MSU SCM 371 EXAM 2 VERIFIED ACCURATE STUDY
GUIDE
Supplier Selection and Evaluation Process - Answers - 1. Recognize need for supplier
selection
2. Identify key sourcing requirements
3. Identify potential supply sources
4. Determine sourcing strategy
5. Limit suppliers in selection pool
6. Determine method of supplier evaluation and selection
7. Select supplier and reach agreement
1. Recognize the Need for Supplier Selection and Evaluation - Answers - -internal users
submit requisitions
-new product development
-poor supplier performance or insufficient capacity
-end of contract period
-buying new equipment
-expanding into new markets or product lines
-conducting outsourcing analysis
-reducing size of supply base
2. Identify Key Sourcing Requirements - Answers - -may be determined by internal and
external customers (supplier quality, cost, delivery performance)
-vary widely from item to item
3. Identify Potential Supply Sources - Answers - -how well existing suppliers can satisfy
cost, quality, or other performance variables
-strategic importance of purchase requirement
-technical complexity of purchase requirement
4. Determine Sourcing Strategy - Answers - -no single strategy will satisfy all situations
-the environment changes (market conditions, user preferences, corporate objectives)
-reevaluate as necessary
Sourcing Strategy Supplier Categories - Answers - -Preferred
-Certified
-Partnered
-Approved
-Disqualified
Single Sourcing - Answers - Can develop closer relationship
-development of value-adding programs
-leverage and power over supplier
, Multiple Sourcing - Answers - -improved assurance of supply
-check against price increases
-active competition that motivates suppliers to perform effectively
Sole Sourcing - Answers - -supplier holds a patent
-1 company licensed or holds the IP
-1 company has the most efficient process
-need to be careful to guard the IP
5. Limit Suppliers in Selection Pool - Answers - 1. Evaluate supplier risk (financial,
operational)
2. Evaluation of supplier performance
3. Evaluation of supplier-provided information (entry qualifiers)
Entry Qualifiers - Answers - -financial strength
-proven manufacturing or service capability
-capable and supportive management
-adequate facilities
-skilled professional and technical staff
6. Determine Method of Supplier Evaluation and Selection - Answers - -evaluation from
supplier-provided information (cost, quality, delivery)
-supplier visits
-use of preferred, certified, or partnered suppliers
-external or third-party information (domestic vs. international)
Steps in Developing a Supplier Evaluation and Selection Survey - Answers - 1. Identify
supplier evaluation categories
2. Assign a weight to each evaluation category
3. Identify and weigh subcategories
4. Define scoring system for categories and subcategories
5. Evaluate supplier directly
6. Review evaluation results and make selection decision
7. Review and improve supplier performance continuously
Risks of Procurement - Answers - -supply chains are becoming longer and more
fragmented
-supply chains are more volatile
-competition is global
Types of Supply Chain Risk - Answers - -supply risk
-environmental risk
-process risk
-control risk
-demand risk
GUIDE
Supplier Selection and Evaluation Process - Answers - 1. Recognize need for supplier
selection
2. Identify key sourcing requirements
3. Identify potential supply sources
4. Determine sourcing strategy
5. Limit suppliers in selection pool
6. Determine method of supplier evaluation and selection
7. Select supplier and reach agreement
1. Recognize the Need for Supplier Selection and Evaluation - Answers - -internal users
submit requisitions
-new product development
-poor supplier performance or insufficient capacity
-end of contract period
-buying new equipment
-expanding into new markets or product lines
-conducting outsourcing analysis
-reducing size of supply base
2. Identify Key Sourcing Requirements - Answers - -may be determined by internal and
external customers (supplier quality, cost, delivery performance)
-vary widely from item to item
3. Identify Potential Supply Sources - Answers - -how well existing suppliers can satisfy
cost, quality, or other performance variables
-strategic importance of purchase requirement
-technical complexity of purchase requirement
4. Determine Sourcing Strategy - Answers - -no single strategy will satisfy all situations
-the environment changes (market conditions, user preferences, corporate objectives)
-reevaluate as necessary
Sourcing Strategy Supplier Categories - Answers - -Preferred
-Certified
-Partnered
-Approved
-Disqualified
Single Sourcing - Answers - Can develop closer relationship
-development of value-adding programs
-leverage and power over supplier
, Multiple Sourcing - Answers - -improved assurance of supply
-check against price increases
-active competition that motivates suppliers to perform effectively
Sole Sourcing - Answers - -supplier holds a patent
-1 company licensed or holds the IP
-1 company has the most efficient process
-need to be careful to guard the IP
5. Limit Suppliers in Selection Pool - Answers - 1. Evaluate supplier risk (financial,
operational)
2. Evaluation of supplier performance
3. Evaluation of supplier-provided information (entry qualifiers)
Entry Qualifiers - Answers - -financial strength
-proven manufacturing or service capability
-capable and supportive management
-adequate facilities
-skilled professional and technical staff
6. Determine Method of Supplier Evaluation and Selection - Answers - -evaluation from
supplier-provided information (cost, quality, delivery)
-supplier visits
-use of preferred, certified, or partnered suppliers
-external or third-party information (domestic vs. international)
Steps in Developing a Supplier Evaluation and Selection Survey - Answers - 1. Identify
supplier evaluation categories
2. Assign a weight to each evaluation category
3. Identify and weigh subcategories
4. Define scoring system for categories and subcategories
5. Evaluate supplier directly
6. Review evaluation results and make selection decision
7. Review and improve supplier performance continuously
Risks of Procurement - Answers - -supply chains are becoming longer and more
fragmented
-supply chains are more volatile
-competition is global
Types of Supply Chain Risk - Answers - -supply risk
-environmental risk
-process risk
-control risk
-demand risk
