Which of the following is not a benefit gained from the utilization of centralized purchasing?

1. Lower non-value-add costs

2. Improved quality

3. Increased charitable contributions

4. Faster time to market

5. Innovation

Question 2:Which of the following is not a contributor to net income?

1. Lowering supply-chain cost

2. Increasing the bullwhip effect

3. Pricing flexibility

4. Lowering downtime

5. Reducing cycle time cost

Question 3:Which is not true about supply chains and networks?

1. The supply chain extends from the ultimate customer back to Mother Earth

2. The chain is viewed as a whole, a single entity rather than fragmented groups

3. Money enters the supply chain only when the ultimate customer buys a product or service

4. The traditional approach to supply chain management is more linear in concept

5. Within a network, events or things must happen in a lock-step order

Question 4:Which of the following is not a strategic supply management activity?

1. Integrated supply strategy

2. Overhead cost center

3. No consideration of revenue impacts

4. Innovation

5. (b) and (c)

Question 5:Which of the following is a strategic supply management activity?

1. Understand suppliers

2. Squeeze the vendor

3. Interconnectedness

4. Use of the Thomas Directory

5. Personal relationship with supplier

Question 6:Which of the following is not a benefit gained from the utilization of centralized purchasing?

1. Consolidation

2. Lower administrative costs

3. Allowance of specialization

4. Larger inventories are maintained

5. Leveraging of volume purchases

Question 7:Which of the following constitute one of the six classifications of work in a purchasing operation?

1. Finance

2. Management and banking

3. Contract and relationship management

4. Distribution

5. (b) and (c)

Question 8:Which of the following is not one of the five Ms of business?

1. Machines

2. Man/womanpower

3. Material

4. Management

5. Methodology

Question 9:Which of the following is not a step in the “Six-step Environment Monitoring Strategy” presented in Chapter 3?

1. “Identify the major suppliers and customers of the materials and services”

2. “Build a model that predicts the material (or service) behavior”

3. “Monitor the model to determine its accuracy”

4. “Run quantitative models to confirm your strategy”

5. “Continuously make improvements as new relationships are understood and additional data becomes available”

Question 10:Which of the following does not contribute to the potential conflict between design engineers and supply management professionals?

1. Supply managers are only interested in the bottom line

2. Engineers naturally tend to design conservatively

3. Engineers usually disregard cost or availability

4. Supply managers are concerned with cost and availability

5. Both differ in their concepts of material

Question 11:Which of the following is not a reason for implementing diversity supplier programs?

1. Governmental contract requirements

2. Fear of economic boycotts

3. Gain political favor

4. Pass down provisions

5. Increased competition

Question 12:Which of the following is not a characteristic of successful diversity programs?

1. Location

2. Support

3. Contracts

4. Feedback

5. Diversity coordinators

Question 13:Which of the following points is not true about the SCPA philosophy and waste avoidance?

1. SCPA focuses on processes that prevent or minimize pollution from being created throughout the chain

2. Focus of SCPA is on reducing the initial generation of waste throughout the chain

3. According to the SCPA, avoiding pollution or mitigating it early in the value chain is almost always less costly than late stage cleanup

4. SCPA utilizes concepts from the Six Sigma philosophy to reduce waste

5. Waste avoidance, like quality assurance, is a systematic approach to optimize the efficiency of a given process

Question 14:Which of the following is not a transactional relationship characteristic?

1. Long-term contract

2. An absence of concern

3. One of a series of independent deals

4. Costs, data and forecasts are not shared

5. Price is the focus of the relationship

Question 15:Which of the following is not a disadvantage of transactional relationships?

1. Potential for communication difficulties

2. Expediting and monitoring of incoming quality

3. Inflexible when flexibility may be required

4. No inspection needed due to low prices

5. Tend to result in more delivery problems

Question 16:Which of the following is not an attribute of alliances?

1. Continuous improvement

2. Contracts that are difficult to interpret

3. Interdependence and commitment

4. Atmosphere of cooperation

5. Informal interpersonal connections

Question 17:Which of the following is not a typical supply management focus of cross-functional teams?

1. Sales forecast development

2. Acquisition of equipment

3. Make/buy and outsourcing analysis

4. Source selection

5. Potential supplier field reviews

Question 18:Which of the following is not a typical benefit of cross-functional teams?

1. Synergy

2. Input from all affected functions

3. Cross-functional teams are inexpensive

4. Time compression

5. Overcoming organizational resistance

Question 19:Which of the following is not a typical prerequisite to successful CFTs?

1. Executive sponsorship

2. Effective team leaders

3. Qualified team members

4. Team should consist of management only

5. Team development and training

Question 20:Which of the following is not a typical supply management role in CFTs?

1. Provide the process expertise in areas such as supply base research, supplier cost modeling and negotiation

2. Provide rationale and support for modifying the management accounting practices of the firm to enable activity based costing

3. Provide content knowledge of a specific supply market or commodity area that the supply management individual directs

4. Serve as the liaison with the supply management organization to ensure project needs obtain priorities

5. Represent the supply management point of view in tradeoffs, setting priorities, making decisions

Question 21:Which of the following is not a key element of Total Quality Management?

1. Recognition that quality is everyone’s responsibility

2. Six Sigma is the performance standard

3. Commitment by everyone in the organization

4. Continuous improvement of quality

5. Satisfaction of the customer

Question 22:Which of the following is not part of the DMAIC Cycle?

1. Design

2. Measure

3. Analyze

4. Improve

5. Control

Question 23:Which of the following is not a principle of the Quality Management System (QMS)?

1. Customer focus

2. Leadership

3. Involvement of people

4. Drive for perfection

5. Process approach

Question 24:Which of the following is not true of the costs of quality?

1. Prevention costs are costs to prevent poor quality in products or services

2. Maintenance is a prevention cost

3. Downtime is an appraisal cost

4. Inspection is an appraisal cost

Question 25:Which of the following is not a quality award?

1. Malcolm Baldrige Award

2. European Quality Award

3. ISO 9000

4. Deming Prize

Question 26:TCO analysis may include the study of all but one of the following issues. Which issue does not belong in the TCO analysis?

1. Structure of foreign and domestic tariffs/duties/taxes

2. Foreign political/economic stability

3. Foreign exchange risk

4. Foreign language syntax

5. Language/communication requirements

Question 27:Which of the following is not a supply chain cost based on the TCO?

1. Forecasting

2. Administration

3. Transportation

4. Inventory

5. Environmental

Question 28:Which of the following is not one of the three major components of total cost of ownership?

1. Acquisition costs

2. Ownership costs

3. Post-ownership costs

4. Opportunity costs

Question 29:Which of the following is not considered an advantage of electronic commerce for supply management?

1. Legal environment is simplified

2. Share information about quality

3. Identify new suppliers

4. Compare potential suppliers

5. Improve information exchange

Question 30:Which of the following is not true about exchanges?

1. A supplier centric exchange is developed jointly by the buyers and sellers, but is owned by two or more suppliers

2. A public exchange is open to all buyers and sellers. E-Bay is an example.

3. A buyer centric exchange is developed by one or more buying firms

4. A consortium refers to several companies that come together to form one marketplace or exchange

5. Vertical focused exchanges are developed to support a specific industry or segment of a market

Question 31:Which of the following is not one of the typical questions to ask prior to inviting a supplier into the design process?

1. Will the supplier be able to provide price concessions

2. Will the supplier be able to meet our cost, quality, and product performance requirements

3. Does the supplier possess the required engineering capability

4. Will the supplier be able to meet our development and production needs

5. Does it have the necessary physical process and quality capabilities required

Question 32:Which of the following is not associated with the development phase of the design process?

1. Development of prototypes

2. Design reviews

3. Qualification testing

4. Failure analysis

5. Value analysis

Question 33:Which of the following questions does not typically belong on a value engineering checklist?

1. Can more parts be used to achieve the same quality?

2. Can you make the item less expensively in your plant?

3. Is the item properly classified for shipping purposes to obtain lowest transportation rates?

4. Can cost of packaging be reduced?

5. Are suppliers contributing suggestions to reduce cost?

Question 34:Which of the following activities is typically not conducted in the production phase of the design process?

1. Process control

2. Material availability research

3. In process and final testing

4. Adjust and calibrate the performance

5. Eliminate defects before much value is added to the product

Question 35:Which of the following is a complex specification based on the categorization?

1. Function and fit specifications

2. Material and method-of-manufacture

3. Brand or trade names

4. Market grades

5. Qualified products

Question 36:Which of the following is not one of the considerations to include when writing specifications?

1. Country of source for the part or component in the design

2. Supply management’s requirement to procure material

3. Production control’s and supply management’s requirement to substitute materials

4. The total firm’s requirements for suitable quality at the lowest overall cost

5. The total firm’s requirement to use commercial and industrial standard material

Question 37:Which of the following is not an organization that can assist as a source of standards in the United States?

1. American Society for Quality

2. Society of Automotive Engineers

3. Society of Mechanical Engineers

4. American Institute of Electrical Engineers

5. International Society for Standardization

Question 38:Which is generally not one of the ways that materials catalogs, whether paper-based or electronic, can aid a firm?

1. Reduction of supply base

2. Reduction in design time

3. Reduction of non-standard parts

4. Reduction of standard parts

5. Reduction of inventory

Question 39:Which of the following is not true about operating leases and the firms that use them?

1. Used by most firms to facilitate business operations

2. Many operating leases are non-cancelable

3. Firm is usually not interested in ownership

4. Most operating leases are short term

5. Most often used when firm wants freedom/flexibility

Question 40:Which of the following is usually not included in a lease contract?

1. Responsibility of both parties

2. Acceptance testing and inspection

3. Guarantee conditions

4. Maintenance refund arrangements

5. Penalties

Question 41:Which is usually not included in planning the statement of work?

1. Work approvals

2. Process flows in the supplier’s facility

3. Use of subcontractors

4. Authorized personnel

5. Exhibits, schedules, and attachments

Question 42:Which of the following is not one of the tips on writing an effective SOW given in the textbook?

1. Explain the interrelationship between tasks

2. Identify all constraints and limitations

3. Include standards that will make performance measurement possible and meaningful

4. Include clause for punitive damages to assure compliance

5. Be clear about phase requirements

Question 43:Which of the following is not a tip for selecting service contractors?

1. Minimize assumptions

2. Encourage questions

3. Facilitate comparison

4. Play hardball

5. Plan evaluation

Question 44:Which of the following is a consideration that favors buying a product?

1. Cost considerations make in-house production less costly

2. Desire to integrate plant operations

3. Stable work force is desired in a period of rising sales

4. Use of excess plant capacity

5. Control over production

Question 45:Which of the following is a consideration that favors making a product?

1. Limited production facilities

2. Cost considerations dictate that it is less expensive to buy

3. Desire to maintain a stable work force in a period of reduction of sales

4. Small-volume requirements

5. Suppliers’ specialized know-how

Question 46:Which of the following is a major element typically included in a “to buy” cost analysis?

1. Incremental factory overhead costs

2. Incremental managerial costs

3. Initial administrative costs

4. Incremental costs of capital

5. Receiving and inspection costs

Question 47:Which one of the following points is not a reason that the make-or-buy decision is often a volatile decision?

1. Rigid formulas and rules of thumb are often used, which are often a poor choice to apply

2. The make-or-buy question is influenced by a multitude of diverse factors that are constantly changing

3. Companies do not support promotions based on cost savings

4. The relevant factors for the decision often vary immensely from one firm to another

5. Companies often do not periodically evaluate the effectiveness of their past decisions to generate information helpful in guiding future decisions

Question 48:Which of the following is not a potential problem of global sourcing?

1. Cultural issues

2. Long lead times

3. Additional inventories

4. Low opacity

5. Lower quality

Question 49:In the evaluation stage of the strategic sourcing plan given in the textbook, several analyses were presented. Which of the following was not one of those analyses?

1. Capacity Capability Analysis

2. Service Capability Analysis

3. Flexibility Capability Analysis

4. Corporate Accountability Analysis

5. Information Technology Capability Analysis

Question 50:Which of the following is not a typical category where the opportunity to reduce costs is increased through early supplier involvement in design?

1. Materials costs may decrease through use of alternative parts and components

2. Services costs improve through collaborative efforts

3. Technology inputs may improve through the collaborative efforts

4. More complex parts and components can be designed

5. Specifications and tolerances may be adjusted to improve productivity while maintaining quality

Question 51:Which of the following is a typical consideration in favor of multiple sourcing?

1. Lower total cost results from higher volume

2. Quality considerations require a single source

3. Buyer obtains more influence with a single source supplier

4. Meet local content requirements

5. Lower costs to source, process, expedite, inspect

Question 52:Which of the following is a typical consideration in favor of single sourcing?

1. Protect the buyer during bad times

2. Maintain competition

3. Provide a back-up source

4. Lower total cost results from higher volume

5. Meet local content requirements

Question 53:Many forces motivate a buying firm to ensure that minority- and women-owned business enterprise (MWBE) businesses receive a share of the firm’s business. Which of the following is not one of those forces?

1. Set-aside quotas in government appropriations

2. Political affiliation of upper management

3. Customer base includes MWBE businesses and their employees

4. Bottom-line profitability

5. Good business sense

Question 54:Which of the following is not one of the six categories of cost?

1. Price of goods

2. Variable manufacturing costs

3. Fixed manufacturing costs

4. Semi-variable costs

5. Total production costs

Question 55:Which of the following is not a common source of prices for a price analysis?

1. Competitive price proposals

2. Regulated prices

3. Mathematical modeling

4. Catalog prices

5. Market prices

Question 56:Which is one of the important elements affecting costs as outlined in Chapter 14?

1. Capabilities of management

2. Efficiency of labor

3. Amount and quality of subcontracting

4. Plant capacity and continuity of output

5. All of the above

Question 57:Which of the following is not considered a major element that affects a supplier’s cost?

1. Effectiveness of competitors

2. Capabilities of management

3. Efficiency of labor

4. Amount and quality of subcontracting

5. Plant capacity and the continuity of output

Question 58:Which of the following statements is typically not true about profit?

1. Profit is the basic reward for risk taking as well as the reward for efficiency

2. A higher profit per unit is generally justified for small special orders

3. Products and services requiring highly technical personnel usually require higher profit

4. Per unit profit is generally lower for complex products that require special tooling and training to produce

5. A higher profit is generally justified for a firm that repeatedly turns out superbly reliable technical products

Question 59:Which of the following is true with respect to fixed price redetermination contracts (FPR)?

1. A FFP is set for a final period of the contract

2. A redetermination (upward or downward) occurs at an initial period during the contract

3. FPR retroactive almost always occurs at the middle point in time of the contract

4. FPR prospective is used where a fair and reasonable price can be developed for initial periods but not subsequent periods

5. FPR prospective is used when uncertainty exists as in the retroactive, but the amount of the contract is small and/or the performance period is short

Question 60:Which of the following is not typical of a CPAF arrangement?

1. The award fee is a pool of money established by the buyer

2. The award fee is a pool of money to reward the supplier in meeting the buyer’s stated needs

3. Receipt of the fee is based on the buying firm’s objective evaluation

4. Receipt of the fee is based on the buying firm’s subjective evaluation

5. The arrangement works as a flexible tool

Question 61:Which of the following is typical of a cost without fee arrangement?

1. Used primarily by nonprofit institutions

2. Firm stands to benefit if the product developed can be used in its own product line

3. The objective is to only make a small profit

4. Institutions do not recover all overhead costs when using this type of contract

5. In recent years, high-technology firms have decreased their use of this contract type

Question 62:Which of the following is a true statement regarding FPEPA contracts?

1. Used only in circumstances that call for quantity production or services

2. To maintain flexibility in meeting changing market demands

3. Used to recognize economic contingencies, such as unstable labor conditions

4. (b) and (c)

5. All of the above

Question 63:In the PDCA Cycle the D stands for which of the following?

1. Document

2. Do

3. Develop

4. Describe

5. Design

Question 64:Which of the following is generally correct about letter contracts and letters of intent?

1. Letter contracts are post-contractual authorizations under which the seller can commence work immediately

2. Under letters of intent, the seller is guaranteed reimbursement for costs up to a specified amount

3. A letter contract should be converted to a definitive contract as soon as possible

4. All of the above

5. None of the above

Question 65:Which of the following statements is not true about time and materials contracts?

1. The parties agree on a fixed rate per labor hour

2. Materials supplied at fair market value plus 10%

3. Used when what is to be done and how is clearly defined and discernable

4. (a), (b) and (c)

5. (b) and (c)

Question 66:Government policy requires that full and open competitive procedures be followed in all its procurements including:

1. Sealed bid method

2. Competitive proposals

3. Single source contracts

4. All of the above

5. None of the above

Question 67:The FAR:

1. Is the primary instruction governing all Government contracting

2. Consists of procurement policies and many procedural and administrative requirements that apply to all procurements by Federal executive agencies

3. Has less than 1,000 pages and is divided into 35 parts

4. (a) and (b)

5. (a), (b) and (c)

Question 68:Which of the following is true about Supply Chain Management?

1. Comprises a series of organizations which add value to goods and services

2. It is the downstream portion of the organization’s value chain

3. It is responsible for feeding the production or conversion process

4. All of the above

5. None of the above

Question 69:Which of the following is not one of the 12 Golden Rules of WCSM?

1. Principally focus on reducing the prices suppliers charge

2. Train and educate supply personnel in world-class processes, leadership, and change management

3. Work in cross-functional mode with internal functions and with key suppliers

4. Recognize and reward excellence, both internally and externally

5. Study and understand supply management’s business environment

Question 70:The three critical skills of world-class value network management include:

1. Management, leadership and knowledge

2. Marketing, responsiveness and leadership

3. Proactive to customer, innovative, and multi-dimensional

4. All of the above

5. None of the above

Question 71:Which of the following is the best statement that summarizes how supply management can positively contribute to the buying organization’s net income?

1. Emphasizing quality also increases sales

2. Faster time to market also increases sales

3. Provides innovations in pricing flexibility

4. Work with suppliers to correct root causes of problems

5. (a), (b) and (c)

6.

CASE STUDIES (25 points each)

Questions should be answered in no less than 200 words each. Please submit in the same format as applicable to, and outlined for, the application lessons. Failure to do so will result in lost points.

Case Study #1 – Seats for the Executives

Please read the following case study and answer the questions at the end.

Seats for the Executives

In June 2002, Tom Dewey, supply manager for Builder’s Bank, Inc.’s (BBI) New York office, wanted to resolve a set of problems arising from the purchase of eighty chairs for the executive boardroom.

General Company Background

BBI was a large international bank with operations throughout the world. It had recently purchased an office building and had hired the well-known architect Peter Tropper to do the major design and renovation plans.

The Supply Department

The supply department in the New York office was responsible for all local purchases, in addition to a few major purchases for the international offices. The bank did not have an approved supplier list; an invitation to bid was an indication that the potential supplier was considered qualified.

Building Renovation

The architectural firm of Peter Tropper was hired to redesign the entire building, including the selection of furniture. Once the design was completed, a working group, including the president and vice president, had approved the design, including selection and color for all major furniture. The supply department did not participate in this process.

In June 2001, Peter Tropper sent a specification sheet to the supply department for all purchases, which included model number and manufacturer. Suppliers would bid on the same manufacturer, with no substitutions allowed. Although the department had the option to split the order between suppliers, Tom Dewey decided to order through a single source.

In late June, the working group asked Tom Dewey to submit a budget of what the bank would have to spend to complete the renovation during fiscal 2002. Therefore, in early July, Tom Dewey submitted a request for proposal (RFP) to ten potential suppliers, all of which responded.

When the bids were received in mid-August, the working group reviewed the bids and rejected them as being too high. The working group and Peter Tropper agreed to a scaling down of the work proposed. A week later, Tom Dewey sent new specifications to the same ten suppliers, of which eight responded. The low bid on the RFP was $1.3 million, submitted by ABCO Furniture, a large local furniture dealer. In September, the working group authorized Tom Dewey to purchase major furniture and the chairs for the executive boardroom totaling $400,000.

Chairs for the Boardroom

Among the items on the RFP were eighty leather chairs for the executive boardroom. These chairs had a single pedestal and a fixed jury base, which would not allow the chairs to rock or swivel. Twelve of the chairs, costing $1,500 each, required installation in concrete, with the remaining sixty-eight chairs, costing $1,300 each, having bases that could be installed on wood flooring. The RFP made no mention of installation.

In February 2001, ABCO Furniture informed Tom Dewey that the chairs were ready. Since the boardroom was still under construction, he arranged to have ABCO store the chairs, with the agreement that he honor the invoice in March. The invoice was paid in late March and ABCO stored the chairs until they were delivered on the morning of April 22, 2001.

When the chairs were delivered, the construction manager talked with Peter Tropper regarding installation. The construction manager told Tom Dewey that the architect had said he would give detailed drawings regarding installation of the chairs, although the drawings had not been received. When Tom Dewey asked Peter Tropper about the problem, Peter indicated that Supply, having bought the chairs, was responsible for installation. Peter Tropper also stated that he had informed Supply, by letter in late March, that Supply was responsible for installation.

At the instruction of Tom Dewey, ABCO hired a local installer to install the chairs. The installer had seen neither the chairs nor the boardroom before. The installer arrived late on the 22nd and discussed the installation procedure with the construction manager. They concluded that they would use expansion bolts in the concrete and wood screws in the platforms. Both the construction manager and the installer agreed that long lag screws could not be used since the platforms were elevated, with electrical conduit underneath.

After installing a few chairs on the morning of April 23rd, the installer and construction manager concluded that the wood screws would not hold. Since the chairs were rigid, the smallness of the diameter of the base was insufficient for the torque applied to the base when the chair was used. Since no adequate support was designed into the floor when the room was remodeled, other support alternatives had to be evaluated.

The construction manager contacted the field representative of Peter Tropper and explained the problem. Peter Tropper indicated that toggle bolts were required. As a check on the architect, the construction manager called the furniture manufacturer in Pennsylvania. The call provided no additional information. The manufacturer’s service representative stated that since they were not directly involved, they were unable to make suggestions. The representative did state, off the record, that the base was too small for the chair.

The installer, even after installing the toggle bolts, discovered that the chairs were still coming loose. In addition, the expansion bolts, installed in the concrete, would also eventually work loose. However, with the upcoming board meeting on May 6, 2001, the construction manager and installer agreed that the chairs could be used temporarily. The supplier, after discussing installation costs with the installer, told Tom Dewey that the current bill for setting up the chairs would be around $4,000. However, for the installer to do the job correctly would cost an additional $15,000.

The May 6 board meeting went smoothly, although many board members noted the instability of the chairs. In June, the executive directors expressed concern over the need to fix the chairs – and quickly. However, Tom Dewey’s frequent discussions with Peter Tropper had yielded no results.

The installer billed ABCO Furniture at the end of May. In late June, Tom Dewey received a bill from ABCO for the installation of the chairs, and a copy of the invoice received by ABCO from the supplier. Tom Dewey recognized that BBI had not allowed for any additional installation costs and wondered what the best way to resolve the problem would be.

1.What alternatives are open to Tom?

2.What is the best course of action now?

3.Who is responsible for the present situation?

4.What should Tom have done to avoid the present situation?

Case Study #2 – PRICE Can Be Problematic

Please read the following case study and answer the questions at the end.

PRICE Can Be Problematic

Sue Jones sat at her desk reflecting on a pricing problem. Sue was a graduate of State University, where she majored in materials management. Since joining the small manufacturing firm of Prestige Plastics in Des Moines, she has been promoted from assistant supply manager to supply manager. She was responsible for buying the chemicals used in producing the firm’s plastic products.

Sue was really perplexed by a particular procurement involving the purchase of X-pane, a chemical that was formulated specifically for Prestige Plastics. Thirty-one days ago, she forwarded a request for bids to six suppliers for Prestige’s estimated annual requirement of 10,000 drums of X-pane. Yesterday morning, Sue opened the five bids that had been received. The bids, F.O.B. Des Moines, were as follows:

The Chicago Chemical Company was low bidder for the fifth straight year. On the face of it, a decision to award the annual requirements contract to Chicago Chemical looked obvious. The day after the bid opening, the sales engineer from Greater Sandusky Chemical threw Sue a ringer. He said that no one would ever be able to beat Chicago Chemical’s price. His firm estimated that setup costs associated with producing X-pane would be approximately $750,000. He went on to say that due to the uncertainties of follow-on orders, his firm would have to amortize this cost over the one-year period of the contract to preclude a loss.

Sue checked with the other unsuccessful bidders. They said substantially the same thing: $700,000 to $850,000 in setup costs were included in their prices.

Next, Sue looked at the history of past purchases of X-pane. She saw that on the initial procurement five years ago, Chicago Chemical’s bid was $202 per barrel, $3 lower than the second lowest price. Since that time, bid prices had increased, reflecting cost growth in the materials required to produce X-pane. Each year, Chicago Chemical’s prices were $3 to $15 per drum lower than those of the unsuccessful competitors.

Sue knew from her supply management course at State University that when five prerequisites were satisfied, under most conditions, competitive bidding normally resulted in the lowest price. She also knew that it was important to maintain the integrity of the competitive bidding process. But Sue felt a strong sense of uneasiness. Something did not seem right.

1.Under what conditions does competitive bidding normally assure the buying manager of obtaining the lowest possible price?

2.Based on the case, define the “competitive bidding trap.” Under what conditions may a buying firm fall into the “competitive bidding trap?”

3.Which situation existed at Prestige Plastics for the first contract? Why?

4.Which situation existed at Prestige Plastics for the current buy? Why?

5.Describe three approaches to overcoming Sue’s pricing problem. Support with a quantitative analysis


 

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