Strategic Sourcing & Supplier Management Flashcards

In the Kraljic matrix, items with high profit impact and high supply risk are classified as:

Answer: Strategic items

Strategic items combine high profit impact with high supply risk and warrant close partnerships.

A buyer finds that a critical component has low spend but only one qualified supplier worldwide. Under Kraljic, the best initial strategy is to:

Answer: Secure supply through buffer stock and search for alternatives

Bottleneck items (low impact, high risk) call for supply assurance and risk reduction.

Which analysis is typically the FIRST step in a strategic sourcing initiative?

Answer: Spend analysis

Spend analysis reveals what is bought, from whom, and how much, forming the basis for category strategy.

Total cost of ownership (TCO) analysis differs from price analysis because TCO includes:

Answer: Acquisition, operating, maintenance, and disposal costs over the life cycle

TCO captures all costs incurred over an item's life, not just the purchase price.

A procurement team builds a cost model from material, labor, overhead, and reasonable profit to estimate what a part ought to cost. This is called:

Answer: Should-cost analysis

Should-cost analysis estimates a fair price from the supplier's underlying cost elements.

Which solicitation is most appropriate when requirements are clearly defined and price is the primary award factor?

Answer: Request for Quotation (RFQ)

An RFQ suits well-specified requirements where price is the main differentiator.

What is the key difference between single sourcing and sole sourcing?

Answer: Single sourcing is a buyer's choice among several capable suppliers; sole sourcing means only one supplier exists

Single sourcing is a deliberate choice, while sole sourcing reflects the market having only one available supplier.