Supply Chain Management Procurement 2 — Questions and Answers
Question 1: Which procurement strategy involves purchasing from a single supplier to leverage volume discounts and build a strong partnership?
- Dual sourcing
- Single sourcing (Correct answer)
- Multiple sourcing
- Global sourcing
Correct answer: Single sourcing
Single sourcing consolidates purchases with one supplier to gain volume discounts and foster deeper supplier relationships.
Question 2: What is the primary purpose of a Request for Proposal (RFP) in procurement?
- To confirm a purchase order
- To solicit detailed bids including technical and pricing information from vendors (Correct answer)
- To notify suppliers of contract termination
- To document supplier performance
Correct answer: To solicit detailed bids including technical and pricing information from vendors
An RFP invites suppliers to submit comprehensive proposals covering technical capabilities, approach, and pricing.
Question 3: In procurement, 'maverick spending' refers to:
- Bulk purchasing to reduce unit costs
- Purchases made outside approved channels or contracts (Correct answer)
- Negotiating aggressive discounts with suppliers
- Sourcing from international markets
Correct answer: Purchases made outside approved channels or contracts
Maverick spending occurs when employees bypass procurement processes and make unauthorized purchases outside established contracts.
Question 4: Which contract type places the greatest financial risk on the buyer?
- Fixed-price contract
- Cost-plus contract (Correct answer)
- Time-and-materials contract
- Lump-sum contract
Correct answer: Cost-plus contract
Cost-plus contracts reimburse the supplier for all costs plus a fee, giving suppliers little incentive to control costs and shifting risk to the buyer.
Question 5: What does 'supplier consolidation' aim to achieve in a procurement strategy?
- Increase the number of active suppliers
- Reduce the supplier base to improve relationships and leverage (Correct answer)
- Diversify risk across more vendors
- Standardize packaging requirements
Correct answer: Reduce the supplier base to improve relationships and leverage
Supplier consolidation reduces the number of suppliers to gain better pricing leverage, streamline management, and build stronger partnerships.
Question 6: Which term describes the practice of negotiating with a supplier after receiving their initial bid to achieve better terms?
- Benchmarking
- Counter-sourcing
- Best and final offer (BAFO) (Correct answer)
- Reverse auctioning
Correct answer: Best and final offer (BAFO)
A Best and Final Offer (BAFO) request asks shortlisted suppliers to submit their most competitive pricing after initial bid evaluation.
Question 7: A company uses e-procurement primarily to:
- Replace all supplier relationships with automated systems
- Automate and streamline purchasing processes using digital tools (Correct answer)
- Eliminate the need for purchase orders
- Outsource procurement to a third party
Correct answer: Automate and streamline purchasing processes using digital tools
E-procurement uses digital platforms to automate requisitioning, ordering, and approval workflows, increasing efficiency and visibility.
Supply Chain Management Procurement 2
Which procurement strategy involves purchasing from a single supplier to leverage volume discounts and build a strong partnership?