Question 1

Andrew runs a factory that makes cakes. Vanilla Extract is a vital ingredient in Andrew’s cakes and this is a monopolistic market. Andrew has noticed recently that the quality of the supplier’s product has reduced, and this has led to several complaints from customers. Andrew is considering entering into a Partnership with this supplier as he believes this will help increase the supplier’s performance. Is this the correct thing to do?

Options :

A : Yes- partnership sourcing can improve performance which will ultimately satisfy the end customer

B : Yes- partnership sourcing will improve sales figures

C : No- Andrew should use an alternative supplier

D : No- Andrew should outsource the vanilla extract.

Answer: A

Question 2

Which of the following are costs of poor quality?

1. Prevention costs

2. External failure costs

3. Appraisal costs

4. Internal failure costs

Options :

A : 1 and 4 only

B : 3 and 4 only

C : 2 and 3 only

D : 1 and 2 only

Answer: B

Question 3

How can you enhance the trust and loyalty of your supplier?

Options :

A : Promise the supplier more work than you can deliver

B : Give the supplier a guaranteed level of orders

C : Apply harsh penalties for poor performance

D : Keep a distance from the relationship

Answer: B

Question 4

Lee is a procurement manager at Real Pirates Ltd and he has a contract with Peg Leg Industries for the supply of fake, wooden legs for his team of Pirates. Real Pirates Ltd have been working with Peg Leg Industries for almost 10 years but recently Lee has discovered he will need to terminate the contract due to ‘Contract Frustration’. What could be the reason for this?

Options :

A : The supplier has committed a material breach

B : An unexpected incident has occurred beyond anyone’s control

C : The supplier has become insolvent

D : The supplier has leaked confidential information about Real Pirates Ltd to a competitor

Answer: B

Question 5

In the Purchasing Portfolio Matrix, a leverage product is a product in a market where it is easy to switch suppliers and the quality is standardized. Is this TRUE or FALSE?

Options :

A : False, the product is in a supply market which is highly complex and the product is of low importance

B : False, the product is in a supply market which is highly complex and the product is of high importance

C : True, the product is in a supply market which is of low complexity and the product is of high importance

D : True, the product is in a supply market which is of low complexity and the product is of low importance

Answer: C

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