5e Chapter 4 Test Questions

Chapter 4—Ethical and Sustainable Sourcing
TRUE/FALSE
1. Reverse logistics has become an important trend in ethical and sustainable sourcing.
ANS: F PTS: 1
BUSPROG: Analytic LO: 4-1 Bloom’s: Knowledge Difficulty: Easy
2. Demands by customers for companies to become more ethically and environmentally focused have
placed added pressures on firms to improve their performance in supply chain management.
ANS: T PTS: 1
BUSPROG: Ethics LO: 4-1 Bloom’s: Comprehension Difficulty: Easy
3. Sustainable sourcing takes into account the long-term impact on people, profits, and the planet.
ANS: T PTS: 1
4. There are two approaches to deciding whether or not an action is ethical. The first approach is
utilitarianism. The second approach is rights and duties.
ANS: T PTS: 1
5. A practice aimed at ensuring that purchased products or materials meet environmental objectives of
the organization is referred to as green purchasing.
ANS: T PTS: 1
6. As described in the text, a “fair trade product” refers to selling and purchasing products without a cash
transaction.
ANS: F PTS: 1
BUSPROG: Analytic LO: 4-2 Bloom’s: Comprehension Difficulty: Easy
7. Ethical sourcing policies should NOT include determining where all purchased goods come from and
how they are made.
ANS: F PTS: 1
8. Sustainable sourcing practices include promoting diversity by intentionally buying from ethnic
minority businesses.
ANS: F PTS: 1
9. It is considered unethical for a firm to intentionally buy from women-owned businesses.

ANS: F PTS: 1
10. Companies outsource to help them reach their sustainability goals.
ANS: T PTS: 1
11. Functional products are characterized by low profit margins, relatively stable demands, and high levels
of competition.
ANS: T PTS: 1
12. It is important for firms to addresses the impact of ethical and sustainable sourcing on other facets of
the organization and its trading partners.
ANS: T PTS: 1
13. Because internationally recognized certifications like ISO 9000 are becoming so common among
suppliers, it is becoming more important that purchasing firms develop internal certification programs
that are geared toward the specific needs of the purchasing organization.
ANS: T PTS: 1
14. Environmental supplier certifications can be used to identify rogue suppliers before they can cause
problems.
ANS: T PTS: 1
15. The use of ethical and environmental certifications for suppliers is decreasing.
ANS: F PTS: 1
16. Creating strategic supplier alliances benefits firms by increasing the performance and value of
suppliers as well as increasing brand awareness.
ANS: T PTS: 1
17. Developing a collaborative negotiation infrastructure includes four steps: build a preparation process,
develop a negotiation database, design a negotiation launch process, and institute a feedback
mechanism.
ANS: T PTS: 1
19. Rewarding suppliers for maintaining high levels of performance is an important step used in
maintaining a successful strategic alliance program.
ANS: T PTS: 1
20. Benchmarking is the practice of watching the mistakes other businesses do and trying to avoid the
same mistakes.
ANS: F PTS: 1
21. There are just a small number of resources available for firms seeking to learn about and implement
successful sourcing practices.
ANS: F PTS: 1
22. It is best for firms to learn through their own experiences the methods and tools that work the best,
rather than benchmarking.
ANS: F PTS: 1
23. Firms assess their sourcing capabilities because the sourcing function is one of the most value-
enhancing functions in an organization.
ANS: T PTS: 1
24. Criteria to evaluate a purchasing department’s performance should include both quantitative and
qualitative assessments.
ANS: T PTS: 1
MULTIPLE CHOICE
1. All of the following are reasons for the increasing use of ethical and sustainable sourcing practices
EXCEPT:
a. Global population growth
b. Increasing environmental awareness
c. Legislation requiring corporate ethical and sustainable sourcing
d. Consumers’ desires for better corporate responsibility
ANS: C PTS: 1
2. ______________ considers the public consequences of organizational buying.

a. The bullwhip effect
b. Ethical sourcing
c. Benchmarking
d. Vendor managed inventory
ANS: B PTS: 1
3. Which of the following is a trend in ethical and sustainable sourcing?
a. Using suppliers who are reducing their carbon footprint
b. Discontinuing purchases from firms that use unacceptable labor practices
c. Reducing the number of delivery miles traveled
d. All of these
ANS: D PTS: 1
BUSPROG: Analytic LO: 4-1 Bloom’s: Application Difficulty: Easy
4. Some businesses refer to sustainability in terms of supporting the three P’s. This stands for:
a. People, place, price
b. Place, price, promotion
c. People, planet, profit
d. Planet, people, price
ANS: C PTS: 1
5. A service where key customers ask suppliers to take on the job of store level replenishment planning is
called:
a. Vendor managed inventory
b. Early supplier involvement scheduling
c. Strategic inventory planning
d. Purchase spend reduction forecasting
ANS: A PTS: 1
6. Which of the following terms refers to an act that creates the greatest good for the greatest number of
people:
a. Rights and duties
b. Corporate responsibility
c. Social sustainability
d. Utilitarianism
ANS: D PTS: 1
7. The Ethical Trading Initiative (ETI) does NOT include which of the following:
a. Workers receive a 30 minute break for an 8 hour shift
b. Working hours are not excessive
c. Regular employment is provided
d. Freedom of association and the right to collective bargaining are respected
ANS: A PTS: 1
8. A fair trade product refers to one that is manufactured or grown by a disadvantaged producer in a
developing country that receives for its goods.
a. Bitcoin
b. A fair price
c. An imported product
d. Freedom of association
ANS: B PTS: 1
9. The purchasing department at Big Horn Sheep Corporation decided to intentionally increase purchases
from small, underdeveloped nations. This decision can be considered:
a. Illegal
b. Unethical
c. Utilitarianism
d. Ethical Sourcing
ANS: D PTS: 1
10. Convincing your supplier to cutting back on packaging, fuel, or electricity is an example of:
a. Ethical sourcing
b. Sole sourcing
c. Sustainable sourcing
d. Global sourcing
ANS: C PTS: 1
11. Promoting diversity by intentionally buying from small firms or ethnic minority businesses is an
example of:
a. Supply base rationalization
b. Ethical sourcing
c. Sustainable sourcing
d. Supply base sourcing
ANS: B PTS: 1
12. Sustainability reporting is ______________ for American companies:

a. Required in the U.S.
b. Mandated quarterly
c. Required every 3 years
d. Largely a voluntary effort
ANS: D PTS: 1
13. Which of the following is NOT a step suggested in the Supply Chain Sourcing Strategy Framework?
a. Establish corporate ethical and sustainable sourcing policies
b. Certify suppliers as ISO 9001 compliant
c. Develop a performance measurement system
d. Prioritize items based on ethical and sustainability opportunities and ease of
implementation.
ANS: B PTS: 1
14. Sustainable sourcing policies should include which of the following?

a. Use of minority workers
b. Fair working conditions
c. Use of renewable energy
d. Use of child labor
ANS: C PTS: 1
15. In designing an ethical and sustainable strategy a firm might make use of which of the following?
a. Hire more supervisors to address problems quickly
b. Use performance measures to identify weaknesses
c. Create many short term relationships with suppliers
d. All of these
ANS: B PTS: 1
16. Leading companies practicing sustainable sourcing and seeking to reduce costs would NOT use which
of the following strategies?
a. Backward integration to purchase suppliers
b. Increase resource efficiencies
c. Avoid use of noncompliant suppliers
d. Rethink transportation and distribution systems
ANS: A PTS: 1
17. The use of environmental supplier certification programs assists companies by which of the following?
a. Identifying strategic alliance candidates
b. Identifying companies who are the most popular with consumers
c. Helping communities who are in jeopardy of plant closures
d. All of the above
ANS: A PTS: 1
18. One standard which is measured in environmental supplier certification is:

a. The number of trucks owned by the supplier
b. Technology investment by the supplier
c. The suppliers’ recycled content
d. The number of on-time deliveries
ANS: C PTS: 1
19. Which of the following could be an ethical and environmental certification requirement?
a. Forest Stewardship Council (FSC) certification
b. Energy Star certification
c. Fair Trade certification
d. All of these
ANS: D PTS: 1
20. ISO 14000 may play a role in a firm’s.

a. Manufacturing flexibility program
b. Supplier certification program
c. Customer certification program
d. Negotiated pricing program
ANS: B PTS: 1
21. Successful strategic supplier alliances can result in which of the following?
a. Better market penetration.
b. Access to new technologies and knowledge
c. Higher return on investment
d. All of these
ANS: D PTS: 1
22. Which of the following can be used as a punishment for suppliers that perform poorly?
a. Elimination of future business with the focal firm
b. Downgrade the supplier's status
c. Billback penalty
d. All of these
ANS: D PTS: 1
23. Which of the following is TRUE?

a. VMI stands for Vertically Managed Inventory
b. 3PL stands for Third Party Leverage
c. VMI stands for Vendor Managed Inventory
d. 3PL stands for Three Point Logistics
ANS: C PTS: 1
24. A negotiation where both sides work together to maximize the joint outcome or to create a joint
optimal result is referred to as:
a. Distributive negotiations
b. Win-win negotiations
c. Optimal review period
d. DMAIC improvement cycle
ANS: B PTS: 1
25. For a large company with many strategic supplier alliances, what would be the best way to manage
them?
a. Create an alliance board to oversee alliances
b. Reduce the number of supplier alliances to less than five
c. Hire an outside firm to manage them
d. All of the above
ANS: A PTS: 1
26. Which of the following is NOT a typical strategy for firms to obtain benchmarking data about other
companies?
a. Discussing sourcing strategies with colleagues at business association meetings
b. Hiring former employees from other companies and assessing their knowledge
c. Utilizing resources from the Center for Advanced Purchasing Studies
d. Collecting published trade information on benchmarking studies
ANS: B PTS: 1
27. Benchmarking is:

a. A system of performance metrics that seeks to motivate suppliers to perform better.
b. A practice where companies attempt to learn and apply the best practices of other
companies.
c. A system of marking defective inbound inventory so it can quickly be identified for return
to the supplier.
d. A program where suppliers compete for contracts, but those companies who are outbid are
provided advice for winning future contracts
ANS: B PTS: 1
28. The main benefit(s) from benchmarking sourcing practices is/are:

a. Savings in energy consumption and materials, lower distribution costs, and improved
corporate image among regulators, customers and community.
b. Lower prices of goods and services, use of fewer buyers and lower administrative costs
c. Larger market for products, economies of scale in purchasing and production, and lower
labor costs.
d. Allows firms to leapfrog the experience-gaining stage by trying things that have worked
well for other companies.
ANS: D PTS: 1
29. Why do firms assess their sourcing capabilities?

a. They are looking for ways to reduce their employee headcount
b. They can easily spot suppliers who are not practicing sustainable sourcing practices
c. They can gauge their success in improving their own value-enhancing contributions to the
firm
d. All of the above
ANS: C PTS: 1
30. Which of the following is true of today’s purchasing staff members?

a. They are viewed as strategic internal suppliers of the organization
b. They are expected to generate cost savings for the organization
c. They are expected to generate service and quality enhancements for the organization
d. All the above
ANS: D PTS: 1
31. Which of the following should NOT be used as assessment criteria to evaluate the purchasing
department’s performance?
a. Improving time to market
b. Lowering inventory turnover rates
c. Participating in value engineering/value analysis efforts
d. Creating supplier alliances
ANS: B PTS: 1
SHORT ANSWER
1. Purchasing goods from suppliers in developing countries be risky. Why might this be risky? How can
firms reduce this risk?
ANS:
 Negative publicity could be connected to a firm if human rights, animal rights, safety, or
environmental abuses become associated with the firm’s suppliers or foreign
manufacturing facilities, this could lead to product boycotts, a tarnished company image,
brand degradation, lower employee morale, and ultimately lower sales, profits, and stock
prices.
 Firms can minimize risk by making sure ethical sourcing policies include: Use of ethical
ratings for suppliers as well as other standard performance criteria; Use of independent
verification of supplier compliance; Reporting of supplier compliance performance to
shareholders; Providing detailed ethical sourcing expectations to suppliers. Determining where
their purchased goods come from and how they are made; and Knowing if suppliers promote
basic workplace principles; Firms can minimize risk by making sure ethical sourcing policies
include: Use of ethical ratings for suppliers as well as other standard performance criteria; Use
of independent verification of supplier compliance; Reporting of supplier compliance
performance to shareholders; Providing detailed ethical sourcing expectations to suppliers.
Determining where their purchased goods come from and how they are made; and Knowing if
suppliers promote basic workplace principles.
PTS: 5
BUSPROG: Communication LO: 4-1 Bloom’s: Comprehension Difficulty: Moderate
2. Sustainable sourcing is a rather common practice among firms in many industries. What are THREE
possible benefits companies practicing sustainable sourcing seek to achieve:
ANS:
 Increased revenues via new and differentiated products.
 Cost reduction gained via resource efficiency, noncompliance fines, and other operation
efficiencies Cost reduction gained via resource efficiency, noncompliance fines, and other
operation efficiencies.
 Managing risk by reducing damage to the brand, being compliant, and capturing socially
responsible clientele.
 Building intangible assets  Improving brand and reputation by being more socially and
environmentally responsible.
PTS: 5
2. As relationships with suppliers become more trusted, reliable, and long-term in nature, early supplier
involvement has become a popular strategy among firms. Explain THREE benefits gained from using
this strategy.
ANS:
Other answers are also possible.
 Reduce Costs  Input from a supplier representative can help firms reduce material cost by
suggesting use of less-expensive materials or more standardized parts. Reductions can be
achieved in operational costs, costs associated with defects, costs associated with downtime,
standard parts, fewer parts, and less expensive materials.
 Improved Quality - The sharing of information allows the best parts and processes to be
designed and used in the manufacturing of the end item. Getting suppliers involved in the
product design process can help firms to design better quality products.
 Reduced New Product Development Time - When a supplier is involved in the buyer’s new
product design process, the part and process changes can be timed to be in place and available
when first needed by the buyer.
 Establishes a Level of Trust and Cooperation  In this age of strategic alliances, establishing
trust and cooperation early in the lifecycle product can pay dividends long into the future of
the product's lifecycle. Firms can establish levels of trust and cooperation that may result in
future collaborative projects.
PTS: 5
3. What is the purpose of supplier certification programs? Describe a certification program that would
help companies who are looking for ethical and sustainable suppliers.
ANS:
 Ethical and sustainable supplier certifications are one way to identify strategic alliance candidates
or to further develop existing alliances. To become certified, a supplier must undergo a series of
audits as well as on-site assessment. The certifications are beneficial when a firm is seeking to
reduce purchases from marginal or poor-performing suppliers.
 ISO 14000 is a family of international standards for environmental management. Becoming ISO
14000 certified enables an organization’s management, employees and external stakeholders to
measure and improve environmental impact. Standards include reduced cost of waste
management, savings in energy consumption and materials as well as lower distribution costs.
PTS: 5
4. Describe THREE important steps in organizing and managing a successful strategic alliance program.
ANS:
 Determine how the program will be organized. For example, it can be based on business units,
geographical areas, or product lines.
 Create ways to disseminate information such as alliance strategies, goals and policies quickly
and effectively through the organization. Make use of email, text, websites, etc.
 Establish commitment to the program by assigning a director or vice-president to report to top
management. Obtain acceptance by the line managers and their employees.
 Continually evaluate alliance performances and make successes visible to the manager and
employees. Since alliance goals change over time, they must be evaluated periodically.
 Reward suppliers for improving or maintaining high levels of performance. Rewards typically
include increased business, banquets and other nonmonetary awards.
PTS: 5
ESSAY
1. Service companies like beauty parlors, cleaning companies and delivery companies are also becoming
aware of the trends in ethical and sustainable sourcing. Describe FOUR ways a service company can
use ethical and sustainable sourcing. Provide an example of how this can happen.
ANS:
 A service company which uses ethical and sustainable sourcing practices can advertise this to
the public. This will demonstrate their commitment to saving the environment as well as
promoting their ethical standards. Example - Display this commitment on their web-site.
 It is also important for a service company to make sure their working conditions are safe and
hygienic and that working hours comply with national laws. Employees should have the right
to join unions. Example. Company reviews the ETI Base Code and makes sure it is
maintaining proper standards.
 When a service company purchases supplies for the company, it should select environmentally
and socially conscious suppliers. Ex. Company uses suppliers who have ethical and
environmental certifications.
 Management can encourage its employees to make conscious decisions in cutting back on
electricity use. This will help to reduce a firms’ energy consumption. Example -
Raising/lowering thermostats or turning off appliances when not in use.
 Products used by the service company should be energy efficient. This can include low-water
consumption products. Example – Product has automatic shut-off when not in use.
 They should make sure there is no discrimination in their hiring, compensation, promotion,
training, retiring or termination practices. Example - Service companies can make a concerted
effort in their hiring practices to promote diversity.
 Many others possible.
PTS: 10
BUSPROG: Ethics LO: 4-1 Bloom’s: Application Difficulty: Difficult
2. Home Depot is a retail leader in selling home improvement tools and materials. Home Depot wants to
become more environmentally conscious.
Answer the following series of questions in an effort to develop a plan that will guide Home Depot
executives into transforming Home Depot into a sustainable organization through green sourcing.
a. Define sustainability.
b. Outline a set of goals (FOUR) that would lead Home Depot down a sustainable path.
c. How do these goals make sense from both a financial and environmental perspective?
d. What are some ways supplier managers can aid in achieving these goals?
ANS:
a. According to the textbook: Sustainability is the ability to meet current needs without
hindering the ability to meet the needs of future generations in terms of economic,
environmental, and social changes.
b. The following are some potential goals that would lead Home Depot down a sustainable
path:
1. Reduce waste
2. Reduce packaging
3. Reduce fuel and energy consumption
4. Reducing material consumption
5. Avoid using noncompliant suppliers
6. Better route management
7. Many others possible.
c. All of the above goals directly translate into lower costs which can then easily translate
in economic gains for the organization. Also, while they are all methods that translate
into cost saving, they all reduce the burden on future generations by conserving
resources and minimizing both toxic and non-toxic wastes.
Additionally, the reduction or elimination of dangerous wastes or non-environmental

practices can reduce or eliminate government fines and penalties and also negative
publicity.
d. Supplier managers are required to

1. Explore material/product options that are deemed environmentally friendly
2. Purchase more efficient packaging options Explore re-usable packaging
options
3. Motivate suppliers to change their business practices
4. Consider suppliers that are located closer to reduce emissions created during
transportation
5. Communicate corporate environmental policies to suppliers
6. Communicate with operations and distribution so that integrated supply chain
actions are aligned with corporate goals.
7. Communicate with designers and manufacturers on methods and materials that
lead to more sustainable business practices.
8. Many others possible.
PTS: 10
BUSPROG: Communication LO:4-4 Bloom’s: Application Difficulty: Difficult
3. Explain why sourcing practices are benchmarked. Provide TWO examples of resources available for
firms seeking to implement successful sourcing practices.
ANS:
 Sourcing practices are benchmarked to allow firms to develop a standard against which to
compare their performance. Benchmarking shortens the learning curve by allowing firms to
make use of what works for other companies.
o CAPS – Center for Advanced Purchasing Studies provides research studies,
benchmarking reports, and best practices case studies They organize purchasing
symposiums and roundtable discussions for purchasing professionals and academics.
o The Supply-Chain Council helps practitioners reduce their supply chain costs and
improve customer service by providing their Supply Chain Operations Reference
(SCORE) model as a framework for supply chain improvement.
o The Arizona-based Institute for Supply Management (ISM) provides resources such as
a monthly publication featuring the latest supply management trends and information.
They also publish the Journal of Supply Chain Management, organize several annual
global supply management conferences, and support many seminars and web
conferences for supply management professionals.
PTS: 10
4. Answer the following 3 questions:

a. Why would a firm want to assess their sourcing capabilities?
b. List FIVE assessment criteria to evaluate the purchasing department’s performance.
c. What kind of performance tool can be used to assess the criteria listed?
ANS:
a. Why would a firm want to assess their sourcing capabilities?
Firms assess their sourcing capabilities because it is one of the most value-enhancing
functions in an organization. There can be tremendous cost savings for the firm and its
customers when purchases are made with the objectives of the firm in mind. To verify
whether the sourcing function is performing in a positive manner, they must be
evaluated against some standards or benchmarks. Management should continuously
audit their capabilities and successes in these areas.
b. List FIVE assessment criteria to evaluate the purchasing department’s performance.

1. participating in and leading multifunctional teams
2. participating in value engineering/value analysis efforts
3. finding and evaluating ethical and sustainable suppliers
4. furthering the integration and development of existing key suppliers
5. managing and developing local, regional, and global suppliers
6. creating early supplier involvement initiatives
7. creating strategic supplier alliances
8. contributing to new product development efforts
9. maintaining and improving internal cooperative relationships
c. What kind of performance tool can be used to assess the criteria listed?
A weighted-factor rating method could be used since the criteria are both qualitative and
quantitative.
PTS: 10

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Chapter 4—Ethical and Sustainable Sourcing

9. It is considered unethical for a firm to intentionally buy from women-owned businesses.

10. Companies outsource to help them reach their sustainability goals.

2. ______________ considers the public consequences of organizational buying.

12. Sustainability reporting is ______________ for American companies:

14. Sustainable sourcing policies should include which of the following?

18. One standard which is measured in environmental supplier certification is:

20. ISO 14000 may play a role in a firm’s.

23. Which of the following is TRUE?

27. Benchmarking is:

28. The main benefit(s) from benchmarking sourcing practices is/are:

29. Why do firms assess their sourcing capabilities?

30. Which of the following is true of today’s purchasing staff members?

 Many others possible.

Additionally, the reduction or elimination of dangerous wastes or non-environmental

d. Supplier managers are required to

4. Answer the following 3 questions:

b. List FIVE assessment criteria to evaluate the purchasing department’s performance.

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