CGM Supply Chain & Vendor Management 1 — Questions and Answers
Question 1: Which supply chain strategy focuses on maintaining minimal inventory levels by receiving goods only as they are needed in the production process?
- Just-In-Time (JIT) (Correct answer)
- Economic Order Quantity (EOQ)
- Safety Stock Management
- Bulk Purchasing
Correct answer: Just-In-Time (JIT)
Just-In-Time (JIT) is a strategy that aligns raw-material orders with production schedules to reduce inventory holding costs.
Question 2: A vendor scorecard is primarily used by a general manager to:
- Determine a vendor's credit rating
- Evaluate and track supplier performance against defined KPIs (Correct answer)
- Negotiate lower prices with vendors
- Audit a vendor's financial statements
Correct answer: Evaluate and track supplier performance against defined KPIs
Vendor scorecards measure supplier performance across metrics like quality, delivery, price, and responsiveness to drive continuous improvement.
Question 3: What is the primary purpose of a Request for Proposal (RFP) in vendor selection?
- To place a purchase order with a preferred vendor
- To solicit detailed bids and solutions from multiple potential suppliers (Correct answer)
- To terminate an existing vendor contract
- To audit current supplier compliance
Correct answer: To solicit detailed bids and solutions from multiple potential suppliers
An RFP invites multiple vendors to submit detailed proposals, allowing the organization to compare solutions, pricing, and capabilities before selecting a supplier.
Question 4: Single-sourcing a critical component from one vendor presents the greatest risk of:
- Higher unit costs due to lack of competition
- Supply disruption if the vendor faces production issues (Correct answer)
- Reduced product quality over time
- Increased administrative overhead
Correct answer: Supply disruption if the vendor faces production issues
Relying on a single supplier creates vulnerability; any disruption at that vendor—such as a natural disaster or financial failure—halts your supply chain.
Question 5: Which contract type places the most financial risk on the buyer?
- Firm Fixed-Price Contract
- Time-and-Materials Contract
- Cost-Plus-Fixed-Fee Contract (Correct answer)
- Indefinite Delivery/Indefinite Quantity Contract
Correct answer: Cost-Plus-Fixed-Fee Contract
In a cost-plus-fixed-fee contract, the buyer reimburses all allowable costs plus a fixed fee, giving the vendor little incentive to control expenses.
Question 6: The bullwhip effect in supply chains refers to:
- The cracking sound made by fast-moving freight conveyors
- Increasing demand variability as orders move upstream from retailer to manufacturer (Correct answer)
- A tactic where buyers intentionally over-order to secure allocations
- A sudden drop in supplier pricing due to bulk ordering
Correct answer: Increasing demand variability as orders move upstream from retailer to manufacturer
The bullwhip effect describes how small fluctuations in consumer demand amplify into larger order swings further up the supply chain, causing excess inventory or shortages.
Question 7: Lead time in supply chain management is best defined as:
- The time required to recruit and train a new supply chain manager
- The total time from placing a purchase order to receiving the goods (Correct answer)
- The longest payment term a vendor offers
- The time needed to conduct a supplier audit
Correct answer: The total time from placing a purchase order to receiving the goods
Lead time measures the elapsed time between initiating an order and its fulfillment, which directly affects inventory planning and customer service levels.
CGM Supply Chain & Vendor Management 1
Which supply chain strategy focuses on maintaining minimal inventory levels by receiving goods only as they are needed in the production process?