CPL Strategic Sourcing & Procurement 3 â Questions and Answers
Question 1: A 'make-or-buy' analysis would most likely favor outsourcing when:
- The activity is a core competency
- Suppliers can perform the function at lower cost with acceptable quality (Correct answer)
- Internal capacity is fully available
- The item is classified as strategic on the Kraljic Matrix
Correct answer: Suppliers can perform the function at lower cost with acceptable quality
Outsourcing is favored when external suppliers can deliver cost or quality advantages for non-core activities, freeing internal resources for strategic work.
Question 2: Supplier scorecards are most effective when they measure performance across which dimensions?
- Price only
- Quality, delivery, cost, and service (Correct answer)
- Financial stability and revenue growth
- Geographic location and warehouse capacity
Correct answer: Quality, delivery, cost, and service
Balanced scorecards track multiple performance dimensionsâquality, on-time delivery, total cost, and responsivenessâto give a holistic view of supplier value.
Question 3: Which procurement document is used to solicit competitive pricing from pre-qualified suppliers for well-defined commodities?
- Request for Information (RFI)
- Request for Proposal (RFP)
- Request for Quotation (RFQ) (Correct answer)
- Letter of Intent (LOI)
Correct answer: Request for Quotation (RFQ)
An RFQ is used when specifications are clear and the primary evaluation criterion is price, making it ideal for commodity purchasing.
Question 4: The 'landed cost' of an imported product includes all of the following EXCEPT:
- Ocean freight charges
- Import duties and tariffs
- Supplier's internal manufacturing overhead (Correct answer)
- Insurance during transit
Correct answer: Supplier's internal manufacturing overhead
Landed cost covers all costs to get goods to the buyer's doorâfreight, duties, insurance, and handlingâbut not the supplier's internal overhead, which is embedded in the unit price.
Question 5: A procurement team discovers that three different business units are independently buying the same chemical from three different suppliers at three different prices. This is best addressed through:
- Category management and spend consolidation (Correct answer)
- Decentralizing procurement further
- Implementing a vendor-managed inventory (VMI) program
- Requesting separate audits of each unit
Correct answer: Category management and spend consolidation
Category management consolidates purchases across business units under a single strategy, leveraging combined volume for better pricing and terms.
Question 6: When a buyer negotiates a 'most favored nation' (MFN) clause, the supplier must:
- Give the buyer exclusive rights to the product
- Charge the buyer no more than its lowest price offered to any customer (Correct answer)
- Maintain safety stock at the buyer's facility
- Accept payment in the buyer's local currency
Correct answer: Charge the buyer no more than its lowest price offered to any customer
An MFN clause ensures the buyer receives pricing no higher than the best price the supplier offers to any other customer, protecting against price discrimination.
Question 7: Sole-source procurement is justified when:
- Multiple suppliers exist but one is preferred
- Only one supplier is capable of meeting the technical requirements (Correct answer)
- The procurement value is below the competitive threshold
- The buyer wants to avoid lengthy RFP processes
Correct answer: Only one supplier is capable of meeting the technical requirements
Sole-source procurement is appropriate when a unique specification, patent, or capability means only one supplier can fulfill the requirement.
CPL Strategic Sourcing & Procurement 3
A 'make-or-buy' analysis would most likely favor outsourcing when: