Supply Management Core Flashcards

A supply manager discovers that a key supplier is financially distressed. The MOST proactive risk mitigation strategy is to:

Answer: Immediately dual-source critical components and develop a contingency supplier

Dual-sourcing and qualifying a contingency supplier before a failure occurs ensures supply continuity, whereas reactive measures taken after a collapse often result in costly shortages.

Which of the following BEST describes the concept of 'total cost of ownership' (TCO)?

Answer: All costs associated with acquiring, using, and disposing of a product over its life

TCO includes acquisition price, ordering costs, receiving and inspection, usage costs, maintenance, downtime, and disposal costs — all costs across the full ownership lifecycle.

An organization uses a cross-functional sourcing team that includes engineering, finance, quality, and supply management. This structure PRIMARILY improves:

Answer: Alignment of supplier selection with organizational requirements across functions

Cross-functional sourcing teams ensure that supplier selection and contract requirements reflect the needs and constraints of all stakeholder functions, reducing downstream conflicts.

When evaluating a potential international supplier, which factor is UNIQUE to global sourcing compared to domestic sourcing?

Answer: Currency exchange rate risk and import duty analysis

Currency exchange rate fluctuations and import duties (tariffs, customs fees, and trade compliance requirements) are unique complications that arise specifically in global sourcing decisions.

A supply manager is drafting a contract clause to protect the organization if a supplier's costs drop significantly due to material price decreases. The MOST appropriate clause is:

Answer: Economic price adjustment clause

An economic price adjustment (EPA) clause ties contract pricing to a published index, allowing prices to move up or down in alignment with actual market conditions for materials or labor.

Which performance metric measures the percentage of purchase orders fulfilled from stock without backorders or substitutions?

Answer: Fill rate

Fill rate measures the proportion of customer or production demand that is met immediately from available inventory, without delays or substitutions.

The ISM Code of Ethics prohibits supply management professionals from:

Answer: Accepting gifts or entertainment that could influence purchasing decisions

The ISM Code of Ethics requires professionals to avoid conflicts of interest, including accepting gifts or personal benefits from suppliers that could improperly influence sourcing decisions.