Supply Chain Management Supplier Management 4 — Questions and Answers
Question 1: Which supplier relationship model is characterized by deep collaboration, joint investment in R&D, and shared risk and reward?
- Transactional relationship
- Preferred supplier program
- Strategic alliance or partnership (Correct answer)
- Spot buying arrangement
Correct answer: Strategic alliance or partnership
A strategic alliance involves deep mutual commitment, including joint innovation, shared IP, and aligned long-term goals beyond typical buyer-seller dynamics.
Question 2: What is the primary risk associated with global sole-sourcing of a critical component from a single low-cost country?
- Higher unit cost than domestic sourcing
- Concentration risk from geopolitical, logistical, or natural disaster disruptions (Correct answer)
- Reduced supplier negotiating leverage
- Non-compliance with domestic content requirements only
Correct answer: Concentration risk from geopolitical, logistical, or natural disaster disruptions
Sole-sourcing from a single geography concentrates supply risk; any disruption — political instability, port closures, or natural disasters — can halt production.
Question 3: A supplier scorecard shows a supplier scoring 95% on quality but only 72% on on-time delivery. What should the buyer do FIRST?
- Immediately place the supplier on a probation list
- Conduct a root cause discussion with the supplier focused on the delivery gap (Correct answer)
- Reduce order volume proportionally to the delivery score
- Switch to an alternate supplier without discussion
Correct answer: Conduct a root cause discussion with the supplier focused on the delivery gap
The first step is a collaborative discussion to understand why delivery performance is lagging and agree on an improvement plan before taking punitive action.
Question 4: What does 'spend under management' measure in a procurement organization?
- The total dollars paid to strategic suppliers in a fiscal year
- The percentage of total company spend that flows through formal procurement processes (Correct answer)
- The amount of cost savings negotiated in supplier contracts
- The budget allocated to supplier development programs
Correct answer: The percentage of total company spend that flows through formal procurement processes
Spend under management measures what proportion of total company expenditure is governed by procurement policies, contracts, and controls.
Question 5: Which sourcing strategy involves combining the purchase volumes of multiple business units to negotiate better pricing from a supplier?
- Category management
- Consolidated or leveraged buying (Correct answer)
- Multi-sourcing
- Reverse auctioning
Correct answer: Consolidated or leveraged buying
Consolidated buying aggregates demand across business units to increase purchasing volume, which strengthens negotiating position and typically yields lower unit prices.
Question 6: A supplier's financial health deteriorates significantly. Which early warning indicator is MOST useful for detecting this risk proactively?
- Increase in supplier quality defect rates
- Changes in the supplier's Dun & Bradstreet credit score or financial rating (Correct answer)
- Longer supplier lead times
- Higher freight charges on inbound shipments
Correct answer: Changes in the supplier's Dun & Bradstreet credit score or financial rating
Credit ratings and financial scoring services provide early signals of a supplier's financial distress before operational symptoms like quality or delivery problems appear.
Question 7: In supply chain management, what is the purpose of a 'preferred supplier list' (PSL)?
- To restrict all purchasing to a fixed set of pre-approved, pre-negotiated suppliers
- To identify suppliers that have been vetted and approved, streamlining future sourcing decisions (Correct answer)
- To rank suppliers by invoice payment priority
- To publicly disclose the company's supplier base to stakeholders
Correct answer: To identify suppliers that have been vetted and approved, streamlining future sourcing decisions
A PSL contains pre-qualified suppliers that have passed vetting requirements, enabling faster purchasing decisions and ensuring baseline quality and compliance standards are met.
Supply Chain Management Supplier Management 4
Which supplier relationship model is characterized by deep collaboration, joint investment in R&D, and shared risk and reward?