Chapter 6 -- Category Strategy Development

True / False

1. Increasing revenues involves either raising prices or keeping prices stable and increasing volume.
a. True
b. Fals
e
ANSWER: True
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 1

2. In general, the less important the category, the more critical it is that internal stakeholders will be involved.
a. True
b. Fals
e
ANSWER: False
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 1

3. Objectives drive goals, whether at the highest levels of an organization or at the functional or department level.
a. True
b. Fals
e
ANSWER: True
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 1

4. A category strategy is a decision process used to identify which suppliers should provide a group of products or
services, the form of the contract, the performance measures used to measure supplier performance, and the appropriate
level of price, quality, and delivery arrangements that should be negotiated.
a. True
b. Fals
e
ANSWER: True
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic

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Chapter 6 -- Category Strategy Development

NOTES: 2

5. In general, the more important the commodity, the less likely that cross-functional members and user groups will be
involved.
a. True
b. Fals
e
ANSWER: False
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 3

6. The problem with secondary data is that they are often outdated and may not provide the specific information for which
the team is looking.
a. True
b. Fals
e
ANSWER: True
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 3

7. SWOT analysis was created to describe the competitive forces in a market economy that help shape an industry.
a. True
b. Fals
e
ANSWER: False
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 3

8. As a strategic planning tool, a SWOT analysis can provide insight even with limited data.
a. True
b. Fals
e
ANSWER: True
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic

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Chapter 6 -- Category Strategy Development

NOTES: 3

9. The RFI constitutes a binding agreement by both the supplier and the purchaser.
a. True
b. Fals
e
ANSWER: False
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 3

10. Identifying the major suppliers in a market is an important first step of any supplier analysis.
a. True
b. Fals
e
ANSWER: True
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 3

11. A preferred supplier designation indicates that the selected supplier should receive the business for a critical
commodity under all possible conditions.
a. True
b. Fals
e
ANSWER: False
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 4

12. A supplier catalog allows users to order directly through the Internet using a company procurement card (just like a
credit card) with the delivery made directly to the site the next day.
a. True
b. Fals
e
ANSWER: True
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic

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Chapter 6 -- Category Strategy Development

NOTES: 4

13. In some cases, a firm may be looking to develop a long-term relationship with a potential supplier, particularly if the
supplier is in the “Routine” quadrant of the Strategy Portfolio Matrix and the category of spend is low volume and routine
to the company’s business.
a. True
b. Fals
e
ANSWER: False
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 4

14. After the buyer-supplier relationship has been established, buyers no longer need to track supplier performance over
time.
a. True
b. Fals
e
ANSWER: False
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 4

15. The strategic sourcing process ends when a contract is signed with a supplier.
a. True
b. Fals
e
ANSWER: False
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 4

16. The insourcing/outsourcing decision cannot be applied to virtually every process conducted within the traditional
walls of an organization.
a. True
b. Fals
e
ANSWER: False
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
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Chapter 6 -- Category Strategy Development

OTHER: Analytic
NOTES: 4

17. Supply base optimization usually refers to increasing the number of suppliers used.
a. True
b. Fals
e
ANSWER: False
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 4

18. Supply base optimization requires an analysis of the number of suppliers required currently and in the future for each
purchased item.
a. True
b. Fals
e
ANSWER: True
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 4

19. Only recently have senior executives begun to realize the increased risk attributed to the higher probability of product
and service flow disruptions in global sourcing networks.
a. True
b. Fals
e
ANSWER: True
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 4

20. One factor that is increasing the risk exposure to supply chain disruption is the decreasing propensity of companies to
outsource processes to global suppliers.
a. True
b. Fals
e
ANSWER: False
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Understanding
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Chapter 6 -- Category Strategy Development

OTHER: Analytic
NOTES: 4

21. Global sourcing can be used to access new markets or to gain access to the same suppliers that are helping global
companies become more competitive.
a. True
b. Fals
e
ANSWER: True
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 4

22. More complex logistics and currency fluctuations require measuring all relevant costs before committing to a
worldwide source.
a. True
b. Fals
e
ANSWER: True
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 4

23. Longer-term relationships are sought with suppliers that have exceptional performance or unique technological
expertise.
a. True
b. Fals
e
ANSWER: True
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 4

24. A longer-term relationship should never include a joint product development relationship with shared development
costs and intellectual property.
a. True
b. Fals
e
ANSWER: False
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
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Chapter 6 -- Category Strategy Development

Understanding
OTHER: Analytic
NOTES: 4

25. When purchasers find that suppliers’ capabilities are not high enough to meet current or future expectations, those
suppliers should always be eliminated from the supply base.
a. True
b. Fals
e
ANSWER: False
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 4

26. Total cost of ownership typically includes costs associated with late delivery, poor quality, or other forms of supplier
nonperformance.
a. True
b. Fals
e
ANSWER: True
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 4

27. An e-RA is an offline, static auction between a buying organization and a group of pre-qualified suppliers who
compete against each other to win the business to supply goods or services that have ill-defined specifications for design,
quantity, quality, delivery, and related terms and conditions.
a. True
b. Fals
e
ANSWER: False
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 5

28. Organizations tend to evolve through four phases as they become mature and sophisticated in their supply
management strategy development.
a. True
b. Fals
e
ANSWER: True
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Chapter 6 -- Category Strategy Development

DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 6

29. In the final and most advanced stage of supply management strategy development, supply management has assumed a
tactical orientation with reporting directly to lower-level management and a simple internal, rather than a strong external,
customer focus.
a. True
b. Fals
e
ANSWER: False
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 6

30. In the initial stages of supply management strategy development, supply management adopts essentially a short-term
approach and reacts to complaints from its internal customers when deliveries are late, quality is poor, or costs are too
high.
a. True
b. Fals
e
ANSWER: True
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 6

31. In the moderate development phase of supply management strategy development, supply management councils or lead
buyers may be responsible for entire classes of commodities, and companywide databases by region may be developed to
facilitate this coordination.
a. True
b. Fals
e
ANSWER: True
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 6

Multiple Choice

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Chapter 6 -- Category Strategy Development
32. A _____ refers to a specific family of products or services that is used in delivering value to the end customer.
a. spend analysis
b. decentralized
structure
c. category
d. centralized structure
e. hybrid structure
ANSWER: c
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 1

33. Which of the following is not one of the primary ways that companies create shareholder value?
a. Increase volume.
b. Reduce cost of employees (downsize).
c. Reduce cost of process and waste.
d. Reduce cost of goods and services.
e. Lower prices.
ANSWER: e
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 1

34. A _____ is concerned with (1) the definition of businesses in which the corporation wishes to participate and (2) the
acquisition and allocation of resources to these business units.
a. business unit strategy
b. supply management strategy
c. human resource management
strategy
d. corporate strategy
e. functional strategy
ANSWER: d
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 1

35. A _____ is concerned with (1) the scope or boundaries of each business and the links with corporate strategy and (2)
the basis on which the business unit will achieve and maintain a competitive advantage within an industry.
a. commodity strategy
b. category strategy
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Chapter 6 -- Category Strategy Development

c. business unit strategy

d. functional strategy
e. supply management
strategy
ANSWER: c
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 1

36. A _____ specifies how supply management will (1) support the desired competitive business-level strategy and (2)
complement other functional strategies.
a. supply management
strategy
b. corporate strategy
c. marketing strategy
d. category strategy
e. business unit strategy
ANSWER: a
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 1

37. A _____ specifies how a group tasked with developing the strategy for the specific category being purchased will
achieve goals that in turn will support higher level strategies.
a. functional strategy
b. corporate strategy
c. business unit
strategy
d. category strategy
e. None of the above.
ANSWER: d
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 1

38. A _____ is an annual review of a firm’s entire set of purchases.

a. cost analysis
b. price analysis
c. make-buy analysis
d. technology
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Chapter 6 -- Category Strategy Development

roadmap
e. spend analysis
ANSWER: e
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 2

39. Which of the following is not one of the questions to be addressed when conducting a spend analysis?
a.What did the business spend its money on over the past year?
b.Did the business receive the right amount of products and services given what it paid
for them?
c.What suppliers received the majority of the business, and did they charge an accurate
price across all the divisions in comparison to the requirements in the POs, contracts,
nad statements of work?
d.What was the on-time delivery performance for each supplier?
e.Which divisions of the business spent their money on products and services that were
correctly budgeted for?
ANSWER: d
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 2

40. Which of the following is not one of the steps in the strategic sourcing process?
a. Build the team and the project charter.
b. Conduct market intelligence research on suppliers.
c. Increasing revenues.
d. Strategy development.
e. Supplier relationship management.
ANSWER: c
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 3

41. The _____ in the strategic sourcing process is a clear statement of the goals and objectives of the sourcing project,
which is officially announced shortly after the team’s first few meetings.
a. triangulation phase
b. optimization process
c. spend analysis
d. project charter
e. price analysis
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Chapter 6 -- Category Strategy Development

ANSWER: d
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 3

42. The key to good market intelligence is to _____ data, which means to explore, compare, and contrast data from
multiple sources before it can be validated.
a. triangulate
b. minimize
c. gather
d. collect
e. assemble
ANSWER: a
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 3

43. The whole point of collecting _____ is to understand the prevailing market conditions and the ability of current or
potential new suppliers to deliver the product or service effectively.
a. customer data
b. secondary data
c. internal data
d. spend analysis
data
e. market research
ANSWER: e
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 3

44. All of the following are examples of factors in Porter’s market internal competition force except _____.
a. speed of industry growth
b. buyer propensity to
substitute
c. exit barriers
d. switching costs
e. capacity utilization
ANSWER: b
DIFFICULTY: Easy

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Chapter 6 -- Category Strategy Development

KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 3

45. Which of the following is not one of Porter’s five forces?

a. Buyer bargaining power.
b. Switching costs.
c. Threat of new entrants.
d. Market internal
competition.
e. Supplier bargaining power.
ANSWER: b
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 3

46. Which of the following is not one of the examples of Porter’s threat of new entrants?
a. Capital markets.
b. Economies of scale.
c. Supplier concentration.
d. Product life cycles.
e. Brand equity and customer loyalty.
ANSWER: c
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 3

47. Which of the following is not one of the examples of Porter’s threat of substitute products and services?
a. Relative performance of substitutes.
b. Relative price of substitutes.
c. Switching costs.
d. Buyer propensity to substitute.
e. Economies of scale.
ANSWER: e
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 3

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Chapter 6 -- Category Strategy Development
48. All of the following are examples of Porter’s power of buyers except _____.
a. buyer
concentration
b. exit barriers
c. price sensitivity
d. brand identity
e. buyer volume
ANSWER: b
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 3

49. Which of the following is not one of the examples of Porter’s power of suppliers?
a. Prices of major inputs.
b. Ability to pass along price increases.
c. Supplier concentration.
d. Availability of skilled workers.
e. Threat of forward or backward
integration.
ANSWER: d
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 3

50. In supplier analysis, _____ requires identifying critical performance criteria and identifying relative competitive
performance.
a. benchmarking
b. make/buy analysis
c. insourcing/outsourcing
analysis
d. Porter’s Five Forces analysis
e. cost analysis
ANSWER: a
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 3

51. The _____ is a solicitation document that is used by organizations to obtain general information about services,
products, or suppliers and is used generally before a specific requisition of an item is issued.
a. e-RA
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Chapter 6 -- Category Strategy Development

b. PO
c. RFP
d. RFI
e. RFQ
ANSWER: d
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 3

52. The goal of _____ is to be able to understand, identify, and exploit cost savings opportunities that may have been
overlooked by business unit managers or even by suppliers in bringing the products and services to the appropriate
location.
a. Marketing research
b. Make-buy analysis
c. Value chain
analysis
d. Price analysis
e. Cost analysis
ANSWER: c
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 3

53. [A] _____ is required to identify the specific capabilities and financial health of key suppliers that are in the supply
base or that may not currently be in the supply base.
a. Make-buy analysis
b. supplier evaluation scorecard
c. Price analysis
d. Portfolio analysis
e. Supplier research
ANSWER: e
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 3

54. [A] _____ is a tool to structure and segment the supply base and is used as a means of classifying suppliers into one of
four types.
a. Supplier scorecard
b. Portfolio analysis
c. Make-buy analysis
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Chapter 6 -- Category Strategy Development

d. Price analysis
e. Value chain
analysis
ANSWER: b
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 3

55. Which of the following is not one of the four categories found in a portfolio analysis matrix?
a. Critical.
b. Routine.
c. Leverage.
d. Commodity
.
e. Bottleneck.
ANSWER: d
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 3

56. All of the following are goals for a strategic category except _____.
a. develop a competitive advantage
b. support and leverage the supplier’s core competencies
c. develop best-in-class suppliers
d. support the company’s overall strategy
e. simplification of the procurement process using electronic
tools
ANSWER: e
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 3

57. Which of the following is not one of the goals for sourcing a routine commodity?
a. Reduce the number of items through substitution.
b. Elimination of small volume spend.
c. Conduct of a detailed negotiation to improve supplier capability.
d. Elimination of duplicate SKUs.
e. Simplification of the procurement process using electronic
tools.

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Chapter 6 -- Category Strategy Development

ANSWER: c
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 3

58. A _____ has a high volume of internal consumption, is readily available, is important to the business, and represents a
significant proportion of spend.
a. leverage commodity
b. portfolio commodity
c. critical commodity
d. routine commodity
e. bottleneck
commodity
ANSWER: a
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 3

59. A _____ has unique requirements or niche suppliers, yet is significant to the business.
a. critical commodity
b. bottleneck
commodity
c. matrix commodity
d. routine commodity
e. leverage commodity
ANSWER: b
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 3

60. In supplier evaluation, different aspects of _____ include management’s commitment to continuous process and
quality improvement, its overall professional ability and experience, its ability to maintain positive relationships with its
workforce, and its willingness to develop a closer working relationship with the buyer.
a. management capability
b. process and design capabilities
c. financial condition and cost structure
d. planning and control systems
e. environmental regulation compliance
ANSWER: a
DIFFICULTY: Moderate
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Chapter 6 -- Category Strategy Development

KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 3

61. In supplier evaluation, a _____ includes those systems that release, schedule, and control the flow of work in an
organization.
a. logistics system
b. cost accounting system
c. traffic management system
d. planning and control system
e. warehouse management system
ANSWER: d
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 3

62. In the _____ of the process of supplier segmentation, the supplier views the buyer as a core customer, as the size of
the account is significant to the supplier, and the account is also important from a strategic perspective.
a. COMMODITY
segment
b. DEVELOP segment
c. EXPLOIT segment
d. NUISANCE segment
e. CORE segment
ANSWER: e
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 3

63. In the _____ of the process of supplier segmentation, the attractiveness of the buyer as a customer is significant and
important to the supplier, but perhaps the historical volume of business with the buyer has been relatively low.
a. EXPLOIT segment
b. CORE segment
c. DEVELOP segment
d. PRICE segment
e. NUISANCE
segment
ANSWER: c
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Remembering
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Chapter 6 -- Category Strategy Development

OTHER: Analytic
NOTES: 3

64. In the _____ of the process of supplier segmentation, suppliers have a significant portion of the buyer’s spend but do
not view the buyer as an important customer.
a. NUISANCE segment
b. COMMODITY
segment
c. DEVELOP segment
d. EXPLOIT segment
e. CORE segment
ANSWER: d
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 3

65. In the _____ of the process of supplier segmentation, the supplier views the buyer as an unimportant customer, and to
make the situation worse, the volume the buyer has with this supplier is insignificant to the supplier.
a. NUISANCE
segment
b. CORE segment
c. EXPLOIT segment
d. DEVELOP segment
e. None of the above.
ANSWER: a
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 3

66. A/An _____ may be used as a decision support tool in which the sourcing team assigns a weight to the different
categories and develops a numerical score for each supplier in each category, thereby developing a final performance
score.
a. make-buy analysis
b. portfolio analysis matrix
c. reverse auction
d. e-catalog
e. supplier selection
scorecard
ANSWER: e
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Understanding
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Chapter 6 -- Category Strategy Development

OTHER: Analytic
NOTES: 3

67. A/An _____ has demonstrated its performance capabilities through previous purchase contracts and, therefore,
receives preference during the supplier selection process.
a. commodity supplier
b. preferred supplier
c. sole source supplier
d. new supplier responding to a RFQ
e. marginal supplier
ANSWER: b
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 3

68. A/An _____ is a formal request for the suppliers to prepare bids, based on the terms and conditions set by the buyer.
a. RFQ
b. purchase order
c. RFI
d. supplier analysis
e. e-RA
ANSWER: a
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 3

69. Buying firms use competitive bidding when _____ is a dominant criterion and the required items or services have
______ specifications.
a. price….unique
b. delivery….unique
c. product performance….straightforward
d. design….unique
e. price….straightforward
ANSWER: e
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 3

70. Competitive bidding is most effective when all of the following conditions apply except when _____.

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Chapter 6 -- Category Strategy Development

a. the buying firm can provide qualified suppliers with clear descriptions of the items or
services to be purchased
b.volume is high enough to justify the cost and effort
c. the firm does not have a preferred supplier
d.the item is new or technically complex, with only vague specifications
e. None of the above conditions apply to competitive bidding.
ANSWER: d
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 3

71. Face-to-face negotiation is best when all of the following conditions apply except when _____.
a. the item is new or technically complex, with only vague specifications
b. the purchase requires agreement about a wide range of performance factors
c. the firm does not have a preferred supplier
d. the buyer requires the supplier to participate in the development effort
e. the supplier cannot determine risks and costs without additional input from the
buyer
ANSWER: c
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 3

72. A _____ is used in regularly scheduled review meetings with suppliers, so that deficiencies in performance can be
noted, discussed, and acted upon.
a. supplier scorecard
b. make-buy analysis
c. competitive bidding process
d. portfolio analysis
e. cost analysis
ANSWER: a
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 3

73. _____ is the process of determining the appropriate number and mix of suppliers to maintain.
a. Make-buy analysis
b. Competitive bidding
c. Supply base

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Chapter 6 -- Category Strategy Development

optimization
d. Portfolio analysis
e. Price analysis
ANSWER: c
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 4

74. Which of the following is not true in regards to low-cost country sourcing?
a.Low-cost country sourcing can be used to access new markets or to gain access to the
same suppliers that are helping global companies become more competitive.
b.Although there has been a strong push to source from emerging BRIC countries in
search of lower costs, there has also been a strong push toward sourcing in these
countries because of local content requirements established by governments in these
areas.
c.Global sourcing is an opportunity to gain exposure to product and process technology,
increase the number of available sources, satisfy countertrade requirements, and
establish a presence in foreign markets.
d.Some buyers source globally to introduce competition to domestic suppliers.
e.Firms are highly experienced with global business processes and practices, and there
are many personnel qualified to develop and negotiate with global suppliers or manage
material pipelines.
ANSWER: e
DIFFICULTY: Moderate
KEYWORDS: Bloom’s:
Understanding
OTHER: Analytic
NOTES: 4

75. _____ is a simultaneous engineering approach that occurs between buyer and seller and seeks to maximize the benefits
received by taking advantage of the supplier’s design capabilities.
a. Supplier development
b. Early supplier design
involvement
c. Total cost of ownership
d. Supplier relationship management
e. Supply base optimization
ANSWER: b
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 4

76. _____ is the process of identifying cost considerations beyond unit price, transport, and tooling.
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Chapter 6 -- Category Strategy Development

a. Total cost of ownership

b. Price analysis
c. Make-buy analysis
d. Portfolio analysis
e. Low-cost country sourcing
ANSWER: a
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 4

77. Which of the following elements is false regarding Phase 1, Basic Beginnings, of supply management strategy
development?
a. Quality/cost teams.
b. Longer-term contracts.
c. Volume leveraging.
d. Supply-base
consolidation.
e. Early sourcing.
ANSWER: e
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 6

78. Which of the following elements is false regarding Phase 2, Moderate Development, of supply management strategy
development?
a. e-RAs.
b. Ad hoc supplier alliances.
c. International sourcing.
d. Global supply chains with external customer
focus.
e. Supply-base optimization.
ANSWER: d
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 6

79. Which of the following elements is false regarding Phase 3, Limited Integration, of supply management strategy
development?
a. Supplier quality focus.
b. Global sourcing.
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Chapter 6 -- Category Strategy Development

c. Ad hoc supplier alliances.

d. Volume leveraging.
e. Long-term contracts.
ANSWER: a
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 6

80. Which of the following elements is true regarding Phase 4, Fully Integrated Supply Chains, of supply management
strategy development?
a. Cross-functional sourcing teams.
b. Cross-enterprise decision making.
c. Quality/cost teams.
d. International sourcing.
e. Total cost of ownership.
ANSWER: b
DIFFICULTY: Easy
KEYWORDS: Bloom’s:
Remembering
OTHER: Analytic
NOTES: 6

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