CPP Supplier Relationship Management 3 — Questions and Answers
Question 1: Which risk mitigation strategy involves qualifying two or more suppliers for the same component?
- Single sourcing
- Dual sourcing (Correct answer)
- Forward buying
- Consignment stocking
Correct answer: Dual sourcing
Dual sourcing qualifies multiple suppliers for the same item, ensuring supply continuity if one supplier experiences disruption.
Question 2: In a vendor-managed inventory (VMI) arrangement, who is responsible for monitoring stock levels and triggering replenishment?
- The buyer's warehouse team
- The logistics carrier
- The supplier (Correct answer)
- A third-party auditor
Correct answer: The supplier
In VMI, the supplier monitors the buyer's inventory levels using shared data and takes responsibility for initiating replenishment orders.
Question 3: What does 'supplier tiering' refer to in supply chain management?
- Ranking suppliers by geographic location
- Classifying suppliers by their level in the supply chain (Tier 1, Tier 2, etc.) (Correct answer)
- Grouping suppliers by annual spend
- Segmenting suppliers by product category
Correct answer: Classifying suppliers by their level in the supply chain (Tier 1, Tier 2, etc.)
Supplier tiering categorizes suppliers by their proximity to the buying organization in the supply chain, with Tier 1 supplying directly to the buyer.
Question 4: A buyer discovers that a Tier 1 supplier is sourcing critical raw materials from a Tier 2 supplier under labor violation sanctions. This situation highlights the importance of:
- Negotiating better payment terms
- Sub-tier supply chain visibility and risk management (Correct answer)
- Increasing safety stock levels
- Switching to domestic suppliers only
Correct answer: Sub-tier supply chain visibility and risk management
Sub-tier visibility allows buyers to identify and mitigate ethical, compliance, and operational risks that originate deeper in the supply chain.
Question 5: Which contract clause protects a buyer by allowing audits of a supplier's financial records and operational processes?
- Indemnification clause
- Right-to-audit clause (Correct answer)
- Force majeure clause
- Limitation of liability clause
Correct answer: Right-to-audit clause
A right-to-audit clause grants the buyer contractual authority to inspect the supplier's books, processes, and compliance records.
Question 6: Early supplier involvement (ESI) in the product development phase primarily helps to:
- Reduce the need for supplier performance reviews
- Leverage supplier expertise to improve design for manufacturability and reduce costs (Correct answer)
- Eliminate the need for quality inspections
- Transfer all design liability to the supplier
Correct answer: Leverage supplier expertise to improve design for manufacturability and reduce costs
ESI brings supplier technical knowledge into design decisions early, improving manufacturability, reducing lead times, and lowering total costs.
Question 7: A total cost of ownership (TCO) analysis for a supplier selection decision should include which of the following beyond purchase price?
- Only freight and duties
- Acquisition, possession, usage, and end-of-life costs (Correct answer)
- Invoice price and payment terms only
- Market price benchmarks from competing suppliers
Correct answer: Acquisition, possession, usage, and end-of-life costs
TCO captures all costs across the full lifecycle of ownership, including ordering, receiving, quality, maintenance, and disposal costs.
CPP Supplier Relationship Management 3
Which risk mitigation strategy involves qualifying two or more suppliers for the same component?