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NEW QUESTION 41
Red Manufacturing work with around 40 different suppliers. One of these suppliers is Blue Business. Red Manufacturing order regularly from Blue Business, and have never had any issues with their performance. The materials Blue Business supply are of low value and there are several other suppliers of these materials in the market. What type of relationship should Red Manufacturing seek to have with Blue Manufacturing?
- A. arms-length
- B. adversarial
- C. single-source
- D. partnership
Answer: A
Explanation:
The correct answer is ‘arms length’. This is a tactical purchase (as it is low value) and keeping the supplier at arms-length means that Red Manufacturing could possibly exploit them to reduce their prices (think back to the Kraljic matrix and where Blue Business would likely fall). A Partnership or Single- Source relationship requires investment into the relationship, and as the products are low value and Red Manufacturing have a lot of other suppliers, they should not be investing time in developing that relationship with Blue Business. An adversarial relationship wouldn’t be advantageous as it may lower the performance of the supplier. See the relationship spectrum on p.5 – this is a hot topic for the exam
NEW QUESTION 42
ABC is a company which sources a vital component from a supplier. There are only a few suppliers in the industry and without this component, ABC would not be able to produce their final product. What type of relationship should ABC seek to develop with their supplier?
- A. outsource
- B. strategic alliance
- C. transactional
- D. arms length
Answer: B
Explanation:
As the component is vital to their business, ABC should seek a collaborative relationship with the supplier. There are three types of collaborative relationship (co-destiny, partnership and strategic alliance). Of these only strategic-alliance is given as an option. Remember – strategic purchase = collaborative relationship with supplier. There are many questions on the Relationship Spectrum on the exam. See p.5 for more details
NEW QUESTION 43
Which of the following are advantages for the buyer of entering into a partnership? Select TWO.
- A. They are likely to be able to gain price stability
- B. The supplier may become complacent
- C. They will gain an increased volume of business
- D. There may be greater continuity of supply
Answer: A,D
Explanation:
The correct answers are; They are likely to be able to gain price stability and There may be greater continuity of supply. The other options are an advantage for the supplier rather than the buyer (They will gain an increased volume of business) and a disadvantage of entering into a partnership (The supplier may become complacent). As you may have guessed from these questions – Partnerships come up a LOT in the exam. See p.130 for info on pros and cons of partnerships.
NEW QUESTION 44
Which of the following documents would you expect a supplier to submit as part of a Request for Proposal? Select THREE
- A. Risk Assessments
- B. Method Statements
- C. Gearing Ratio
- D. Full pricing information
- E. Liquidity Ratio
Answer: A,B,D
Explanation:
You would expect a supplier to submit full pricing information, risk assessments and method statements. However, depending on what you’re procuring, you might not need to see risk assessments or method statements. Liquidity and Gearing may be looked at during the Pre-Qualification stage, but wouldn’t form part of a RFP. See p.76
NEW QUESTION 45
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