CORE - Supply Management Core Exam

When a supply manager conducts due diligence from cost, cultural, and service perspectives to weigh the benefits and risks of outsourcing, they are primarily engaging in analytical problem solving. This involves:

Project management: Overseeing projects and ensuring they are completed on time and within budget, which is not the primary focus here.

Technical knowledge: Understanding specific technical aspects, which may be part of the analysis but not the primary skill.

Analytical problem solving: Evaluating different facets such as cost, culture, and service to make informed decisions about outsourcing.

Functional interaction: Collaborating across different functions, which is necessary but not the core skill in this context.

Thus, the skills being employed are best described as analytical problem solving.

References:

Supply chain management literature on due diligence and risk analysis.

Analytical methods in decision-making.

Regular performance reviews are crucial for suppliers that have a significant impact on the organization:

Standard: These suppliers typically provide routine products or services, and while performance reviews are important, they may not be the most critical.

Key: Key suppliers are important, but they are usually not as critical as strategic suppliers.

Strategic: Strategic suppliers provide goods or services that are vital to the organization’s long-term success, requiring regular performance reviews to ensure alignment and continuous improvement.

Commodity: Commodity suppliers provide widely available products, making performance reviews less critical compared to strategic suppliers.

Therefore, it is most important to conduct regular performance reviews with strategic suppliers.

References:

Strategic supply chain management literature.

Best practices in supplier performance management.

Initial Bids Review: Evaluate the bids submitted by the suppliers ($110,000, $114,000, and $135,000).

Lowest Bid Consideration: The lowest initial bid of $110,000 should be the baseline because it represents the market's competitive price before any negotiation.

Calculate Cost Avoidance: After negotiations, the final cost is $105,000. The cost avoidance is calculated against the $110,000 baseline, showing the savings achieved through negotiation.

References

Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2016). Purchasing and Supply Chain Management. Cengage Learning.

Burt, D. N., Petcavage, S. D., & Pinkerton, R. L. (2010). Supply Management. McGraw-Hill Education.