Category Strategy for Sourcing

A company's product is basically a cheap but branded plastic toy that doesn't require much quality. Which would be a type of material that is tightly linked to the company's brand equity?

Leveragable materials Rationale Leveragable materials are of high strategic importance but of low supply chain difficulty, so they are key areas where supply chain leverage can be applied to increase efficiencies and lower costs.

A manufacturer has worked extensively with a single supplier over the past 15 years, building high levels of trust. They fully share goals, strategies, and tactics with each other and attempt to reflect the partner's plans in their own. Which type of relationship does this represent?

Collaboration/strategic alliance Rationale A collaboration/strategic alliance is a long-term relationship, characterized by full sharing of goals, strategies, and tactics and the attempt to reflect the partner's plans in their own.

Which of the following exemplifies a long-term arrangement in which suppliers are fully aware of the purchaser's goals and strategies and work with the purchaser to develop and implement tactics?

Collaboration/strategic alliance Rationale Collaborations or strategic alliances are long-term arrangements ruled more by agreements than contracts. The suppliers are fully aware of the purchaser's goals and strategies and work with the purchaser to develop and implement tactics. Trust levels are high.

An organization invests significant effort in performing a spend analysis as part of its supply base analysis. However, the results are difficult to interpret since different divisions had different supplier databases and it is not clear which categories are the "vital few" to manage. What is the best solution proposed?

Next year, invest in a data warehouse to consolidate each division's supplier information. Rationale Data preparation is key to a spend analysis. This includes consolidating supplier databases (perhaps across different business units or acquired organizations), reviewing the database for duplicates or other issues to be corrected, and ensuring that category and subcategory descriptors for suppliers are correctly assigned. While a consolidated supplier database is the goal, it is not something that will necessarily be easy to do or fast. The correct answer gives time to develop a solution, in this case a data warehouse.

When should an organization invest in a category strategy and category management for its sourcing?

Whenever managing a set of suppliers as a category will add customer value. Rationale A category is like a product family used for grouping the organization's saleable goods and services in that managing purchasing as a category helps add customer value.

When conducting a supply base analysis, what is typically done to enable a spend analysis to avoid needing to use estimates and assumptions?

Make it a retroactive review of the prior year. Rationale A spend analysis is a review of all purchases that the organization makes during a period. It is typically a retroactive review of the prior year. This allows any variances from the budget to be known, for example.

Which of the following component purchasing goals are reactive or defensive reasons for forming a strategic alliance?

Number of suppliers able to provide the component Rationale From a purely reactive stance, companies with certain types of supply situations may be able to manage risk better in a strategic alliance. If only one supplier is available, the organization may need to maintain a close relationship with that supplier to ensure availability and opportunities for developing individualized components that could provide competitive differentiation.

Which is an example of a primary sourcing category at an organization?

Printer engines Rationale A category in terms of sourcing is a grouping of purchased goods or services and the suppliers that provide them. Categories are organization-specific. Categories should be made that the organization finds relevant to the management of suppliers and overall purchasing spend. The other answers are ways to classify these organization-specific categories or the suppliers themselves.

Software calculates the lowest total cost of ownership (TCO) for an organization. The supply plan cannot fully address all service, capacity, and quality goals defined in the corporate strategy. What is the first step the supply chain manager should take to win supply plan approval?

Provide several differentiated yet cost-efficient options. Rationale Differences between a supply plan and the corporate strategy must be resolved during plan validation and refinement. If the supply plan cannot simultaneously meet all customer service, production capacity, and product quality goals, the best first step is to present decision makers with several supply plan options that are sufficiently differentiated by various priorities while minimizing costs to the greatest extent possible. If none of these plans is approved, the supply chain manager could make a case to change the corporate strategy if it is not feasible or profitable.

Which is a clue that the organization represents a significant percentage of a given supplier's business?

The supplier singles out the buyer in its marketing materials. Rationale Related factors include the profit margins that sales to the customer provide, if multiple supplier locations work with the organization, if they provide goods in multiple sourcing categories, or if they are small and need to highlight the customer's business in their marketing materials.