CORE Exam Dumps : Supply Management Core Exam

Scenario Overview: The supply manager issued an RFQ to five suppliers; three declined, and the remaining two raised concerns about risk and pricing.

Conference Outcome: A conference revealed that only three tolerances were critical, leading to a revised RFQ.

Value Engineering: This process involves evaluating a project to reduce costs while maintaining quality by identifying essential versus non-essential specifications.

Supply Manager’s Role: By facilitating this discussion, the supply manager helped reduce project costs and risks, demonstrating the principles of value engineering.

References

CIPS. (n.d.). Value Engineering in Procurement.

ISM. (n.d.). Cost Management and Value Engineering.

To determine how many units JKL, Inc. needs to buy to justify changing suppliers, the following steps are taken:

Calculate the Cost Savings per Unit:

Current supplier cost per unit: X

New supplier cost per unit: X - $0.03

Savings per unit: $0.03

Determine the Transition Cost:

Transition cost to the new supplier: $12,000

Calculate the Break-Even Point:

The break-even point is when the total savings equal the transition cost.

Savings per unit × Number of units = Transition cost

$0.03 × Number of units = $12,000

Number of units = $12,000 / $0.03

Number of units = 400,000

Therefore, JKL, Inc. needs to buy 400,001 units to justify changing suppliers, as the 400,000 units would only cover the transition cost, and any additional units would result in actual savings.

References:

Cost-benefit analysis in supply chain management.

Break-even analysis principles in procurement decisions.