CPL Strategic Sourcing & Procurement 2 — Questions and Answers
Question 1: Which sourcing strategy is most appropriate when a commodity has low supply risk and low profit impact?
- Strategic partnership
- Leverage buying
- Routine/acquisition focus (Correct answer)
- Bottleneck management
Correct answer: Routine/acquisition focus
The Kraljic Matrix places low-risk, low-impact items in the 'routine' quadrant, where the goal is to streamline and automate purchasing to reduce transaction costs.
Question 2: A total cost of ownership (TCO) analysis differs from a unit price comparison primarily because it:
- Focuses only on acquisition price
- Includes all costs over the product lifecycle (Correct answer)
- Ignores supplier quality ratings
- Applies only to capital equipment
Correct answer: Includes all costs over the product lifecycle
TCO captures acquisition, operating, maintenance, and disposal costs, giving a complete picture beyond the purchase price alone.
Question 3: A 'preferred supplier' designation typically means the supplier:
- Has an exclusive contract with no competitors
- Has been pre-qualified and receives first consideration for new business (Correct answer)
- Is exempt from performance reviews
- Must match any lower bid automatically
Correct answer: Has been pre-qualified and receives first consideration for new business
Preferred supplier status reflects pre-qualification based on proven performance, giving that supplier priority consideration before others are solicited.
Question 4: In a reverse auction, prices typically move in which direction during the bidding event?
- Upward as suppliers compete for volume
- Downward as suppliers undercut each other (Correct answer)
- Remain fixed per pre-set price bands
- Fluctuate based on currency exchange rates
Correct answer: Downward as suppliers undercut each other
In a reverse auction, multiple suppliers bid against each other in real time, driving prices downward to win the buyer's business.
Question 5: Which contract type places the greatest cost risk on the buyer?
- Firm-fixed-price (FFP)
- Fixed-price with economic price adjustment
- Cost-plus-percentage-of-cost (CPPC) (Correct answer)
- Fixed-price incentive (FPI)
Correct answer: Cost-plus-percentage-of-cost (CPPC)
CPPC reimburses all supplier costs plus a percentage fee, giving the supplier no incentive to control costs and exposing the buyer to unlimited cost growth.
Question 6: Early supplier involvement (ESI) in product development primarily helps organizations:
- Reduce the number of approved vendors
- Incorporate supplier expertise to improve design and reduce costs (Correct answer)
- Eliminate the need for formal RFPs
- Standardize payment terms across all categories
Correct answer: Incorporate supplier expertise to improve design and reduce costs
ESI leverages supplier knowledge during design to enhance manufacturability, reduce material costs, and shorten time-to-market.
Question 7: Spend analysis in strategic sourcing is primarily used to:
- Audit supplier financial statements
- Identify and categorize purchasing expenditures to find savings opportunities (Correct answer)
- Set annual procurement department budgets
- Calculate inventory carrying costs
Correct answer: Identify and categorize purchasing expenditures to find savings opportunities
Spend analysis aggregates and categorizes an organization's purchasing data to reveal patterns, consolidation opportunities, and potential cost reductions.
CPL Strategic Sourcing & Procurement 2
Which sourcing strategy is most appropriate when a commodity has low supply risk and low profit impact?