CPP Strategic Sourcing & Supplier Management 2 — Questions and Answers
Question 1: In the Kraljic matrix, items with high profit impact and high supply risk are classified as:
- Bottleneck items
- Non-critical items
- Leverage items
- Strategic items (Correct answer)
Correct answer: Strategic items
Strategic items combine high profit impact with high supply risk and warrant close partnerships.
Question 2: A buyer finds that a critical component has low spend but only one qualified supplier worldwide. Under Kraljic, the best initial strategy is to:
- Delegate purchasing to end users via P-cards
- Run a reverse auction to cut price
- Consolidate spend to gain leverage
- Secure supply through buffer stock and search for alternatives (Correct answer)
Correct answer: Secure supply through buffer stock and search for alternatives
Bottleneck items (low impact, high risk) call for supply assurance and risk reduction.
Question 3: Which analysis is typically the FIRST step in a strategic sourcing initiative?
- Spend analysis (Correct answer)
- Supplier scorecard design
- Award recommendation
- Contract negotiation
Correct answer: Spend analysis
Spend analysis reveals what is bought, from whom, and how much, forming the basis for category strategy.
Question 4: Total cost of ownership (TCO) analysis differs from price analysis because TCO includes:
- Only the unit price and freight
- Acquisition, operating, maintenance, and disposal costs over the life cycle (Correct answer)
- Supplier profit margin only
- The buyer's internal budget allocation
Correct 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.
Question 5: 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:
- Price benchmarking
- Should-cost analysis (Correct answer)
- Target costing
- Activity-based budgeting
Correct answer: Should-cost analysis
Should-cost analysis estimates a fair price from the supplier's underlying cost elements.
Question 6: Which solicitation is most appropriate when requirements are clearly defined and price is the primary award factor?
- Request for Information (RFI)
- Request for Proposal (RFP)
- Request for Quotation (RFQ) (Correct answer)
- Expression of Interest (EOI)
Correct answer: Request for Quotation (RFQ)
An RFQ suits well-specified requirements where price is the main differentiator.
Question 7: What is the key difference between single sourcing and sole sourcing?
- Sole sourcing is always cheaper than single sourcing
- Single sourcing is used only in government contracting
- Single sourcing is a buyer's choice among several capable suppliers; sole sourcing means only one supplier exists (Correct answer)
- They are identical terms
Correct 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.
