Supplier Evaluation & Performance Management Flashcards

The weighted scorecard method evaluates suppliers by:

Answer: Assigning importance weights to performance criteria and calculating a composite score

The weighted scorecard assigns relative importance percentages to criteria such as quality, delivery, service, and cost, then calculates a weighted composite score for objective comparison.

What is the primary goal of a supplier development program?

Answer: To improve a supplier's capabilities to better meet the buyer's current and future needs

Supplier development programs work collaboratively with suppliers to strengthen their processes, quality systems, and capabilities, improving performance without the disruption of switching suppliers.

A Service Level Agreement (SLA) in a supplier contract typically specifies:

Answer: Specific measurable performance standards and consequences for non-compliance

An SLA defines specific, measurable performance standards such as uptime, response times, and delivery rates, along with remedies or penalties if those standards are not met.

Supplier segmentation (such as the Kraljic Matrix) helps procurement professionals by:

Answer: Categorizing suppliers by spend and risk to apply differentiated management strategies

Supplier segmentation classifies suppliers based on spend volume and supply risk, allowing procurement to invest resources strategically—partnering closely with critical suppliers and streamlining management of routine ones.

Which financial metric is most commonly used to assess a supplier's ability to meet short-term obligations?

Answer: Current ratio

The current ratio (current assets divided by current liabilities) measures a supplier's short-term liquidity and ability to meet near-term financial obligations without disrupting supply.

What is the primary benefit of conducting a spend analysis?

Answer: It provides visibility into purchasing patterns to identify savings and consolidation opportunities

Spend analysis reveals where, how, and with whom money is being spent, enabling procurement to consolidate suppliers, negotiate better terms, and eliminate maverick spending.

Which of the following best defines 'supplier risk management' in procurement?

Answer: Identifying, assessing, and mitigating risks that could disrupt supply from key suppliers

Supplier risk management involves proactively identifying potential disruptions (financial, geopolitical, operational, or natural disasters) and implementing mitigation strategies to protect supply continuity.