Strategic Sourcing & Supplier Management Flashcards

In negotiation, BATNA refers to:

Answer: A negotiator's best alternative if no agreement is reached

BATNA (Best Alternative to a Negotiated Agreement) sets the point where walking away beats a deal.

A buyer's maximum is $52 per unit and the supplier's minimum is $47. The $47–$52 range is the:

Answer: Zone of possible agreement (ZOPA)

The ZOPA is the overlap between the buyer's and seller's acceptable limits.

Which contract type places the MOST cost risk on the supplier?

Answer: Firm-fixed-price

Under firm-fixed-price, the supplier absorbs any cost overruns.

For a multi-year steel purchase with volatile commodity prices, which clause best protects both parties?

Answer: Economic price adjustment (EPA) clause tied to a published index

An EPA clause ties price changes to an objective index, sharing market volatility fairly.

Under Incoterms 2020 FCA (seller's premises), when does risk transfer to the buyer?

Answer: When goods are loaded onto the buyer's nominated carrier at the seller's premises

Under FCA at the seller's premises, risk passes once goods are loaded onto the buyer's carrier.

A reverse auction is LEAST suitable for which purchase?

Answer: A complex, custom-engineered strategic component needing close collaboration

Reverse auctions suit standardized items with competitive markets, not collaborative strategic buys.

To reduce supply disruption risk for a key part without losing volume leverage, a buyer most often uses:

Answer: Dual sourcing with a primary and secondary split, such as 70/30

Dual sourcing keeps a backup supplier qualified while preserving most of the volume with the primary.