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1) Which of the following is not a common cause for the bullwhip effect?
| A. | Price fluctuations | |
| B. | Periodic/irregular order policies | |
| C. | Trade deals | |
| D. | All of these are common causes of the Bullwhip Effect. |
2) You have been talking to your co-worker about a document you just sent to a supplier. The document contains your offer to purchase 50 gallons of lubricating oil and has the terms and conditions of the purchase printed on the document. The document is legally binding if the supplier accepts it. This document is a?
| A. | Planned order release | |
| B. | Purchase requisition | |
| C. | Purchase order | |
| D. | Material requisition |
3) Many companies and state governments are beginning to pursue centralized purchasing of supplies. Which of the following are true with respect to centralized versus decentralized purchasing?
| A. | Decentralized purchasing reduces the duplication of activities | |
| B. | Centralized purchasing leads to local sourcing | |
| C. | Decentralized purchasing uses a common supply base | |
| D. | Centralized purchasing can lead to greater quantity discounts |
Expert Answer
Part 1:
If variations in customer demand are not adequately recognized or passed on with some distortions in the upstream process, it results in over stocking or stock out situations. This phenomenon is known as the Bullwhip effect. It refers to the distortion or deformation of information, when it moves from the market to the vendors through to the organization’s distribution network, and to its manufacturing and procurement department upstream in the supply chain. There are a few reasons that contribute towards the bullwhip effect. These are:
- Frequent changes in the demand forecast
- Poor coordination between the supply chain partners or parties that are involved
- Variability in lead time
- Fluctuations in price
- Errors in demand forecasting
Correct ANS: Trade deals
PART 2:
Purchase order is an document which contains offer to the supplier for the purchase of certain material with given terms and conditions of the purchase. The document is legally binding if the supplier accepts the offer.
ANS: C
PART 3:
Following are the advantages of a centralized purchasing organization.
1. Concentrated volume
2. Leveraging purchase volume
3. Specialization
4. Avoid duplication
5. Lower transportation costs
6. No competition within units for resources
7. Common supply base
Following are the advantages of a decentralized purchasing organization.
1. Closer knowledge of requirements
2. Local sourcing
3. Less bureaucracy
| A. | Decentralized purchasing reduces the duplication of activities | False, decentralization creates duplication of work | |
| B. | Centralized purchasing leads to local sourcing | False, decentralized leads to local sourcing, due to authority given to the department | |
| C. | Decentralized purchasing uses a common supply base | False, due to centralization, purchase is done from common supply base | |
| D. | Centralized purchasing can lead to greater quantity discounts | True, due purchasing in lots and from same supplier base, it leads to quantity discounts |
ANS: D
