Procurement & Strategic Sourcing Flashcards

Which negotiation approach focuses on creating value for both buyer and supplier rather than dividing a fixed resource?

Answer: Integrative (win-win) negotiation

Integrative negotiation seeks to expand the total value available by identifying shared interests and creative trade-offs that benefit both parties.

A contract clause specifying that prices will adjust based on changes in a commodity index is called a:

Answer: Price escalation/de-escalation clause

An escalation/de-escalation clause automatically adjusts contract prices in line with a published index, sharing commodity risk between buyer and supplier.

Supplier development programs are designed to:

Answer: Improve a supplier's capabilities, quality, or delivery performance to meet buyer requirements

Supplier development involves investing resources to help a supplier build the capabilities needed to meet current or future performance expectations.

Which payment term gives a buyer a discount for early payment?

Answer: 2/10 net 30

2/10 net 30 means the buyer receives a 2% discount if payment is made within 10 days, otherwise the full amount is due in 30 days.

A reverse auction in e-procurement is characterized by:

Answer: Multiple suppliers competing in real time by lowering their bids to win a buyer's business

In a reverse auction, the buyer defines requirements and suppliers bid against each other in real time, driving prices down through competition.

The Kraljic Matrix classifies purchased items by profit impact and supply risk primarily to:

Answer: Determine the appropriate procurement strategy for each spend category

The Kraljic Matrix plots items on two axes to categorize them as routine, leverage, bottleneck, or strategic, guiding differentiated buying strategies.