APP Negotiation & Supplier Management 2 — Questions and Answers
Question 1: A purchasing practitioner wants to strengthen negotiation leverage before a major contract renewal. Which action BEST builds that leverage?
- Accept the incumbent's first offer to show good faith
- Conduct a formal competitive bid process with alternate suppliers (Correct answer)
- Request a sole-source justification from the incumbent
- Delay the negotiation until after the contract expires
Correct answer: Conduct a formal competitive bid process with alternate suppliers
Running a competitive bid introduces credible alternatives, which is the most direct way to increase buyer leverage.
Question 2: In supplier scorecards, which metric best reflects a supplier's ability to respond to sudden demand changes?
- On-time delivery rate
- Price competitiveness index
- Flexibility and responsiveness score (Correct answer)
- Defect parts per million (PPM)
Correct answer: Flexibility and responsiveness score
Flexibility and responsiveness measures how quickly a supplier adjusts capacity or lead times when buyer demand fluctuates.
Question 3: During negotiation, the supplier states: 'This is our final price — take it or leave it.' What tactic is the supplier using?
- Good cop / bad cop
- Anchoring
- Bogey
- Fait accompli (Correct answer)
Correct answer: Fait accompli
A 'take it or leave it' ultimatum is a fait accompli tactic, presenting a position as non-negotiable.
Question 4: A buyer is negotiating payment terms and wants to improve cash flow. Which term change achieves this?
- Changing from Net 60 to Net 30
- Changing from Net 30 to Net 60 (Correct answer)
- Requiring prepayment on all orders
- Eliminating early payment discounts
Correct answer: Changing from Net 30 to Net 60
Extending payment terms from Net 30 to Net 60 means the buyer retains cash longer, improving working capital.
Question 5: Which supplier relationship strategy is most appropriate for a highly strategic, sole-source component with high supply risk?
- Transactional / arms-length management
- Preferred supplier program with periodic reviews
- Collaborative partnership with joint development (Correct answer)
- Spot market purchasing to minimize commitment
Correct answer: Collaborative partnership with joint development
High strategic value and high supply risk call for deep collaborative partnerships that align interests and reduce mutual vulnerability.
Question 6: A Total Cost of Ownership (TCO) analysis for a supplier should include which cost category that invoice price alone misses?
- Gross margin of the supplier
- End-of-life disposal and maintenance costs (Correct answer)
- Supplier's employee salaries
- Market share of the supplier's industry
Correct answer: End-of-life disposal and maintenance costs
TCO captures costs over the entire lifecycle, including disposal and maintenance, which invoice price does not reflect.
Question 7: Which negotiation approach focuses on expanding value for both parties rather than splitting a fixed amount?
- Distributive negotiation
- Positional bargaining
- Integrative negotiation (Correct answer)
- Competitive negotiation
Correct answer: Integrative negotiation
Integrative (interest-based) negotiation seeks to create value by addressing the underlying interests of both parties.
APP Negotiation & Supplier Management 2
A purchasing practitioner wants to strengthen negotiation leverage before a major contract renewal.
Which action BEST builds that leverage?