a. kickback
b. agglomeration
c. bribe
7
d. dovetailing
31. ___________ identifies opportunities to recover revenues or reduce costs associated with
scrap, surplus, obsolete, and waste materials.
a. Recycling
b. Reuse
c. Reverse logistics
d. Investment recovery
32. ___________ materials refer to stock that exceeds the reasonable requirements of an
organization.
a. Waste
b. Excess
c. Obsolete
d. Scrap
33. ___________ materials are no longer serviceable, have been discarded, or are a by-product
of the production process.
a. Waste
b. Obsolete
c. Scrap
d. Excess
34. ___________ materials have no economic value.
a. Waste
b. Scrap
c. Obsolete
d. Excess
8
35. ___________ refers to a set of technology and finance-based processes that strive to optimize
cash flow by allowing businesses to extend their payment terms to their suppliers while
simultaneously allowing their suppliers to get paid early.
a. Cash flow management

b. Supply chain finance
c. Flexible payment system
d. Supplier credit float
[LO 6.7: To describe the concept of supply chain finance and how it can be used in procurement
relationships; Moderate; Concept; AACSB Category 3: Analytical thinking]
True-False Questions
1. Procurement refers to the raw materials, component parts, and supplies bought from outside
organizations to support a company’s operations. (True)
2. Procurement’s costs often range between 40 and 60 percent of an organization’s revenues.

(False)

3. Procurement’s historical focus in many organizations was to minimize the total number of
outside suppliers. (False)
4. A contemporary procurement manager might have responsibility for reducing cycle times
and for generating additional revenues by collaborating with the marketing department.
(True)
5. Procurement and purchasing are viewed as synonymous terms. (True)
9
6. Supply chain management refers to a relational exchange approach involving a limited
number of suppliers. (False)
7. Strategic sourcing involves an increased focus on identifying and using data internally and
across the supply chain so that a company can consolidate its purchasing power for enhanced
value. (True)
8. One benefit to procurement cards is that they are easily used outside of their domestic
market. (False)
9. First and foremost, procurement’s objectives must manage the purchasing process effectively
and efficiently. (False)

10. One of procurement’s most important responsibilities involves supplier selection and
evaluation. (True)
[LO 6.3: To review supplier selection and evaluation approaches; Easy; Application; AACSB
11. The first step in supplier selection and evaluation is situation analysis. (False)
[LO 6.3: To review supplier selection and evaluation approaches; Moderate; Synthesis; AACSB
12. A benefit to multiple sourcing is increased cooperation and communication in a supply

relationship. (False)
13. Single sourcing consolidates purchase volume with a single supplier with the hopes of
enjoying lower costs per unit. (True)
10
[LO 6.3: To review supplier selection and evaluation approaches; Easy; Application; AACSB
14. The final step of the supplier selection process is to evaluate the decision. (True)
[LO 6.3: To review supplier selection and evaluation approaches; Easy; Synthesis; AACSB
15. Supplier scorecards involve assessments of a supplier’s structure, resources, technology,

health, and responsibility. (False)
[LO 6.3: To review supplier selection and evaluation approaches; Moderate; Concept; AACSB
16. Supplier scorecards can be categorical, weighted point, or cost based in nature. (True)
17. Supplier selection and evaluation generally involve multiple criteria, and these criteria can
vary in both number and importance, depending on the particular situation. (True)
[LO 6.3: To review supplier selection and evaluation approaches; Moderate; Synthesis; AACSB
18. The Optimal Cost Reliability Model is used by many managers to classify corporate
purchases in terms of their importance and supply complexity. (False)
[LO 6.4 To review Kraljic’s Portfolio Matrix; Moderate; Concept; AACSB Category 3:
19. Bottleneck refers to the low importance, low complexity category of Kraljic’s Portfolio
Matrix. (False)
[LO 6.4 To review Kraljic’s Portfolio Matrix; Moderate; Application; AACSB Category 3:
20. Leverage refers to the high importance, low complexity category of Kraljic’s Portfolio
Matrix. (True)
21. Supply management refers to a degree of aggressive procurement not normally encountered
in supplier selection. (False)
11
[LO 6.4 To review Kraljic’s Portfolio Matrix; Moderate; Concept; AACSB Category 3:
22. Supplier development is synonymous with reverse marketing. (True)
[LO 6.4 To review Kraljic’s Portfolio Matrix; Easy; Concept; AACSB Category 3: Analytical
thinking]
23. One reason for the growth of the supplier development concept is that achieving competitive
advantage in the supply chain is predicated on purchasers adopting a more aggressive
approach. (True)
24. Global procurement refers to buying components and inputs anywhere in the world. (True)
[LO 6.5: To establish issues associated with global procurement; Easy; Concept; AACSB
25. Global procurement is primarily driven by the input-output and market-access strategies.
(False)
26. Problem recognition is the first step in global procurement. (False)
[LO 6.5: To establish issues associated with global procurement; Moderate; Synthesis; AACSB
27. Because global sourcing increases the distance that components and inputs must be moved,
managers must consider the trade-off between transportation and holding costs. (True)
28. Implementation is often a major shortcoming of many global procurement plans. (True)
[LO 6.5: To establish issues associated with global procurement; Moderate; Synthesis; AACSB
29. When taking an activity-based costing approach, firms consider all the costs that can be
assigned to the acquisition, use, and maintenance of a purchase. (False)
[LO 6.5: To establish issues associated with global procurement; Moderate; Concept; AACSB
12
30. Dovetailing refers to procuring products from suppliers closer to one’s own facilities. (False)
[LO 6.5: To establish issues associated with global procurement; Moderate; Concept; AACSB
31. Sustainable procurement refers to the integration of social and environmental considerations
into all stages of the purchasing process. (True)
32. Diversity and philanthropy are two dimensions of socially responsible procurement. (True)
33. With respect to gift giving and gift receiving, bribes refer to money paid after an exchange.
(False)
34. The relevance, importance, and challenges associated with socially responsible procurement
are likely to lessen in the coming years. (False)
35. Investment recovery identifies opportunities to recover revenues or reduce costs associated
with scrap, surplus, obsolete, and waste materials. (True)
36. Investment recovery is often the responsibility of the finance manager. (False)
37. Excess materials refer to stock that exceeds the reasonable requirements of an organization.
(True)
13
38. Scrap materials are no longer serviceable, have been discarded, or are a by-product of the
production process. (True)
39. Obsolete materials have no economic value. (False)
40. Supply chain finance refers to a set of technology and finance-based processes that strive to
optimize cash flow by allowing businesses to extend their payment terms to their suppliers
while simultaneously allowing suppliers to be paid early. (True)
14

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TEST BANK

Multiple Choice Questions (correct answers are bolded)

2. Procurement costs often range between ___________ and ___________ percent of an

[LO 6.1: To compare procurement, purchasing, and supply management; Moderate;

3. Procurement’s historical focus in many organizations was to ___________.

a. incur minimal supply disruptions

4. Procurement and ___________ are viewed as synonymous terms.

a. There is a reduced number of invoices.

7. Which of the following is not a potential procurement objective?

a. minimizing procurement costs

[LO 6.2: To review procurement objectives; Moderate; Synthesis; AACSB Category 3:

8. A focus on satisfying internal customers is associated with which procurement objective?

a. managing the supply base

[LO 6.2: To review procurement objectives; Moderate; Synthesis; AACSB Category 3:

[LO 6.2: To review procurement objectives; Moderate; Synthesis; AACSB Category 3:

a. managing the supply base

[LO 6.2: To review procurement objectives; Moderate; Synthesis; AACSB Category 3:

11. What is the first step in supplier selection and evaluation?

a. Prepare a request for proposal.

a. Identify the need for supply.

a. greater supply risk mitigation

a. greater supply risk mitigation

16. Which of the following statements is false?

a. Supplier selection and evaluation generally involves multiple criteria.

17. Which of the following would not be part of a supplier audit?

18. Kraljic’s Portfolio Matrix ___________.

a. provides a framework for evaluating warehousing decisions

a. Kraljic’s Portfolio Matrix

20. A degree of aggressive procurement involvement not normally encountered in supplier

21. Supplier development is synonymous with ___________.

a. supplier selection and evaluation

23. Which of the following is false?

a. In the factor-input strategy, an organization is seeking low-cost or high-quality sources

24. What is the first step in a global sourcing development model?

25. ___________ is often a major shortcoming of many global procurement plans.

34. ___________ materials have no economic value.

a. Cash flow management

2. Procurement’s costs often range between 40 and 60 percent of an organization’s revenues.

[LO 6.1: To compare procurement, purchasing, and supply management; Moderate;

5. Procurement and purchasing are viewed as synonymous terms. (True)

[LO 6.2: To review procurement objectives; Moderate; Synthesis; AACSB Category 3:

12. A benefit to multiple sourcing is increased cooperation and communication in a supply

15. Supplier scorecards involve assessments of a supplier’s structure, resources, technology,

22. Supplier development is synonymous with reverse marketing. (True)

26. Problem recognition is the first step in global procurement. (False)

39. Obsolete materials have no economic value. (False)

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2. Procurement costs often range between _ and _ percent of an