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Question 1Supply Chain Management

A manufacturer holds 12,000 units of safety stock to buffer against demand variability. Which inventory classification does this buffer primarily represent?

  1. Pipeline stock
  2. Safety stock Correct answer.
  3. Cycle stock
  4. Anticipation stock

Explanation

Safety stock exists specifically to absorb unpredictable fluctuations in demand or supply lead time, so a buffer held for demand variability is safety stock by definition. Cycle stock instead reflects the normal lot-size quantity consumed between replenishments.

Question 2Supply Chain Management

Which metric directly measures how often a firm's entire on-hand inventory is sold and replaced over a period?

  1. Order cycle time
  2. Fill rate
  3. Inventory turnover Correct answer.
  4. Perfect order rate

Explanation

Inventory turnover equals cost of goods sold divided by average inventory value, expressing how many times stock is cycled through in a period. Fill rate and perfect order rate measure service performance, not inventory velocity.

Question 3Supply Chain Management

A company wants a single number describing the average deviation of forecast error regardless of direction. Which measure should it use?

  1. Forecast bias
  2. Mean forecast error
  3. Tracking signal
  4. Mean absolute deviation Correct answer.

Explanation

Mean absolute deviation averages the absolute values of forecast errors, so positive and negative misses do not cancel and the result reflects typical error magnitude. Mean forecast error and bias preserve sign and therefore measure direction rather than size.

Question 4Supply Chain Management

In the SCOR model, which performance attribute addresses the cost of goods sold, supply chain management costs, and cash-to-cash cycle time?

  1. Reliability
  2. Cost Correct answer.
  3. Responsiveness
  4. Agility

Explanation

The SCOR cost attribute covers the expenses and working-capital measures of supply chain operation, including COGS, SCM cost, and cash-to-cash cycle time. Reliability, responsiveness, and agility are customer-facing performance attributes.

Question 5Supply Chain Management

Which Incoterm places the maximum obligation on the seller, including delivery to the named destination and import clearance?

  1. CIF
  2. FOB
  3. EXW
  4. DDP Correct answer.

Explanation

Delivered Duty Paid requires the seller to deliver goods to the named place, clear export and import, and pay duties, leaving the buyer with minimal obligation. EXW sits at the opposite extreme with minimal seller responsibility.

Question 6Supply Chain Management

A retailer that places orders based on actual customer demand rather than forecast demand is applying which principle?

  1. ABC classification
  2. Pull-based replenishment Correct answer.
  3. Economic order quantity
  4. Push-based distribution

Explanation

Pull-based replenishment triggers supply in response to real consumption signals, which reduces the bullwhip effect across the chain. Push systems instead deploy inventory according to forecast.

Question 7Supply Chain Management

Which document typically authorizes a supplier to ship goods and states the quantity and items ordered?

  1. Packing list
  2. Bill of lading
  3. Purchase order Correct answer.
  4. Invoice

Explanation

A purchase order is the buyer's formal commitment specifying items, quantities, prices, and terms, and it authorizes the supplier to fulfill. The bill of lading is the carrier's receipt and contract of carriage.

Question 8Supply Chain Management

Which layout approach is most associated with reducing travel and enabling continuous flow in a lean production environment?

  1. Process-oriented layout
  2. Cellular layout Correct answer.
  3. Fixed-position layout
  4. Warehouse aisle layout

Explanation

Cellular layouts group dissimilar machines into cells that produce a family of similar parts end to end, cutting travel and enabling continuous flow. Process-oriented layouts group similar equipment together and typically generate more movement.

Question 9Supply Chain Management

A distributor's annual demand is 10,000 units, ordering cost is 50 per order, and annual holding cost is 4 per unit. What is the economic order quantity?

  1. 1,000 units
  2. 500 units Correct answer.
  3. 250 units
  4. 2,000 units

Explanation

EOQ equals the square root of 2DS divided by H. With 2 times 10,000 times 50 equal to 1,000,000, divided by 4 gives 250,000, whose square root is 500 units.

Question 10Supply Chain Management

A supplier's on-time delivery rate is 92 percent, its complete-order rate is 95 percent, and its damage-free rate is 98 percent. What is the approximate perfect order rate?

  1. 92.0 percent
  2. 95.0 percent
  3. 98.0 percent
  4. 85.7 percent Correct answer.

Explanation

Perfect order rate multiplies the individual performance components because an order must satisfy every criterion simultaneously. Multiplying 0.92 by 0.95 by 0.98 yields roughly 0.857, or 85.7 percent.

Question 11Supply Chain Management

A firm's inventory turns are 8 per year. What is the approximate days of supply on hand?

  1. 45 days Correct answer.
  2. 60 days
  3. 8 days
  4. 26 days

Explanation

Days of supply equals 365 divided by annual inventory turns, so 365 divided by 8 is about 45.6 days. Higher turnover therefore corresponds to fewer days of inventory.

Question 12Supply Chain Management

A company experiences demand amplification as orders move upstream from retailer to distributor to manufacturer. Which phenomenon is being described?

  1. Bullwhip effect Correct answer.
  2. Postponement
  3. Vendor-managed inventory
  4. Cross-docking

Explanation

The bullwhip effect is the amplification of demand variability as orders pass upstream through the supply chain, driven by factors such as order batching and shortage gaming. Postponement and cross-docking are strategies that can mitigate it.

Question 13Supply Chain Management

A firm uses a three-period simple moving average to forecast demand. Actual demand was 100, 120, and 110 in the last three periods. What is the forecast for the next period?

  1. 110 Correct answer.
  2. 115
  3. 100
  4. 120

Explanation

A simple moving average of the three most recent periods is the sum 100 plus 120 plus 110, which is 330, divided by 3, giving 110. Each observation receives equal weight.

Question 14Supply Chain Management

Which sourcing strategy concentrates volume with a single supplier to gain scale advantages while accepting higher dependency risk?

  1. Global sourcing
  2. Multiple sourcing
  3. Dual sourcing
  4. Single sourcing Correct answer.

Explanation

Single sourcing awards the full requirement to one supplier, which can lower unit cost and simplify coordination but raises exposure to disruption. Multiple and dual sourcing deliberately split volume to reduce that exposure.

Question 15Supply Chain Management

A warehouse receives full pallets from suppliers and immediately breaks them into mixed-case shipments for individual stores without storing the goods. Which practice is this?

  1. Cycle counting
  2. Put-away
  3. Slotting
  4. Cross-docking Correct answer.

Explanation

Cross-docking moves inbound goods directly to outbound vehicles with little or no storage, reducing handling and inventory dwell time. Put-away and slotting concern placing goods into storage locations.

Question 16Supply Chain Management

Which transportation mode is generally best suited for high-value, time-sensitive, long-distance shipments where speed outweighs cost per unit?

  1. Air freight Correct answer.
  2. Ocean freight
  3. Rail freight
  4. Inland barge

Explanation

Air freight offers the fastest transit for long distances, which justifies its high cost for high-value or urgent goods. Ocean, rail, and barge are slower but far cheaper per unit of weight.

Question 17Supply Chain Management

A company postpones final product configuration until customer orders arrive, holding generic inventory that can become multiple variants. Which benefit does this primarily deliver?

  1. Lower forecast risk on finished variants Correct answer.
  2. Higher transportation cost
  3. Longer order cycle time
  4. Reduced raw material variety

Explanation

Postponement keeps inventory in a generic state, so variability is absorbed before commitment to a specific variant, reducing the risk of mismatched finished-goods forecasts. It typically increases rather than reduces the variety of components held.

Question 18Supply Chain Management

A firm classifies items so that the small number of high-value parts receives tight control and frequent review, while many low-value parts receive loose control. Which technique is being applied?

  1. Safety stock optimization
  2. JIT replenishment
  3. ABC analysis Correct answer.
  4. Demand sensing

Explanation

ABC analysis segments inventory by value or usage so management effort concentrates on the few items accounting for most value. JIT and safety stock optimization address replenishment timing and quantity rather than segmentation.

Question 19Supply Chain Management

A supplier agrees to hold inventory at the buyer's site and invoice only when the buyer consumes it. Which arrangement is described?

  1. Cycle stock
  2. Safety stock
  3. Drop shipping
  4. Consignment stock Correct answer.

Explanation

Under consignment, the supplier retains title until the buyer consumes the goods, so the buyer avoids carrying cost and ownership risk before use. Drop shipping instead sends goods directly to the end customer.

Question 20Supply Chain Management

A plant produces 900 units in a 10-hour shift with two 15-minute breaks and a 30-minute planned maintenance stop. What is the approximate takt time in seconds per unit?

  1. 30 seconds
  2. 45 seconds
  3. 40 seconds
  4. 36 seconds Correct answer.

Explanation

Available production time is 10 hours minus 15, 15, and 30 minutes, leaving 9 hours, or 32,400 seconds. Dividing 32,400 by 900 units gives 36 seconds per unit.

Question 21Supply Chain Management

A supply chain maps its tier-1, tier-2, and tier-3 suppliers and identifies a sole-source component deep in the network. Which risk category does this exposure primarily represent?

  1. Supply risk Correct answer.
  2. Operational risk
  3. Financial risk
  4. Demand risk

Explanation

Supply risk concerns the availability and reliability of inbound goods, and a sole-source component at a lower tier is a classic upstream vulnerability. Demand risk instead concerns variability from customers.

Question 22Supply Chain Management

A company uses a periodic review system with a review interval of 14 days and a lead time of 7 days. Which protected period must the safety stock cover?

  1. 7 days
  2. 28 days
  3. 21 days Correct answer.
  4. 14 days

Explanation

In a periodic review system, exposure spans the review interval plus the replenishment lead time, so 14 plus 7 equals 21 days of protection. A continuous review system would protect only the lead time.

Question 23Supply Chain Management

A process has a bottleneck capacity of 80 units per hour and total demand of 100 units per hour. What does the theory of constraints predict about the system's output?

  1. Output will equal the average of capacity and demand
  2. Output will fall below 80 because of queue starvation at the bottleneck
  3. Output will reach 100 units per hour because non-bottleneck resources absorb the gap
  4. Output will be capped near 80 units per hour unless the bottleneck is expanded Correct answer.

Explanation

The theory of constraints holds that system throughput is limited by the bottleneck, so output cannot exceed roughly 80 units per hour regardless of capacity elsewhere. Only relieving the constraint raises system throughput.

Question 24Supply Chain Management

A firm's total logistics cost is 2,000,000 and its sales revenue is 20,000,000. If logistics cost is reduced by 10 percent, what revenue increase would be required to produce the same absolute profit gain, assuming a 5 percent net profit margin?

  1. 2,000,000
  2. 400,000
  3. 200,000
  4. 4,000,000 Correct answer.

Explanation

A 10 percent cut in 2,000,000 logistics cost saves 200,000. At a 5 percent margin, matching that saving requires additional revenue of 200,000 divided by 0.05, which equals 4,000,000.

Question 25Supply Chain Management

A company reports cash-to-cash cycle time of 45 days, composed of days inventory outstanding of 60 and days sales outstanding of 30. What is its days payable outstanding?

  1. 30 days
  2. 75 days
  3. 45 days Correct answer.
  4. 15 days

Explanation

Cash-to-cash cycle equals days inventory outstanding plus days sales outstanding minus days payable outstanding. Rearranging gives 60 plus 30 minus 45, so days payable outstanding is 45 days.

Question 26Supply Chain Management

A company's transportation manager must choose a mode for shipping 40 containers of low-value furniture from Asia to Europe with a delivery window of six weeks. Which mode best fits this requirement?

  1. Rail freight across the Pacific
  2. Air freight
  3. Courier express
  4. Ocean freight Correct answer.

Explanation

Ocean freight offers the lowest cost per ton-kilometer for large, heavy, low-value loads and transit times of several weeks are acceptable, so it matches the cost and lead-time requirement. Air and express modes cost far more and are justified only when speed or value density demands it. Rail cannot cross the Pacific directly, so it is not a viable single-mode option for this lane.

Question 27Supply Chain Management

Which inventory measure expresses the average number of days a unit spends in inventory before being sold?

  1. Days of inventory outstanding Correct answer.
  2. Order cycle time
  3. Fill rate
  4. Perfect order rate

Explanation

Days of inventory outstanding converts average inventory into the number of days of sales it represents, using average inventory divided by daily cost of goods sold. It is a core working-capital metric because it directly reflects how long cash is tied up in stock. The other measures describe service performance or elapsed process time rather than inventory duration.

Question 28Supply Chain Management

Which term describes the practice of holding a small buffer of stock to absorb normal variability in demand and lead time?

  1. Cycle stock
  2. Obsolete stock
  3. Safety stock Correct answer.
  4. Pipeline stock

Explanation

Safety stock exists specifically to protect against uncertainty in demand and replenishment lead time, so service levels are maintained when variability occurs. Cycle stock results from ordering in batches, and pipeline stock is inventory in transit. Obsolete stock is inventory that can no longer be sold.

Question 29Supply Chain Management

Which procurement document is issued by a buyer to request prices and terms from potential suppliers before a purchase decision is made?

  1. Bill of lading
  2. Purchase order
  3. Request for quotation Correct answer.
  4. Goods receipt note

Explanation

A request for quotation invites suppliers to submit pricing and commercial terms so the buyer can compare offers before committing. A purchase order is issued after the decision to buy, and a goods receipt note records inbound delivery. A bill of lading is a transport document issued by the carrier.

Question 30Supply Chain Management

In demand planning, which characteristic distinguishes a qualitative forecasting method from a quantitative one?

  1. It always produces a lower forecast error than a time-series model.
  2. It relies on historical numerical data and statistical models.
  3. It relies on judgment, opinion, or expert input rather than numerical history. Correct answer.
  4. It is used only for products with stable, high-volume demand.

Explanation

Qualitative forecasting draws on expert judgment, market intelligence, or sales-force opinion when numerical history is sparse or unreliable, such as for new products. Quantitative methods instead extrapolate from historical data using statistical models. Neither category is guaranteed to be more accurate in all situations.

Question 31Supply Chain Management

Which term describes the total time from when a customer places an order until the product is delivered?

  1. Review period
  2. Supplier lead time
  3. Order-to-delivery lead time Correct answer.
  4. Manufacturing cycle time

Explanation

Order-to-delivery lead time spans the entire fulfillment process from customer order entry through delivery, and it is the clock the customer experiences. Manufacturing cycle time covers only production, supplier lead time covers replenishment from a supplier, and a review period is the interval between inventory checks.

Question 32Supply Chain Management

A company wants to reduce total landed cost when importing components. Which cost element is most often overlooked when teams compare only supplier unit price?

  1. Duties, freight, and inventory carrying costs incurred after purchase Correct answer.
  2. The supplier's internal labor rate
  3. The buyer's marketing budget
  4. The supplier's depreciation schedule

Explanation

Total landed cost adds freight, insurance, duties, brokerage, and the carrying cost of inventory in transit to the quoted unit price. Teams that compare only unit price miss these elements and can select a supplier who is cheaper on paper but more expensive overall. The other items are internal or supplier-side figures not part of landed cost.

Question 33Supply Chain Management

Which statement best describes the role of a third-party logistics provider in a supply chain?

  1. It manufactures components on behalf of the buyer.
  2. It finances the buyer's inventory purchases.
  3. It performs outsourced logistics activities such as warehousing and transportation for shippers. Correct answer.
  4. It sets customs tariff rates for imported goods.

Explanation

A third-party logistics provider delivers outsourced logistics services, typically transportation, warehousing, and value-added handling, under contract to shippers. It does not manufacture goods, set government tariffs, or act as the primary financier of inventory. This specialization lets shippers focus capital and management attention on their core business.

Question 34Supply Chain Management

A retailer holds average inventory of 600,000 at cost and its annual cost of goods sold is 3,600,000. What is its approximate days of inventory outstanding?

  1. 100 days
  2. 167 days
  3. 30 days
  4. 61 days Correct answer.

Explanation

Days of inventory outstanding equals average inventory divided by daily cost of goods sold. Daily COGS is 3,600,000 divided by 365, about 9,863, and 600,000 divided by 9,863 gives roughly 61 days. This means the retailer holds about two months of sales in stock.

Question 35Supply Chain Management

A firm's forecast for the last period was 500 units and actual demand turned out to be 560 units. Using exponential smoothing with a smoothing constant of 0.2, what is the forecast for the next period?

  1. 548 units
  2. 572 units
  3. 560 units
  4. 512 units Correct answer.

Explanation

Exponential smoothing sets the new forecast equal to the old forecast plus the smoothing constant times the forecast error. The error is 560 minus 500, or 60, and 0.2 times 60 is 12, so the new forecast is 512. A low smoothing constant damps the response to the most recent deviation.

Question 36Supply Chain Management

A buyer faces annual demand of 9,000 units, an ordering cost of 40 per order, and an annual holding cost of 8 per unit. What is the economic order quantity?

  1. 450 units
  2. 150 units
  3. 300 units Correct answer.
  4. 212 units

Explanation

The economic order quantity equals the square root of twice annual demand times ordering cost divided by holding cost. That is the square root of (2 times 9,000 times 40) divided by 8, which is the square root of 90,000, or 300 units. At this lot size the annual ordering cost and annual holding cost are equal.

Question 37Supply Chain Management

A warehouse handles 1,200 order lines in an 8-hour shift with 6 pickers working the full shift. What is the approximate pick productivity per labor hour?

  1. 15 lines per labor hour
  2. 25 lines per labor hour Correct answer.
  3. 150 lines per labor hour
  4. 200 lines per labor hour

Explanation

Total labor hours are 6 pickers times 8 hours, or 48 hours. Dividing 1,200 order lines by 48 labor hours gives 25 lines per labor hour. This productivity measure supports labor planning and benchmarking across shifts.

Question 38Supply Chain Management

A company ships 2,000 orders in a month. Of these, 1,840 arrive on time, and of those, 1,700 arrive complete and undamaged with correct documentation. What is the perfect order rate?

  1. 85 percent Correct answer.
  2. 98 percent
  3. 92 percent
  4. 95 percent

Explanation

The perfect order rate counts orders that satisfy all criteria simultaneously, so it is 1,700 divided by 2,000, or 85 percent. Multiplying the individual on-time, complete, and damage-free rates would overstate performance because the criteria overlap imperfectly. Perfect order rate is the stricter, customer-facing service measure.

Question 39Supply Chain Management

Under a vendor-managed inventory arrangement, which party typically decides replenishment quantities and timing for the buyer's stock?

  1. The customs broker
  2. The third-party carrier
  3. The supplier, using shared demand and inventory data Correct answer.
  4. The buyer's category manager

Explanation

In vendor-managed inventory the supplier takes responsibility for monitoring stock levels and deciding replenishment, using demand and inventory data shared by the buyer. This shifts replenishment decisions to the party with the clearest view of production and supply. The buyer retains accountability for sales data accuracy and shelf capacity.

Question 40Supply Chain Management

A manufacturer wants to reduce risk from a single-source component while keeping some scale advantage. Which sourcing approach best fits this goal?

  1. Dual sourcing with a primary and a qualified secondary supplier Correct answer.
  2. Vertical integration of the component's production
  3. Spot buying from whichever supplier offers the lowest price
  4. Sole sourcing with a long-term exclusive contract

Explanation

Dual sourcing keeps most volume with a primary supplier to preserve scale while a qualified secondary supplier provides continuity if the primary fails. This balances concentration benefits against disruption risk. Sole sourcing maximizes dependence, spot buying sacrifices stability, and vertical integration is a much larger capital commitment.

Question 41Supply Chain Management

Which performance measure best captures how well a distribution network meets customer demand from available stock?

  1. Inventory turnover
  2. Warehouse utilization
  3. Freight cost per mile
  4. Order fill rate Correct answer.

Explanation

Order fill rate measures the proportion of customer demand satisfied from stock on hand, directly reflecting service to customers. Inventory turnover and warehouse utilization are efficiency measures, and freight cost per mile is a transportation cost metric. Service and efficiency measures must be balanced, since high fill rates can require more inventory.

Question 42Supply Chain Management

A firm's logistics cost is 3,000,000 and sales are 30,000,000. If logistics cost is cut by 12 percent, what increase in sales would be needed to produce the same absolute profit improvement, assuming a 4 percent net profit margin?

  1. 9,000,000 Correct answer.
  2. 30,000,000
  3. 12,000,000
  4. 3,000,000

Explanation

A 12 percent cut in 3,000,000 of logistics cost saves 360,000. To generate the same profit at a 4 percent margin, sales must rise by 360,000 divided by 0.04, or 9,000,000. This illustrates why cost reduction often leverages profit more than equivalent revenue growth.

Question 43Supply Chain Management

A company wants to shorten its cash-to-cash cycle. Which combination of actions achieves this?

  1. Reduce days inventory outstanding and collect receivables faster Correct answer.
  2. Extend days sales outstanding and reduce days payable outstanding
  3. Increase days sales outstanding and increase days inventory outstanding
  4. Increase days inventory outstanding and extend days payable outstanding

Explanation

Cash-to-cash cycle equals days inventory outstanding plus days sales outstanding minus days payable outstanding. Reducing inventory days and collecting receivables sooner both shorten the cycle, freeing cash. Extending payables also helps, but the other listed combinations lengthen the cycle.

Question 44Supply Chain Management

Which lean concept holds that producing more than the next process needs is a form of waste?

  1. Overproduction Correct answer.
  2. Poka-yoke
  3. Heijunka
  4. Jidoka

Explanation

In lean thinking overproduction is waste because it consumes materials, labor, and space to create output that is not yet required, and it hides other problems. Jidoka refers to stopping the line when abnormalities occur, heijunka is production leveling, and poka-yoke is error-proofing. Each addresses a different lean principle.

Question 45Supply Chain Management

A firm uses a continuous review policy with average daily demand of 200 units, a lead time of 5 days, and safety stock of 400 units. At what inventory position should a replenishment order be triggered?

  1. 1,000 units
  2. 2,000 units
  3. 600 units
  4. 1,400 units Correct answer.

Explanation

The reorder point equals average demand during lead time plus safety stock. Demand over the five-day lead time is 200 times 5, or 1,000 units, and adding 400 units of safety stock gives a reorder point of 1,400. Ordering at this position protects service while avoiding excess stock.

Question 46Supply Chain Management

A distribution center must decide whether to centralize inventory in one facility or keep it in several regional facilities. Which trade-off is most directly affected by this decision?

  1. Product design complexity versus warranty cost
  2. Employee training cost versus office rent
  3. Inventory pooling benefits versus transportation and response time Correct answer.
  4. Supplier payment terms versus customs duties

Explanation

Centralizing inventory pools demand variability, which lowers total safety stock, but it increases outbound shipping distance and can slow customer response. Regional facilities shorten delivery but require more inventory in total. This is the classic inventory-service trade-off in network design.

Question 47Supply Chain Management

A plant runs a line where station A can process 60 units per hour, station B 45 units per hour, and station C 75 units per hour. Demand is 50 units per hour. What is the maximum sustainable output and the resulting constraint?

  1. 75 units per hour, constrained by station C
  2. 50 units per hour, constrained by demand
  3. 45 units per hour, constrained by station B Correct answer.
  4. 60 units per hour, constrained by station A

Explanation

The line's output cannot exceed its slowest station, so station B at 45 units per hour caps throughput. Because this is below the 50-unit demand, station B is the binding bottleneck and determines system capacity. Improving stations A or C would not raise output until B is expanded.

Question 48Supply Chain Management

A supply chain team must choose between a low-cost overseas supplier with 60-day lead time and a domestic supplier with 10-day lead time at 15 percent higher unit price. Which analysis best supports the decision?

  1. Selecting the domestic supplier because shorter lead time is always preferable
  2. Selecting the overseas supplier because lower unit price always reduces total cost
  3. Comparing only the quoted unit prices of the two suppliers
  4. Comparing total landed cost including inventory carrying cost of longer transit and added safety stock Correct answer.

Explanation

Longer lead time raises in-transit inventory and safety stock requirements, and those carrying costs can offset a lower unit price. A total landed cost comparison that includes freight, duties, and inventory carrying cost captures the full economic difference. Choosing on unit price alone or on lead time alone ignores the trade-off.

Question 49Supply Chain Management

A company's sales and operations planning process repeatedly produces a plan that operations cannot execute because sales forecasts are consistently optimistic. Which change most improves the process?

  1. Increasing finished goods inventory to cover every forecast error
  2. Letting each function keep its own separate plan and budget
  3. Removing operations from the planning meetings to speed decisions
  4. Using a single consensus demand plan with measured forecast accuracy and shared accountability Correct answer.

Explanation

Effective sales and operations planning depends on one consensus demand plan owned jointly by sales, operations, and finance, with forecast accuracy tracked and accountability shared. Separate plans or excluded functions recreate the mismatch. Building inventory to cover errors adds cost without fixing the planning process.

Question 50Supply Chain Management

A firm reduces its supplier base from 200 to 40 strategic suppliers while retaining competitive tension through structured bidding for commodity items. Which outcome is most consistent with this sourcing strategy?

  1. Complete elimination of supply disruption risk
  2. Higher transaction and coordination costs across a larger supplier pool
  3. Stronger supplier relationships and lower total cost for strategic categories Correct answer.
  4. Guaranteed reduction in unit prices for every purchased item

Explanation

Consolidating spend with fewer strategic suppliers deepens relationships, improves coordination, and typically lowers total cost through volume leverage and joint improvement. Competitive bidding on commodities preserves price discipline where it matters. Consolidation reduces management complexity but does not eliminate disruption risk or guarantee lower prices on every item.