CE CE Supply Chain & Supplier Relationship Management 2 — Questions and Answers
Question 1: What is a Request for Proposal (RFP) and how is it used when sourcing international suppliers?
- A formal document sent to multiple potential suppliers specifying requirements and inviting competitive bids, used to compare capabilities and pricing (Correct answer)
- A government request for exporters to register in a trade database
- An application for an export license submitted to BIS
- A proposal by a foreign government for joint venture investment
Correct answer: A formal document sent to multiple potential suppliers specifying requirements and inviting competitive bids, used to compare capabilities and pricing
An RFP outlines the buyer's technical, quality, capacity, pricing, and compliance requirements, allowing multiple international suppliers to submit bids for structured comparison.
Question 2: What is 'total cost of ownership' (TCO) in supplier selection and why does it differ from purchase price?
- TCO includes all costs associated with sourcing from a supplier—purchase price plus shipping, duties, quality failures, inventory carrying costs, and risk—not just the unit price (Correct answer)
- TCO refers only to the landed cost (purchase price plus freight and duties)
- TCO is the supplier's internal manufacturing cost
- TCO is calculated only for capital equipment, not traded goods
Correct answer: TCO includes all costs associated with sourcing from a supplier—purchase price plus shipping, duties, quality failures, inventory carrying costs, and risk—not just the unit price
TCO reveals the true cost of supply by capturing hidden expenses like tariffs, longer lead times requiring larger safety stock, defect rates, and supplier failure risk that the purchase price alone misses.
Question 3: What is dual sourcing in supply chain strategy and why do U.S. exporters implement it?
- Using at least two separate suppliers for a critical input to reduce dependency on any single source and ensure continuity if one supplier fails (Correct answer)
- Sourcing the same product from both domestic and international suppliers simultaneously
- Having backup logistics providers in addition to primary carriers
- Using two different factories within the same supplier company
Correct answer: Using at least two separate suppliers for a critical input to reduce dependency on any single source and ensure continuity if one supplier fails
Dual sourcing mitigates single-source risk by ensuring a second supplier can step in during disruptions, preventing production halts when one supplier faces capacity, quality, or geopolitical issues.
Question 4: What is a supplier code of conduct and why do U.S. companies increasingly require international suppliers to sign one?
- A document outlining ethical, environmental, labor, and anti-corruption standards suppliers must adhere to, driven by regulatory requirements and reputational risk management (Correct answer)
- A pricing agreement preventing suppliers from raising prices
- A non-disclosure agreement protecting proprietary product information
- A document setting minimum quality standards for raw materials
Correct answer: A document outlining ethical, environmental, labor, and anti-corruption standards suppliers must adhere to, driven by regulatory requirements and reputational risk management
Supplier codes of conduct address forced labor, child labor, environmental practices, bribery, and safety; U.S. companies require them to comply with laws like the FCPA and to protect brand reputation.
Question 5: What is vendor-managed inventory (VMI) and how does it benefit international supply chain management?
- An arrangement where the supplier monitors and replenishes the buyer's inventory levels based on agreed parameters, reducing the buyer's ordering burden and improving availability (Correct answer)
- A system where the buyer manages all of the supplier's raw material inventories
- A consignment arrangement where ownership doesn't transfer until sale
- A software system for tracking shipment locations in transit
Correct answer: An arrangement where the supplier monitors and replenishes the buyer's inventory levels based on agreed parameters, reducing the buyer's ordering burden and improving availability
In VMI, the supplier takes responsibility for maintaining agreed stock levels at the buyer's location, using shared demand data to time replenishments and reduce stockouts and carrying costs.
Question 6: What is the importance of intellectual property (IP) protection when working with international contract manufacturers?
- Without proper contracts and IP protections, foreign manufacturers may copy designs, processes, or technology—exposing exporters to loss of competitive advantage and legal costs (Correct answer)
- IP protection only matters when exporting patented pharmaceutical products
- International contract manufacturers are legally prohibited from copying U.S. designs
- IP protection is only relevant for exports, not for manufacturing partnerships
Correct answer: Without proper contracts and IP protections, foreign manufacturers may copy designs, processes, or technology—exposing exporters to loss of competitive advantage and legal costs
U.S. exporters must register IP in key markets, use non-disclosure agreements, limit technology transfer to what's necessary, and include strong IP clauses in manufacturing contracts to prevent counterfeiting.
CE CE Supply Chain & Supplier Relationship Management 2
What is a Request for Proposal (RFP) and how is it used when sourcing international suppliers?