Supply Chain and Logistics Procurement and Sourcing 2 — Questions and Answers
Question 1: What is a blanket purchase order?
- An order for all items in a product category
- A long-term agreement to purchase items at fixed prices over a defined period (Correct answer)
- An emergency order placed without competitive bidding
- An order covering multiple supplier locations
Correct answer: A long-term agreement to purchase items at fixed prices over a defined period
A blanket PO establishes pricing and terms for recurring purchases over a period, reducing the need to issue individual orders.
Question 2: What is spend analysis in procurement?
- Evaluating supplier quality scores
- Examining and categorizing all organizational expenditures to identify savings opportunities (Correct answer)
- Calculating freight cost per shipment
- Reviewing budget variances monthly
Correct answer: Examining and categorizing all organizational expenditures to identify savings opportunities
Spend analysis aggregates, cleanses, and categorizes purchasing data to identify cost-saving opportunities, consolidation potential, and compliance issues.
Question 3: Which sourcing strategy involves working closely with a small number of preferred suppliers?
- Sole sourcing
- Preferred supplier program (Correct answer)
- Open tendering
- Reverse auction
Correct answer: Preferred supplier program
A preferred supplier program qualifies a limited set of vendors and concentrates volume with them in exchange for better pricing and service.
Question 4: What is a reverse auction in procurement?
- Buyer sells surplus assets to suppliers
- Suppliers compete by submitting progressively lower bids for a buyer's contract (Correct answer)
- Buyer auctions purchase rights to the highest bidder
- Inventory is auctioned in reverse order
Correct answer: Suppliers compete by submitting progressively lower bids for a buyer's contract
In a reverse auction, multiple suppliers bid against each other in real time, driving down the price a buyer pays for goods or services.
Question 5: What does 'maverick spending' mean in procurement?
- Innovative sourcing strategies
- Unauthorized purchases made outside approved procurement processes (Correct answer)
- Exceeding the annual budget
- Purchasing from international suppliers
Correct answer: Unauthorized purchases made outside approved procurement processes
Maverick spending occurs when employees bypass procurement policies and approved suppliers, reducing negotiating leverage and compliance.
Question 6: What is supplier segmentation?
- Dividing a supplier's product catalog into categories
- Classifying suppliers based on strategic importance and risk to prioritize management effort (Correct answer)
- Splitting orders across multiple suppliers equally
- Grouping suppliers by geographic region
Correct answer: Classifying suppliers based on strategic importance and risk to prioritize management effort
Supplier segmentation categorizes vendors into tiers (strategic, preferred, transactional) to allocate appropriate relationship and management resources.
Supply Chain and Logistics Procurement and Sourcing 2
What is a blanket purchase order?