SUPPLY CHAIN MGMT EXAM 2 QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026

SUPPLY CHAIN MGMT EXAM 2 QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026 Transactional - Answers Typically based just on pricTransactional - Answers Typically based just on price, not strategic. Ex transactional buying. Capitol Goods - Answers Goods/equipment purchased to produce consumer goods. Ex. manufacturing equipment to produce consumer goods. Consumer Goods - Answers The end/finished product to be sold to consumers. RFI - Answers Request for Information RFP - Answers Request for Proposal The "Market" - Answers The available supply of or potential demand for specific goods or services. Purchasing - Answers Largely transactional activity, managing a firm's acquisition procedures and standards, facilitated by the placement & processing of a PO, and often follows a formal sourcing process. Procurement - Answers Range of processes related to an organization's need to procure (buy) goods & services, examples of activities - supplier selection, price negotiation, contract management, supplier performance management. Strategic Sourcing - Answers Broader processes than procurement, align with organizational and supply chain goals and objectives, and cross-disciplinary collaboration. What Makes Strategic Sourcing Unique - Answers - consolidate and leverage purchasing power - emphasis on value (effectiveness) - deeper, more meaningful supplier relationships - attention directed to process improvement - enhanced teamwork and professionalism Assess Total Value - Answers Emphasis beyond acquisition cost, evaluating total cost of ownership and the value of the supplier relationship. Develop Individual Sourcing Strategies - Answers Individual spend categories need customized sourcing strategies. Evaluate Internal Requirements - Answers Requirements and specifications thoroughly assessed and rationalized as part of the sourcing process. Focus On Supplier Economics - Answers Suppliers' economics understood before identifying buying tactics (e.g. volume leveraging, price unbundling, price adjustment mechanisms). Drive Continuous Improvement - Answers Strategic sourcing initiatives as subset of continuous improvement process for procurement and sourcing organizations Identifying Strategic Sourcing Partners - Answers •View from an organizational perspective •Develop individual strategies •Evaluate supply options (funnel) -Start broad and then narrow •Market analysis - RFI - RFP/RFQ - Site visits -Final selection -Determine selection criteria •Cost, quality, reliability, risk, capability, financial, locations, lead time, sustainability, innovation, exclusivity Supplier Portfolio Screening - Answers 1. Quality 2. Reliability 3. Risk 4. Capability 5. Financial 6. Desirable Qualities 7. Sustainability Strategic Sourcing Process - Answers 1. Develop Strategic Plan 2. Understand Spend 3. Evaluate Supply Sources 4. Finalize Sourcing Strategy 5. Implement Sourcing Strategy 6. Onboarding and Transitioning 7. Collaborative Process Improvement Cons of Electronic Procurement - Answers *Cyber-security *Lack of face-to-face contact between the buyer and seller *Technology-related concerns (lack of standard protocols, system reliability, time & money investment) Advantages of Electronic Procurement - Answers *Lower operating costs (reduce paperwork & sourcing time, improve control over inventory & spending) *Improve procurement and sourcing efficiency (find new supply sources, improve communications, improve personnel use, lower cycle times) *Reduce procurement prices (improve comparison shopping, reduce overall prices paid) *Improve communications *Easier access to more suppliers Importance of Pricing - Answers •Align with positioning for target customers •Align with Marketing Mix (4P's) •Target what customers are willing & able to pay •Supports organizational goals •Enables adequate income to cover costs and make a profit Commodity Markets - Answers - Raw materials like grain, oil, sugar, cotton, coal, lumber - Supply and demand forces dictate the price that suppliers charge - Less supply or increased demand usually increase prices & vice versa Price Lists - Answers -Published prices generally used for standardized products like gasoline or office supplies -Buyers might receive a purchase discount from the list price such as a discount based on purchasing more product (volume discount) Price Quotations - Answers - Used for both standard and specialty items - Promotes competition among suppliers - Usually follows a request for quote (RFQ) Negotiations - Answers - Used when other methods don't apply or have failed - Effective when the buyer is interested in a strategic alliance or long-term relationship - Can be time consuming but offer significant benefits in terms of price and quality - Becoming increasingly common for logistics managers Why is Negotiating Important? - Answers •Negotiating is an essential skill for personal growth & professional success •It's a skill that begins with identifying & acting on one's wants & needs •Many individuals lack the confidence, motivation or training to ask for what they want in certain situations •Others are reluctant to initiate requests in general •Effective negotiation skills & techniques can positively impact & optimize yourself & your company Preparation Techniques - Answers 1. Familiarize your team with the supplier's company 2. Discover the supplier's agenda 3. Profile the supplier's negotiating team personnel 4. Review the supplier's performance history 5. Select & prepare your negotiation team 6. Rehearse non-verbal signals 7. Develop & complete a strategy worksheet What is BATNA? - Answers best alternative to a negotiated agreement Creating a BATNA - Answers •Brainstorm a list of all available alternatives that might be considered should the negotiation fail to render a favorable agreement •Choose the most promising alternatives and expand them into practical and attainable alternatives •Identify the best of the alternatives and keep it in reserve as a fall-back during the negotiation Negotiation Strategy Types - Answers Competing (transactional), Collaborating (strategic), Compromising, Avoiding, Accommodating Fixed Costs - Answers An expense that does not change regardless of production increases or decreases. Variable Costs - Answers A cost that changes in proportion to production or sales. Machine Flexibility - Answers a production machine capable of producing a variety of products without significant downtime between product runs Offshoring - Answers The practice of moving production or service operations overseas with the intention of reducing the cost of doing business. KPIs - Answers Key performance indicators measure strategic performance How does Supply Chain impact Production Operations? - Answers Procurement Sources Raw Materials - Transportation Moves them to Factory - Manufacturing Makes the Products - Distribution Fulfills the customer orders - Transportation Moves them to Customers. Evaluating Tradeoffs - Answers 1. Volume vs. Variety 2. Responsiveness vs. Efficiency 3. Make vs. Buy 4. Production cost vs. Supply Chain cost Volume vs Variety in Production Process Decisions - Answers - Economies of Scale - Higher-volume production with lower cost per unit of output - Suitable in situations where production processes have high fixed costs and equipment. - Economies of Scope - Low-volume production with flexible capabilities of producing a wide variety of products - Important in markets characterized by changing customer demand. Responsiveness vs Efficiency in Production Facility Decisions - Answers -Centralized vs. Regional *Centralized production facilities provide operating cost and inventory efficiencies. *Regional production facilities allow companies to be closer to customers and more responsive. -Large vs. Small *Larger facilities with excess capacity provide the flexibility to respond to demand spikes. *Smaller facilities that are better utilized are more cost-efficient. Make vs. Buy - Answers - In-house production (Make)• Internal production processes are more directly visible.• Internal processes are easier to control from a quality standpoint. - Outsource (Buy)• Lower product costs• Free-up resources for other, more strategic needs BUT• More difficult to maintain visibility and synchronize activities.• More difficult to control over quality, intellectual property rights, and customer relationships. The Importance of Packaging - Answers Ease of handling Protection of goods Equipment compatibility Improve efficiencies Provide information Sustainability KPIs/Metrics - Answers Critical production KPIs address total cost, total cycle time, delivery performance, quality, and safety. Pursue Goals •Align metrics with corporate objectives •Limit the number of metrics used to 5 or 6 per function •Measure performance of individual activities Avoid Mistakes •Using KPIs that are too narrow. •Encouraging wrong outcomes. Focusing on issues that are not key priorities. Key Groups of Production Metrics - Answers 1. Customer experience and responsiveness 2. Quality 3. Efficiency 4. Inventory 5. Compliance 6. Maintenance 7. Flexibility and innovation 8. Cost and profitability What is a tariff and why have one? - Answers -to raise revenue -to protect domestic industries -to protect domestic consumers -to protect national interests Who has the power to enact a tariff? - Answers The Constitution gives Congress the power over trade - The International Emergency Economic Powers Act (IEEPA, 1977) gives the President emergency powers to enact tariffs -Typically used for sanctions against other countries (ex Iran, Russia, etc) -Can be used to seize property or freeze assets of individuals (cartel leaders, etc) -2025 was first time it was used for tariffs -National emergency from fentanyl -National emergency from unfair trade practices - Tariffs struck down in lower Federal Courts as exceeding the power given to the executive branch in IEEPA. We are now awaiting a ruling from the Supreme Court. If it is struck down, it could require the refunding of over 150 Billion in collected tariffs. Negatives of a tariff? - Answers -Typically, it is the United States importing company that pays the tariff to the US Treasury. - -Risk of reciprocal tariffs and a trade war. - -Tariffs can lead to inflation: -Lack of innovation due to lack of competition -Typically, the tariff ends up increasing the price of goods for consumers The Essence of Demand Management - Answers -To estimate and manage customer demand and use this information to make operating decisions. -To further the ability of firms throughout the supply chain to collaborate on activities related to the flow of products, services, information, and capital. -Desired end result: Greater value for the end user or consumer Common Problems in Demand Management - Answers - Lack of coordination between departments - Too much emphasis placed on forecasts of demand, with less attention on the collaborative efforts and plans needed to be developed from the forecasts - Non-strategic uses of demand information Effective Demand Management - Answers Effective demand management unifies channel members with the common goals of satisfying customers and solving customer problems. 1. Gather & analyze knowledge about consumers, their problems, and their unmet needs. 2 .Identify partners to perform functions needed in demand chain. 3. Move functions to the channel member that can perform them most effectively and efficiently. 4. Share with other supply chain members knowledge about customers, technology, and logistics challenges and opportunities. 5. Developing products and services that solve customers' problems. 6. Develop & execute best methods to deliver products & services to consumers in the desired format. Demand Management Supports Business Strategy - Answers Growth strategy, Portfolio strategy, Positioning strategy, Investment strategy Demand Forecasting - Answers • Foundation of many SC manager decisions • How to balance supply and demand • All forecasts will be wrong • Select the forecasting technique with the lowest forecast error Two Types of Demand Forecasting - Answers independent demand and dependent demand Random Fluctuation - Answers cannot be anticipated & is usually the cause to hold safety stocks to avoid stockouts Trend Fluctuation - Answers Gradual increase or decrease in demand over time for an organization. Seasonal Fluctuation - Answers patterns will normally repeat themselves during a year for most organizations Simple Moving Average - Answers predicts a value by averaging a fixed number of most recent actual values Weighted Moving Average - Answers a forecasting model that assigns a different weight to each period's demand according to its importance Exponential Smoothing - Answers A weighted-moving-average forecasting technique in which data points are weighted by an exponential function. Executive Judgement - Answers expert opinions from different departments is averaged Sales Force Composite - Answers forecast based on the Market Research/Survey - Answers directly collecting information from consumers about purchases Delphi Method - Answers panels of experts individually questioned (not as a group); effective for long range forecasting Demand Management - Answers - How organizations create forecasts that are used to create marketing, production, finance, and logistics plans - Align organization resources to strategic goals Order Management & Customer Service - Answers - The execution of the plans from demand management - Tactical, day-to-day activities Order Management - Answers Defines and sets in motion the logistics infrastructure of the organization. Phase 1: Influence and Order Organization attempts to change the manner by which customer place orders Phase 2: Execute the Order Order receipt: electronic vs. manual Order fulfillment: inventory policy, number and location of warehouses Order shipments: transportation mode choice Customer Service - Answers Anything that touches the customer, including all activities that impact information flow, product flow, and cash flow between the organization and its customers. Customer service as a philosophy - Elevated to an organization-wide commitment Customer service as a performance measure - Assess performance through measures like on-time delivery and percentage of orders filled complete Customer service as an activity - A task that an organization must perform to satisfy customers Order Management: Influencing the Order - Answers Customer Relationship Management (CRM) -Align the supplier's resources with its customers in a manner that increases both customer satisfaction and supplier profits -How? How much? What? When? -Maximize efficiencies of the shipping organizations logistics network 4 Basics Steps in the Implementation of the CRM Process 1. Segment the Customer Base by Profitability 2. Identify the Product/Service Package for Each Customer Segment 3. Develop and Execute the Best Processes -Measure Performance and Continuously Improve CRM: Product/Service Package ExamplesOption #1, Most Commonly Used - Answers -Offer the same product/service to each customer segment, while varying the product quality or service levels. -Pro: easy for the supplier to manage -Con: Assumes that all customer segments value the same types of supplier offerings. CRM Product/Service Package Example, Option#2 - Answers -Vary the service offerings for each customer segment -Pro: meet the needs of each segment -Con: difficult for the supplier to manage What is activity-based costing? - Answers "A methodology that measures the cost and performance of activities, resources, and cost objects. Resources are assigned to activities, then activities are assigned to cost objects based on their use. ABC recognizes the causal relationships of cost drivers to activities" Danger zone segment - Answers strategies are: (1) Change the manner in which the customer interacts with the shipper to move the customer to another segment; (2) Charge the customer the actual cost of doing; or (3) Switch the customer to an alternative distribution channel. Build Segment - Answers strategies aim to maintain the cost to serve but build net sales value to help drive the customer into the "Protect" segment. Cost engineer segment - Answers strategies aim to find more efficient ways for the customer to interact with the shipper. Protect segment - Answers most profitable, provide shipper with the most cost efficiencies Marketing Objective - Answers Allocate resources to the marketing mix to maximize long-term profitability of the firm Logistics Objective - Answers Minimize total costs, given customer service objective, where: Total costs = Transportation costs + Warehousing costs + Order processing & Information costs + Lot quantity costs + Inventory carrying costs Time - Answers absolute length of lead time -Sellers - order to cash -Buyers - order cycle time, lead time, replenishment time Dependability - Answers Consistent lead time, safe delviery, correct orders Communications - Answers pre-transaction, transaction, post transaction Convenience - Answers flexible logistics service level Item - Answers a case, an inner-pack, or an "each" on an order Line - Answers a single product on a multiple product order Item Fill Rate - Answers the percentage of items in stock available to fill an order Line Fill Rate - Answers the percentage of total lines filled complete on an order Order Fill Rate - Answers the percentage of orders filled complete Perfect Order Rate - Answers The percentage of orders filled completely, received on time, billed accurately, etc. Metrics - Answers -Internal *Item fill rate *Line fill rate -External Metrics *Order fill rate *Perfect order Service Recovery - Answers -requires an organization to realize that mistakes will occur and to have plans in place to fix them -Key Aspects *Measuring the costs of poor service *Anticipating the needs for recovery *Developing employee training and empowermente, not strategic. Ex transactional buying. Capitol Goods - Answers Goods/equipment purchased to produce consumer goods. Ex. manufacturing equipment to produce consumer goods. Consumer Goods - Answers The end/finished product to be sold to consumers. RFI - Answers Request for Information RFP - Answers Request for Proposal The "Market" - Answers The available supply of or potential demand for specific goods or services. Purchasing - Answers Largely transactional activity, managing a firm's acquisition procedures and standards, facilitated by the placement & processing of a PO, and often follows a formal sourcing process. Procurement - Answers Range of processes related to an organization's need to procure (buy) goods & services, examples of activities - supplier selection, price negotiation, contract management, supplier performance management. Strategic Sourcing - Answers Broader processes than procurement, align with organizational and supply chain goals and objectives, and cross-disciplinary collaboration. What Makes Strategic Sourcing Unique - Answers - consolidate and leverage purchasing power - emphasis on value (effectiveness) - deeper, more meaningful supplier relationships - attention directed to process improvement - enhanced teamwork and professionalism Assess Total Value - Answers Emphasis beyond acquisition cost, evaluating total cost of ownership and the value of the supplier relationship. Develop Individual Sourcing Strategies - Answers Individual spend categories need customized sourcing strategies. Evaluate Internal Requirements - Answers Requirements and specifications thoroughly assessed and rationalized as part of the sourcing process. Focus On Supplier Economics - Answers Suppliers' economics understood before identifying buying tactics (e.g. volume leveraging, price unbundling, price adjustment mechanisms). Drive Continuous Improvement - Answers Strategic sourcing initiatives as subset of continuous improvement process for procurement and sourcing organizations Identifying Strategic Sourcing Partners - Answers •View from an organizational perspective •Develop individual strategies •Evaluate supply options (funnel) -Start broad and then narrow •Market analysis - RFI - RTransactional - Answers Typically based just on price, not strategic. Ex transactional buying. Capitol Goods - Answers Goods/equipment purchased to produce consumer goods. Ex. manufacturing equipment to produce consumer goods. Consumer Goods - Answers The end/finished product to be sold to consumers. RFI - Answers Request for Information RFP - Answers Request for Proposal The "Market" - Answers The available supply of or potential demand for specific goods or services. Purchasing - Answers Largely transactional activity, managing a firm's acquisition procedures and standards, facilitated by the placement & processing of a PO, and often follows a formal sourcing process. Procurement - Answers Range of processes related to an organization's need to procure (buy) goods & services, examples of activities - supplier selection, price negotiation, contract management, supplier performance management. Strategic Sourcing - Answers Broader processes than procurement, align with organizational and supply chain goals and objectives, and cross-disciplinary collaboration. What Makes Strategic Sourcing Unique - Answers - consolidate and leverage purchasing power - emphasis on value (effectiveness) - deeper, more meaningful supplier relationships - attention directed to process improvement - enhanced teamwork and professionalism Assess Total Value - Answers Emphasis beyond acquisition cost, evaluating total cost of ownership and the value of the supplier relationship. Develop Individual Sourcing Strategies - Answers Individual spend categories need customized sourcing strategies. Evaluate Internal Requirements - Answers Requirements and specifications thoroughly assessed and rationalized as part of the sourcing process. Focus On Supplier Economics - Answers Suppliers' economics understood before identifying buying tactics (e.g. volume leveraging, price unbundling, price adjustment mechanisms). Drive Continuous Improvement - Answers Strategic sourcing initiatives as subset of continuous improvement process for procurement and sourcing organizations Identifying Strategic Sourcing Partners - Answers •View from an organizational perspective •Develop individual strategies •Evaluate supply options (funnel) -Start broad and then narrow •Market analysis - RFI - RFP/RFQ - Site visits -Final selection -Determine selection criteria •Cost, quality, reliability, risk, capability, financial, locations, lead time, sustainability, innovation, exclusivity Supplier Portfolio Screening - Answers 1. Quality 2. Reliability 3. Risk 4. Capability 5. Financial 6. Desirable Qualities 7. Sustainability Strategic Sourcing Process - Answers 1. Develop Strategic Plan 2. Understand Spend 3. Evaluate Supply Sources 4. Finalize Sourcing Strategy 5. Implement Sourcing Strategy 6. Onboarding and Transitioning 7. Collaborative Process Improvement Cons of Electronic Procurement - Answers *Cyber-security *Lack of face-to-face contact between the buyer and seller *Technology-related concerns (lack of standard protocols, system reliability, time & money investment) Advantages of Electronic Procurement - Answers *Lower operating costs (reduce paperwork & sourcing time, improve control over inventory & spending) *Improve procurement and sourcing efficiency (find new supply sources, improve communications, improve personnel use, lower cycle times) *Reduce procurement prices (improve comparison shopping, reduce overall prices paid) *Improve communications *Easier access to more suppliers Importance of Pricing - Answers •Align with positioning for target customers •Align with Marketing Mix (4P's) •Target what customers are willing & able to pay •Supports organizational goals •Enables adequate income to cover costs and make a profit Commodity Markets - Answers - Raw materials like grain, oil, sugar, cotton, coal, lumber - Supply and demand forces dictate the price that suppliers charge - Less supply or increased demand usually increase prices & vice versa Price Lists - Answers -Published prices generally used for standardized products like gasoline or office supplies -Buyers might receive a purchase discount from the list price such as a discount based on purchasing more product (volume discount) Price Quotations - Answers - Used for both standard and specialty items - Promotes competition among suppliers - Usually follows a request for quote (RFQ) Negotiations - Answers - Used when other methods don't apply or have failed - Effective when the buyer is interested in a strategic alliance or long-term relationship - Can be time consuming but offer significant benefits in terms of price and quality - Becoming increasingly common for logistics managers Why is Negotiating Important? - Answers •Negotiating is an essential skill for personal growth & professional success •It's a skill that begins with identifying & acting on one's wants & needs •Many individuals lack the confidence, motivation or training to ask for what they want in certain situations •Others are reluctant to initiate requests in general •Effective negotiation skills & techniques can positively impact & optimize yourself & your company Preparation Techniques - Answers 1. Familiarize your team with the supplier's company 2. Discover the supplier's agenda 3. Profile the supplier's negotiating team personnel 4. Review the supplier's performance history 5. Select & prepare your negotiation team 6. Rehearse non-verbal signals 7. Develop & complete a strategy worksheet What is BATNA? - Answers best alternative to a negotiated agreement Creating a BATNA - Answers •Brainstorm a list of all available alternatives that might be considered should the negotiation fail to render a favorable agreement •Choose the most promising alternatives and expand them into practical and attainable alternatives •Identify the best of the alternatives and keep it in reserve as a fall-back during the negotiation Negotiation Strategy Types - Answers Competing (transactional), Collaborating (strategic), Compromising, Avoiding, Accommodating Fixed Costs - Answers An expense that does not change regardless of production increases or decreases. Variable Costs - Answers A cost that changes in proportion to production or sales. Machine Flexibility - Answers a production machine capable of producing a variety of products without significant downtime between product runs Offshoring - Answers The practice of moving production or service operations overseas with the intention of reducing the cost of doing business. KPIs - Answers Key performance indicators measure strategic performance How does Supply Chain impact Production Operations? - Answers Procurement Sources Raw Materials - Transportation Moves them to Factory - Manufacturing Makes the Products - Distribution Fulfills the customer orders - Transportation Moves them to Customers. Evaluating Tradeoffs - Answers 1. Volume vs. Variety 2. Responsiveness vs. Efficiency 3. Make vs. Buy 4. Production cost vs. Supply Chain cost Volume vs Variety in Production Process Decisions - Answers - Economies of Scale - Higher-volume production with lower cost per unit of output - Suitable in situations where production processes have high fixed costs and equipment. - Economies of Scope - Low-volume production with flexible capabilities of producing a wide variety of products - Important in markets characterized by changing customer demand. Responsiveness vs Efficiency in Production Facility Decisions - Answers -Centralized vs. Regional *Centralized production facilities provide operating cost and inventory efficiencies. *Regional production facilities allow companies to be closer to customers and more responsive. -Large vs. Small *Larger facilities with excess capacity provide the flexibility to respond to demand spikes. *Smaller facilities that are better utilized are more cost-efficient. Make vs. Buy - Answers - In-house production (Make)• Internal production processes are more directly visible.• Internal processes are easier to control from a quality standpoint. - Outsource (Buy)• Lower product costs• Free-up resources for other, more strategic needs BUT• More difficult to maintain visibility and synchronize activities.• More difficult to control over quality, intellectual property rights, and customer relationships. The Importance of Packaging - Answers Ease of handling Protection of goods Equipment compatibility Improve efficiencies Provide information Sustainability KPIs/Metrics - Answers Critical production KPIs address total cost, total cycle time, delivery performance, quality, and safety. Pursue Goals •Align metrics with corporate objectives •Limit the number of metrics used to 5 or 6 per function •Measure performance of individual activities Avoid Mistakes •Using KPIs that are too narrow. •Encouraging wrong outcomes. Focusing on issues that are not key priorities. Key Groups of Production Metrics - Answers 1. Customer experience and responsiveness 2. Quality 3. Efficiency 4. Inventory 5. Compliance 6. Maintenance 7. Flexibility and innovation 8. Cost and profitability What is a tariff and why have one? - Answers -to raise revenue -to protect domestic industries -to protect domestic consumers -to protect national interests Who has the power to enact a tariff? - Answers The Constitution gives Congress the power over trade - The International Emergency Economic Powers Act (IEEPA, 1977) gives the President emergency powers to enact tariffs