Supply Chain Management Supply Chain Management MCQ 3 — Questions and Answers
Question 1: Which sourcing strategy involves selecting only one supplier for a specific component to maximize economies of scale and relationship depth?
- Dual sourcing
- Multiple sourcing
- Single sourcing (Correct answer)
- Global sourcing
Correct answer: Single sourcing
Single sourcing concentrates all purchases with one supplier to leverage volume discounts and closer collaboration, though it increases supply risk.
Question 2: Total Cost of Ownership (TCO) in procurement includes which of the following beyond purchase price?
- Only transportation and tariff costs
- Only quality inspection costs
- All costs incurred throughout the product's life cycle, including acquisition, use, and disposal (Correct answer)
- Only costs incurred during the negotiation phase
Correct answer: All costs incurred throughout the product's life cycle, including acquisition, use, and disposal
TCO captures every cost associated with a purchase—acquisition, operating, maintenance, and end-of-life disposal—to enable true cost comparisons between suppliers.
Question 3: Which forecasting method uses historical sales data patterns such as trend, seasonality, and cycles to project future demand?
- Delphi method
- Market research
- Time-series analysis (Correct answer)
- Collaborative Planning, Forecasting, and Replenishment (CPFR)
Correct answer: Time-series analysis
Time-series analysis decomposes past demand data into trend, seasonal, cyclical, and random components to forecast future demand.
Question 4: In lean supply chain management, 'muda' refers to:
- Value-added production steps
- Any activity that consumes resources without adding customer value (waste) (Correct answer)
- A Japanese term for continuous improvement
- A supplier performance scorecard
Correct answer: Any activity that consumes resources without adding customer value (waste)
Muda is the Japanese term for waste—any activity that uses resources but does not add value from the customer's perspective.
Question 5: Which type of contract is commonly used when demand is uncertain, allowing the buyer to purchase up to a maximum quantity at a pre-agreed price?
- Fixed-price contract
- Cost-plus contract
- Blanket purchase order (Correct answer)
- Time-and-materials contract
Correct answer: Blanket purchase order
A blanket purchase order establishes pricing and terms in advance while allowing the buyer to call off quantities as needed within an agreed ceiling.
Question 6: What is the primary purpose of safety stock in inventory management?
- To reduce the reorder point
- To buffer against variability in demand and supply lead times (Correct answer)
- To eliminate the need for cycle counting
- To maximize warehouse utilization
Correct answer: To buffer against variability in demand and supply lead times
Safety stock is extra inventory held to protect against unexpected demand spikes or supplier delivery delays, preventing stockouts.
Question 7: A company implements a system where inventory ownership transfers from the supplier to the buyer only when goods are consumed or sold. This is called:
- Just-in-Time replenishment
- Consignment inventory (Correct answer)
- Vendor-Managed Inventory
- Drop shipping
Correct answer: Consignment inventory
Under consignment inventory, the supplier retains ownership of stock stored at the buyer's location until the buyer actually uses or sells the items.
Supply Chain Management Supply Chain Management MCQ 3
Which sourcing strategy involves selecting only one supplier for a specific component to maximize economies of scale and relationship depth?