Test Bank For Principles Of Supply Chain Management: A Balanced Approach, 3rd Edition

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Chapter 1—Introduction to Supply Chain ManagementTRUE/FALSE1.According to the textbook, the keys to successful supply chain management include trust and honest,accurate communications between supply chain partners.ANS:TPTS:1REF:p. 2-92.According to the textbook, rapidly changing communication technology makes the development ofglobal partnerships more difficult than in the past.ANS:FPTS:1REF:p. 53.According to the textbook, supply chains include raw material suppliers, intermediate componentmanufacturers, end-product manufacturers, wholesale distributors, and retailers.ANS:TPTS:1REF:p. 64.According to the textbook, retail stores are considered the focal firms in modern supply chains.ANS:FPTS:1REF:p. 65.Reverse logistics activities include the return of defective and damaged items to the manufacturer, andthe recycling of used packaging.ANS:TPTS:1REF:p. 66.Trucking companies, airfreight shipping companies, and information system providers can all beconsidered service providers to the supply chain.ANS:TPTS:1REF:p. 77.According to the textbook, a supply chain's end customers are the only true source of income for allsupply chain organizations.ANS:TPTS:1REF:p. 78.Effective supply chain management relies on competitive bidding, corporate privacy, and contractsbased on short-term performance.ANS:FPTS:1REF:p. 89.The bullwhip effect is the result of companies producing excessive defective products; defective itemsare whipped back from the end customer toward the manufacturer of the defect.ANS:FPTS:1REF:p. 1110.According to the textbook, in the 1950's and 1960's, mass production techniques focused on creatingsupplier partnerships, improving process design and flexibility, and improving product quality.ANS:FPTS:1REF:p. 12

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11.According to the textbook, third-party logistics providers (3LPs) do not offer assistance with helpingproducts clear customs.ANS:FPTS:1REF:p. 1412.According to the textbook, environmental and social impacts are considered outside of supply chainmanagement.ANS:FPTS:1REF:p. 1513.According to the textbook, 'integration' is one of the four supply chain elements.ANS:TPTS:1REF:p. 1514.ISO9000 is a standardized program for certifying suppliers.ANS:TPTS:1REF:p. 1615.The universally accepted definition of supply chain management is "the management and integrationof the parties involved in producing the end items coveted by consumers."ANS:FPTS:1REF:p. 1716.The assembly or production of finished products, producing the right amount of product, and ensuringthat finished products meet specific quality, cost, and customer service requirements can all beconsidered elements of operations.ANS:TPTS:1REF:p. 1717.Improved quality is one benefit of using a lean production system.ANS:TPTS:1REF:p. 1918.Successful supply chain integration occurs when supply chain participants realize that the needs anddesires of the end item manufacturer dictate the objectives and policies of all the other supply chainparticipants.ANS:FPTS:1REF:p. 21-2219.Trends in supply chain management include increasing inventory levels and considering theelimination of logistics intensive online retailing.ANS:FPTS:1REF:p. 22-2720.Trends in supply chain management include increasing supply chain responsiveness and consideringthe negative environmental impacts of supply chains.ANS:TPTS:1REF:p. 24MULTIPLE CHOICE1.Which of the following is an illustration of a company that has vertically integrated?

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a.A computer manufacturer that acquires its computer components supplierb.A computer manufacturer that acquires warehouses to aid in its product distributionc.A computer components supplier that begins to assemble computers for sale to consumersd.All of theseANS:DPTS:1REF:p. 52.Successful modern supply chain management typically includes the practice of:a.Keeping high inventories throughout the supply chainb.Always purchasing materials with the lowest per unit costc.The sharing of information between supply chain partnersd.Leadership through the practice of issuing ultimatums to your supply chain partnersANS:CPTS:1REF:p. 53.According to the textbook, which of the following statements is TRUE? Consumers buy productsbased on a combination of:a.Cost, quality, manufacturer, and simplicity of useb.Cost, quality, availability, and brandc.Cost, quality, advertising, store preference, and appearanced.Cost, quality, availability, maintainability, and reputationANS:DPTS:1REF:p. 64.Which of the following is a reverse logistics activity:a.Recycling products and componentsb.Delivering finished goods to your customerc.Developing a collaborative relationship with your supplierd.Managing the quality of productsANS:APTS:1REF:p. 65.According to the textbook, conditions which must be present for successful supply chain managementinclude:a.Vertical Integrationb.Corporate contracts regarding performance expectationsc.Short-term company focused performanced.Cooperation among firmsANS:DPTS:1REF:p. 86.A certain supply chain is made up of:1.Raw Materials Supplier2.Components Manufacturer3.A firm that manufacturers Sub-assemblies4.End Item Manufacturer5.Wholesale Distributor6.Local Retail Chain WarehouseWho is considered the second tier supplier of the firm that manufacturers Sub-assemblies?a.Raw Materials Supplierb.Wholesale Distributorc.The final end item consumerd.Components Manufacturere.Local Retail Chain Warehouse

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ANS:APTS:1REF:p. 97.A certain supply chain is made up of:1.Raw Materials Supplier2.Components Manufacturer3.A firm that manufacturers Sub-assemblies4.End Item Manufacturer5.Wholesale Distributor6.Local Retail Chain WarehouseWho is considered the End Item Manufacturer's second tier supplier?a.Raw Materials Supplierb.Wholesale Distributorc.The final end item consumerd.Components Manufacturere.Local Retail Chain WarehouseANS:DPTS:1REF:p. 98.The following is an example of the bullwhip effect:a.Barkley's produces a defective product and thus realizes an excessive increase in consumerreturnsb.Barkley's products are so successful that it adds a new retailer for distributionc.Barkley's incorrectly anticipates consumer demand resulting in stockouts at severalpopular retailersd.Barkley's is unhappy with the performance of a distributor which causes a chain-reactionof replacements to companies involved in its supply chainANS:CPTS:1REF:p. 119.The term Supply Chain Management and the field of study it represents today seems to have emergedin the:a.1980'sb.1970'sc.1960'sd.1990'sANS:APTS:1REF:p. 12-1310.Which of the following would be considered a third party provider?a.A Raw materials supplierb.An intermediate component manufacturerc.A firm that leases storage warehousingd.An end product manufacturerANS:CPTS:1REF:p. 1411.Which of the following was a popular way in the 1990's of developing radically new businessprocesses in an effort to reduce waste and increase performance?a.Business process reengineeringb.Benchmarkingc.Process integrationd.Vertical integrationANS:APTS:1REF:p. 14

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12.Which of the following can be classified as a 3PL?a.A company that offers warehousing servicesb.A company that offers transportation servicesc.A company that offers customs clearing servicesd.All of theseANS:DPTS:1REF:p. 1413.The following supply chain concept was introduced in the 1990's in an attempt to reduce waste andincrease performance:a.Business Process Reengineeringb.Offshoringc.Vertical Integrationd.Material Requirement PlanningANS:APTS:1REF:p. 1414.According to the text, the FOUR important elements of the supply chain are:a.Purchasing, manufacturing, transportation, retail storesb.Purchasing, operations, logistics, integrationc.Purchasing, manufacturing, logistics, transportationd.Purchasing, operations, manufacturing, distributionANS:BPTS:1REF:p. 1515.Encouraging or helping a firm's suppliers to perform in a desired fashion can be referred to as:a.Progressive procurementb.Supplier managementc.Right-shoringd.Supply chain performance managementANS:BPTS:1REF:p. 1616.One operational method for controlling and managing inventory is the implementation of a softwaresystem which can be referred to as:a.Material requirements planning (MRP)b.Demand capacity tracking (DCT)c.Inventory sourcing (IS)d.Demand process reengineering (DPR)ANS:APTS:1REF:p. 1717.Which of the following acronyms is NOT paired with its correct "translation?"a.TQM−Total Quality Managementb.JIT−Just-in-Timec.MRP−Materials Requirements Planningd.ERP−Estimated Response ParametersANS:DPTS:1REF:p. 1718.Which of the following statements is TRUE?a.Supply chain management was invented by the auto manufacturing industryb.Strategic partnerships are seen as one of the foundations of supply chain managementc.Purchasing is seen as the final and most difficult step in the supply chain

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d.Service response logistics is the digital distribution of servicesANS:BPTS:1REF:p. 1719.Which of the following acronyms is NOT paired with its correct "translation?"a.TQM−Total Quality Managementb.JIT−Just-in-Timec.MRP−Manufacturing Responsiveness and Planningd.ERP−Enterprise Resource PlanningANS:CPTS:1REF:p. 1720.Lean production is typically associated with which of the following company's production systems?a.Proctor and Gambleb.Toyotac.Boeingd.IntelANS:BPTS:1REF:p. 1921.Transportation management, customer relationship management, network design, and service responselogistics are all important issues that are most closely related to:a.Purchasingb.Manufacturingc.Integrationd.LogisticsANS:DPTS:1REF:p. 19-2022.Which of the following is strategy usually employed by lean organizations in an effort to ensurecontinued quality compliance among suppliers and with internal production facilities?a.MRP IIb.Six Sigmac.3PLd.CAPSANS:BPTS:1REF:p. 1923.Assembly or production of finished products, producing the right amount of product, and ensuring thatfinished products meet specific quality, cost, and customer service requirements are all importantissues that are most closely related to:a.Purchasingb.Operationsc.Integrationd.DistributionANS:BPTS:1REF:p. 1924.Right-shoring refers to:a.An expansion of the supply chainb.Contraction activities within the supply chainc.An increase in the responsiveness of the supply chaind.A decrease in the responsiveness of the supply chainANS:BPTS:1REF:p. 23

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25.Which of the following is a system that aids in controlling inventory?a.MRPb.ERPc.AARPd.Both MRP and ERPANS:DPTS:1REF:p. 23SHORT ANSWER1.There are many definitions for supply chain management.Define supply chain management in your own words using the components that all three of the text'sdefinitions have in common.ANS:Improve operating efficienciesQualityCustomer service among the collaborating organizationsPTS:5REF:p. 82.Explain the concept of 'value-enhancing benefits' by giving THREE examples of benefits that may berealized by a firm that successfully manages its supply chain.ANS:Lower purchasing and inventory carrying costsBetter product qualityHigher levels of customer serviceIncrease in sales.PTS:5REF:p. 9-113.Explain the difference between logistics and supply chain management.ANS:Supply chain management involves the integration of key business processes among participants andthe supply chain acts and reacts as one entity. The four elements of supply chain include supply,operations, logistics, and integration.Logistics is a subset element of supply chain management. Important issues that typically fall underlogistics include: transportation, network design, global supply chain issues, sustainability, and serviceresponse logisticsPTS:5REF:p. 154.List three concepts used by supply chain managers in an attempt to make a firm more flexible andresponsive to customers' changing needs:ANS:Agile manufacturingJITMass customization

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Lean manufacturingQuick responsePTS:5REF:p. 24ESSAY1.Discuss the differences between supply chain partnerships of the past and those that have developedtoday.ANS:In the past, supply chain partnerships did not really exist.•Supply chains were seen as a series ofindependent organizationsthat were looked on, toperform their core competency for the sake of their downstream "partner."•Firms in the pastdid not seek to share information.•Buyers of supplies and services instead usually were reduced tobargain hunters. Lowcost was valued over quality.•Traditional relationships were also characterized by alarge number of partnersandshort-term contracts. This put an emphasis on low cost that would provide short-termprofits versus sustainable profits that might come along with consistently high qualitygoods and services.•In some cases, conglomerates were formed by firms seeking more supply chain control.Modern supply chain partnerships are much different.•Partnerships of today encouragesharing and collaborationfrom the design phase to thedelivery phase.•Partners, nowadays, see each other as achain of customersconnected by their goal ofpleasing the final end customer.•While cost is still an important aspect of creating value for the customer,today supplychains also focus on the importance of higher quality, more customization, and swiftdelivery service.•It is for this reason that modern partnerships focus on collaboration from the momentthey begin to design a product until the product's lifecycle has run its course.•Modern partnerships often include asmall number of partnerswho understand the valueoflong-term contracts that value quality, speed, and flexibilityas much, if not more,than cost.PTS:102.List the four elements of supply chain management and provide a short description of each of the fourelements. What types of failures might each of those elements create within the supply chain? Whymight those results be linked to errors in a particular element?ANS:Note: While the descriptions of each of the four elements are relatively general and accurate, the typesof failures each of the elements may be responsible for, are rather long lists. Therefore, in many casesit is important for the student to explain why one element may ultimately be responsible for a certainproblem with a list.a.Purchasing Elements−The purchasing elements of the supply chain take into accountthe filling of requisitions through a process of finding suppliers, developing supplieralliances, managing suppliers, strategic sourcing, supplier certification, and purchasingthe correct amounts of product with the proper balance of quality, speed, and flexibility

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at a price that will still provide acceptable return.Some of the mistakes in purchasing can cause low-quality end-items, high inventories,stockouts, excessive cost of goods sold, interruptions in production, or excessiveoperational costs.b.Operations Elements−The operations elements of the supply chain take into account theassembly or processing of materials and components into finished products or services.Operations is also responsible for creating the right amount of product within anappropriate period of time that will meet the demand needs of the customer while stillsatisfying their specific needs in terms of quality, cost, customization, and timelydelivery.Mistakes in operations can cause shortages, stockouts, high inventories, low inventories,excessive operational costs, late deliveries, low-quality end-items, defects, or dangerousend-items.c.Logistics Elements−the distribution elements of the supply chain are focused ondelivering products to customers at the right time, quality, and volume. The distributionelements include transportation, warehousing, break-bulking, packaging,containerization, and any services related to developing and keeping a distributionitinerary.Mistakes in distribution can cause shortages, stockouts, excessive operational costs,damaged end-items, high pilferage rates, delivery errors (wrong item to the wrongdestination), and lost inventory.d.Integration Elements−The integration elements involve the planning and coordinationrequired to create a seamless supply chain. Supply chain integration requiresmanagement to inform all supply chain parties of how important it is for them to shareinformation, articulate their needs, and develop relationships.Poor supply chain integration will cause conflicts between supply chain partners, latedeliveries, tardy production, overproduction, under production, poor forecasting, overpurchasing, material shortages, long lead times, high operational costs, excessive waitingtimes, and excessive inventories.PTS:103.Starbucks sells coffee and other items and consumables through their tens of thousands of worldwideoutlets. Starbucks must satisfy their worldwide clientele with premium quality beverages, foods, andproducts that are representative of the Starbucks name and image.Answer the following questions in an effort to describe the importance of Starbucks effectively andefficiently managing their worldwide supply chain.1.What are the expectations of Starbucks' customers in terms of Starbucks' coffeebeverages?2.What should be the primary goals of Starbucks' coffee bean supply chain if they plan tobe a customer focused organization?3.How does purchasing help Starbucks achieve their supply chain goals?4.How do the operations elements of Starbucks' supply chain aid in achieving their supplychain goals?5.How does logistics aid in Starbucks achieving their supply chain goals?

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6.Why is effective integration required for Starbucks to achieve their goals?ANS:Note: This is a basic estimation of the Starbucks supply chain. The question is intended to demonstratethat even a simple coffee bean supply chain requires effective management of all the supply chainelements. In addition, students will see that a good supply chain has goals that are aligned with theneeds and desires of the customer.1.Starbucks beverages need to be high quality drinks of a consistent quality no matter thelocation. They must be readily available and quickly processed to the customer's specificspecifications.In other words, high quality, consistent quality, speed of delivery, moderate pricing,beverage customization, and excellent service are all important in satisfying thecustomer.2.Starbucks requires a variety of high quality beans to be readily available to everyStarbucks location on a consistent basis. The beans must be purchased and delivered at areasonable cost.3.Purchasing would be responsible for developing relationships with coffee bean supplierswho are reliable. They would need to be able to communicate their quality and volumeneeds to the supplier while still being able to negotiate contracts that provide for areasonable pricing structure.4.The operations elements of the supply chain can include:a.Growing the beansb.Processing the beansc.Processing each drink order in the retail outletd.Maintaining the facilitiesThese all have direct ties to product quality and consistent quality. In addition, theseoperations activities, as well as others not listed can have an effect on service. Finally,design and execution of the in-store processes can create opportunities for customizationin a timely fashion.5.Logistics would be responsible for the timely pick-up and delivery of the beans from thesuppliers to distribution centers to the retail outlets. The packaging and storage of thebeans during distribution have an effect on the quality of the beans that finally made it tothe retail outlets. Efficient and effective distribution will help insure that Starbucksoutlets consistently have a stock of the finest coffee beans the purchasing departmentcan acquire.6.Integration requires timely execution of numerous process steps. This includes effectiveand efficient planning and coordination between multiple parties (Starbucks, deliverycompanies, farmers, bean processors, outlet managers and employees...).The following example demonstrates how integration between the other three supplychain elements is required.In order for a supply chain to meet all of the needs outlined in the goals section, beansmust be grown, immediately processed, and then purchased by Starbucks. Distributionmust be aware of the purchase, and then be aware of when and where to pick-up the

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beans. They will then have to have a location where those beans must be delivered. Thebeans can then be broken down to per store orders which will then be shipped to andreceived by retail outlets. The retail outlets will have to have enough space to properlystore the beans. Corporate operations specialist will then be responsible for havingdesigned and implemented high speed processes that can consistently provide thebeverages ordered by each individual customer.PTS:10

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Chapter 2—Purchasing ManagementTRUE/FALSE1.Purchasing can be broadly classified into two categories: merchants and industrial buyers.ANS:TPTS:1REF:p. 392.The acquisition of services is also known as contracting.ANS:TPTS:1REF:p. 393.The term Supply Management is used to describe responsibilities above and beyond those oftraditional purchasing.ANS:TPTS:1REF:p. 394.In the context of Supply Chain Management, the acts of obtaining raw materials, services,maintenance, repair and operating supplies for money can all be defined as purchasing.ANS:TPTS:1REF:p. 395.Industrial supply chain member buyers purchase their merchandise in volume to take advantage ofquantity discounts, transportation economy, and storage efficiency, and then they create value throughservices like consolidating merchandise or break bulking.ANS:FPTS:1REF:p. 396.The goal of a good purchasing system is to ensure efficient information transitions between thematerials users, the purchasing personnel, and the suppliers.ANS:TPTS:1REF:p. 39-407.There is a clear line between purchasing activities and the supply management function.ANS:FPTS:1REF:p. 408.According to the Annual Survey of Manufacturers, the cost of materialsexceedsthe value added to thematerials during manufacturing.ANS:TPTS:1REF:p. 409.The goal of a proper purchasing system is to ensure the efficient transmission of information from theusers to the purchasing personnel, and ultimately, to the suppliers.ANS:TPTS:1REF:p. 4310.A growing trend among firms that practice supply chain management is supplier development.ANS:TPTS:1REF:p. 4511.A purchase order is legally binding once issued by the buyer.

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ANS:FPTS:1REF:p. 4612.Procurement credit cards can be used for small purchases excluding meals, lodging, and travelexpenses.ANS:FPTS:1REF:p. 5113.Blank check purchase orders, Corporate purchasing cards, Petty cash, and Open-end purchase ordersare all possible alternatives to dealing with small value purchases such as those for office supplies.ANS:TPTS:1REF:p. 5114.If the break-even point in a typical make-buy scenario is 24,000 units and 8,000 units are required,than the firm should choose to make.ANS:FPTS:1REF:p. 5515.If the break-even point in a typical make-buy scenario is 10,000 units and 15,000 units are required,than the firm should choose to make.ANS:TPTS:1REF:p. 5516.The possibility of events like strikes, assembly line breakdowns, and natural disasters are all reasons acompany should favor using a single supplier.ANS:FPTS:1REF:p. 60-6117.Centralized purchasing is the practice where individual, local purchasing departments throughout asingle corporation make their own, individual purchasing decisions to fulfill their individual localneeds.ANS:FPTS:1REF:p. 62-6318.Decentralized purchasing is the practice where individual, local purchasing departments throughout asingle corporation make their own, individual purchasing decisions to fulfill their individual localneeds.ANS:TPTS:1REF:p. 62-6319.NAFTA and the WTO are trade organizations seeking to reduce tariff and non-tariff barriers among itsmember countries.ANS:TPTS:1REF:p. 63-6420.The WTO is a trade organization seeking to establish trade barriers that will protect member countriesby excluding nations that pose an economic threat.ANS:FPTS:1REF:p. 64MULTIPLE CHOICE

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1.The hybrid purchasing system, such as the one utilized by Harrah's, includes many benefits. In such asystem the regional office preserves four fundamental purchasing rights. Which of the following isNOT one of those rights?a.Allow suppliers to bid for each purchaseb.Select the supplierc.Use whichever pricing method is appropriated.Monitor contacts with potential suppliersANS:APTS:1REF:p. 382.According to the textbook, the Las Vegas division of Harrah's Entertainment utilizes which of thefollowing purchasing structures?a.Autocraticb.Decentralizedc.Centralizedd.Hybrid (centralized-decentralized)ANS:DPTS:1REF:p. 383.The primary goals of purchasing include all EXCEPT:a.Secure materials at the lowest costb.Ensure the highest quality raw materials are purchasedc.Improve the quality of finished goods producedd.Maximize customer satisfactionANS:BPTS:1REF:p. 404.The measurement of the impact of change in purchase spend on a firm profit before taxes, assuminggross sales and other expenses remain unchanged, is referred to as:a.Break-Even Analysisb.Direct Offsetc.Profit-Leverage Effectd.Leveraging Purchase VolumeANS:CPTS:1REF:p. 425.When calculating Return on Investment, current assets include:a.Cash, Accounts Receivable, and Inventoryb.Cash, Accounts Receivable, and Equipmentc.Accounts Receivable, Equipment, and Real Estated.Equipment, Buildings, and Real EstateANS:APTS:1REF:p. 426.Which type of requisition is used for materials and standard parts that are requested on a recurringbasis?a.Open requisitionb.Blanket requisitionc.Traveling requisitiond.Recyclable requisition (Cyc-Rec)ANS:CPTS:1REF:p. 437.Inventory Turnover can be calculated by:a.Ratio of average inventory cost over cost of goods soldb.Ratio of cost of goods sold over average inventory cost

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c.Ratio of inventory days in stock over average inventory costd.Ratio of average inventory cost over inventory days in stockANS:BPTS:1REF:p. 438.A pre-printed order form for purchasing materials and standard parts that are requested on a recurringbasis is referred to as:a.Material Requisitionb.Purchase Requisitionc.Planned Order Released.Traveling RequisitionANS:DPTS:1REF:p. 449.A form of purchasing that is placed directly to the supplier and suitable when firms use the samecomponents to make standard goods over a relatively long period of time is referred to as:a.Material Requisitionb.Purchase Requisitionc.Planned Order Released.Traveling RequisitionANS:CPTS:1REF:p. 4410.When a material is not available in the warehouse and there is no current supplier for the item, thebuyer must identify a pool of suppliers and issue a:a.Request for Quotationb.Purchase Orderc.Contract for Saled.Sales OrderANS:APTS:1REF:p. 4511.On occasion, firms assist suppliers, new or old, to improve their processing capabilities, product orservice quality, delivery effectiveness, and cost performance by providing the required technical andfinancial assistance. This is referred to as:a.Supplier developmentb.Outsourcingc.Centralized purchasingd.Supplier hybridizationANS:APTS:1REF:p. 4512.TheUniform Commercial Code governs the purchase and sale of goods in the US except in the stateof:a.Hawaiib.Louisianac.Mississippid.South DakotaANS:BPTS:1REF:p. 4613.Which of the following documents is considered the buyer's offer to purchase products or servicesfrom a supplier, is legally binding once the supplier accepts it, and usually has the terms andconditions of purchase preprinted on the back of the document?a.Purchase requisitionb.Planned order release

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