Question 1

uring the transition period, firms incur additional costs related to internal staff providing _______________. There is usually lower efficiency and effectiveness at the beginning of the contract.

Accepted Answer

During the transition period, firms may need to provide additional support and duplicate resources to ensure a smooth transfer of services. This can lead to increased costs and lower efficiency at the beginning of the contract as staff adjust to new processes and systems. Advice, training, and additional resources may also be necessary, but duplicate services and resources are a common factor during transitions.

Question 2

While internal coordination costs are unique to external sourcing alternatives, they must be contrasted against the _______________ and ____________ associated with internally sourcing a product or service.

Accepted Answer

Internal coordination and overhead costs are associated with internally sourcing a product or service, as they involve managing and maintaining internal resources and processes.

Question 3

It has long been recognized in both the strategy and operations literature that the most effective external sourcing relationships involve considerable _______________ and ____________.

Accepted Answer

The answer of It has long been recognized in both...

Question 4

If sourcing internally, firms must estimate the costs of ________ prevention, the costs of _____________, the cost of ___________, and the cost of ____________.

Accepted Answer

When sourcing internally, firms must estimate the costs of preventing defects, the costs of appraising quality, the costs of internal failure, and the costs of external failure. These costs are associated with the four types of quality costs: prevention (preventing defects from occurring), appraisal (checking for defects), internal failure (defects found before the product is delivered), and external failure (defects found after the product is delivered). Only option B correctly identifies these four types of quality costs.

Question 5

roadly, risk can be defined as a measure of the probability and severity of adverse effects. One can divide risk management into four iterative phases. Which of the following is not one of the iterative phases?

Accepted Answer

Contingency planning, risk mitigation, risk monitoring, and risk assessment are all iterative phases of risk management that involve different aspects of identifying, analyzing, and responding to risks. Loss prevention, however, is not typically considered one of these phases, although it is often an important goal of risk management strategies. Instead, loss prevention can be thought of as a broader objective of risk management, which involves identifying and reducing potential sources of harm or damage in order to minimize the negative impact of adverse events.

Question 6

The cost of quality is an essential consideration in sourcing decisions. The costsssociated with ensuring quality are often categorized as: .

Accepted Answer

The cost associated with ensuring quality are often categorized as preventative and appraisal costs, which are costs incurred to prevent defect and appraisal costs are costs incurred to detect defects. Additionally, there are costs related to internal failure, which occur before the product is delivered to the customer, and external failure, which occur after the delivery of the product. Choices A and D are not relevant to the concept of cost of quality.

Question 7

The relationship between higher levels of vertical integration and an increase in bureaucratic costs has been noted in the extant academic literature. Some firms have cast the decision to _____________ versus the decision to externally source as a comparison between the costs of bureaucracy and the cost of _____________.

Accepted Answer

The correct answer is A) vertically integrate / external coordination. This is because the relationship discussed pertains to the choice between increasing vertical integration, which involves incorporating more stages of production or distribution within the firm (thus potentially increasing bureaucratic costs), and sourcing externally, which involves coordinating with outside firms or suppliers (thus incurring costs related to external coordination).

Question 8

One of the most influential factors in _______________ decisions is the coordination requirements. Perhaps nowhere is this more evident than when considering new product or service development.

Accepted Answer

Vertical integration involves the integration of different stages in the production process, and coordination requirements are a major consideration in determining the degree of integration. In the case of new product or service development, coordination between different stages of the process (such as design, production, and marketing) is critical to success, making vertical integration an important factor in decision-making. Horizontal integration involves integration with similar companies, strategic alliances involve partnerships with other businesses, and mergers and acquisitions involve the combination of two or more companies, but none of these options specifically address coordination requirements as a major factor.

Question 9

Some of the often "hidden costs" of outsourcing include training internal employees to become relationship managers rather than technical managers. The hidden costs also include ______________________________________ required to thwart labor disputes.

Accepted Answer

B) retention bonuses, severance packages, employee turnover, and management time are often overlooked costs associated with outsourcing. These elements represent additional expenses that can arise from the need to maintain staff morale, manage transitions, and handle the increased management oversight required when outsourcing functions.

Question 10

report by Cranfield University to the Department for Transport in England recognized outsourcing as one of the key factors driving increased levels of ____________. The idea of ______________ should underlie all of the previously discussed cost categories.

Accepted Answer

The report by Cranfield University to the Department for Transport in England identified outsourcing as a key driver of increased levels of supply chain risk. Therefore, the idea of supply chain risk and risk management should underlie all of the cost categories discussed. None of the other options are supported by the information given in the question.

Question 11

________________ involves answering three questions: (1) What adverse events could happen? (2) What is the probability of these events happening? and (3) What is the financial impact if these events occur?

Accepted Answer

Risk assessment involves identifying potential risks and evaluating their likelihood and potential impact. This information is key in developing strategies for risk management, including contingency planning, risk mitigation, and loss prevention. By answering the three questions posed in the prompt, organizations can gain a more comprehensive understanding of the risks they face and develop effective risk management plans accordingly.

Question 12

The cost reduction must be significantly lower than the current direct operating costs in order for an outsourcing proposal to be attractive. The generic strategic benefits of outsourcing are listed below with one exception. Which one is not one of the strategic benefits?

Accepted Answer

Improvement in the organization's core competencies is not a strategic benefit of outsourcing; rather, it is a result of focusing internally on what the organization does best.

Question 13

In general, one can think of __________ coordination costs as those overhead expenses incurred solely due to the decision to _________ source a product or service.

Accepted Answer

The answer of In general, one can think of __________...

Question 14

Outsourcing initiatives must ___________. The type of management and relationship skills and capabilities must be developed through training and/or recruitment within the outsourcing organizations.

Accepted Answer

Outsourcing initiatives must create value, which encompasses improving efficiency, reducing costs, enhancing quality, and potentially increasing profits. The focus is on overall value creation rather than just one specific aspect like profit or cost reduction.

Question 15

Moreover, Dunn and Bradstreet found that 20 to 25 percent of all outsourcing relationships fail within __________ and nearly half fail within ____ years. This implies that the likelihood of incurring these expenses again, or experiencing costs associated with reinternalizing an outsourced activity, is ___________. Another critical financial consideration with outsourcing is the impact on the ___________.

Accepted Answer

Dunn and Bradstreet found that nearly half of all outsourcing relationships fail within five years, indicating that the likelihood of incurring these expenses again or experiencing costs associated with reinternalizing an outsourced activity is relatively high. Additionally, the impact on the internal workforce is another critical financial consideration with outsourcing.

Question 16

If considering international sourcing alternatives, it is important that the decision makers develop a complete understanding of the costs involved with _____________________ ____________________________________________________________.

Accepted Answer

Understanding the costs of ensuring compliance with governmental laws, regulations, and local business customs is crucial when considering international sourcing alternatives.

Question 17

Tariff rates in ______________ countries are typically less than 10 percent but can be much higher for _________________ nations and for certain products such as agriculture. These environmental parameters may be highly dynamic, requiring analysts to be "on the ground" and well connected to develop a deep understanding of the _______________.

Accepted Answer

Tariff rates in developed countries are typically less than 10 percent, but they can be much higher for lesser-developed nations and for certain products such as agriculture. Analysts need to understand the evolving environment to navigate these dynamics effectively.

Question 18

While a contract is required to legally protect one's interests, an extensive strategic assessment and a true commitment to a cooperative relationship with the service provider are both necessary to realize expected outsourcing benefits. These insights offer valuable guidance to __________________ in terms of where and how ______________ should be applied.

Accepted Answer

The insights are specifically valuable to outsourcing practitioners, and they guide where and how sourcing resources should be applied to achieve the expected benefits.

Question 19

Presumably, _______________ induces higher levels of many overhead administrative functions such as payroll, benefits management, utility expenses, IT expenses, and so forth.

Accepted Answer

The answer of Presumably, _______________ induces higher levels of many...

Question 20

The buying firm will need to ensure that proper mechanisms are in place to make sure that they are capable of detecting _____________ by an external source.

Accepted Answer

Quality failures can occur due to various reasons, including external factors such as the supplier's inability to meet the desired quality standards. Thus, the buying firm should have proper mechanisms in place to detect quality failures caused by external sources. A, B, C, and D are also important factors but are not directly related to external sources.

Quiz 9: Strategic Outsourcing

uring the transition period, firms incur additional costs related to internal staff providing _______________. There is usually lower efficiency and effectiveness at the beginning of the contract.

While internal coordination costs are unique to external sourcing alternatives, they must be contrasted against the ___ and associated with internally sourcing a product or service.

It has long been recognized in both the strategy and operations literature that the most effective external sourcing relationships involve considerable ___ and .

If sourcing internally, firms must estimate the costs of __ prevention, the costs of _, the cost of _, and the cost of ________.

roadly, risk can be defined as a measure of the probability and severity of adverse effects. One can divide risk management into four iterative phases. Which of the following is not one of the iterative phases?

The cost of quality is an essential consideration in sourcing decisions. The costsssociated with ensuring quality are often categorized as: .

The relationship between higher levels of vertical integration and an increase in bureaucratic costs has been noted in the extant academic literature. Some firms have cast the decision to _ versus the decision to externally source as a comparison between the costs of bureaucracy and the cost of _.