Which of the following statements is the best definition of 'value engineering?

• A.Analysing perceived value after the product is available for sale
• B.Building value into a new product from design stage onwards
• C.Producing good value products right first time.
• D.Value achieved by an engineering department

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An automotive manufacturer is sourcing rubber components from Company A.
The specification given to the supplier state that the component should be 1 meter long, without mentioning the tolerance. Enthusiast with the opportunity, engineers at Company A work hard to cut the components with tolerance at only +/- 1mm. The head and tail of the component is then joined together to form a circular band. After that it is stretched over another component. To fit this purpose, the rubber component can be at any length from 80cm to 110cm. This is an example of...?

• A.Defects
• B.Waiting
• C.Unnecessary motion
• D.Over processing

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A procurement team is categorising their purchased items into four quadrants of Kraljic's supply chain portfolio matrix. They realise that there are some low-value items which come from very few suppliers in the market. The organisation is critically dependent on these suppliers. The team plans to reduce the dependence by finding alternative sources. Is this a right course of action?

• A.Yes, the organisation needs to reduce the supply risks
• B.No, the organisation should run competitive biddings to exploit the competition
• C.No, there is no way to escape this dependency
• D.Yes, this action will dramatically increase the supplier's bargaining power

Correct Answer: A

According to Kraljic portfolio matrix, the low-value items with high supply risk are bottleneck items.

The purchasing strategy that is commonly recommended for these products is primarily based on acceptance of the dependence and reduction of the negative effects of the unfavourable position. An alternative strategy suggested by purchasing practitioners is to find other suppliers and move towards the non-critical quadrant.
- Accept dependence, reduce negative consequences: The main focus of this strategy is to assure supply, if necessary even at additional cost. Examples of this strategy are keeping extra stocks of the materials concerned or developing consigned stock agreements with suppliers. By performing a risk analysis firms can identify the most important bottleneck products and consider the implications. A possible action for dealing with unexpected bad dependence positions for certain products is to employ contingency planning.
- Reduce dependence and risk, find other solutions: This strategy is geared towards reducing the dependence on the supplier. The most common way to achieve this is to broaden the specifications of the product or to search for new suppliers.
The procurement team in the scenario has selected reducing dependency by finding alternatives. This is a right strategy for bottleneck item.
Reference:
- CIPS study guide page 82-84
- Purchasing strategies in the Kraljic matrix-A power and dependence perspective, Marjolein C.J. Caniels, Cees J. Gelderman LO 2, AC 2.1

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Which of the following are typically included in a conformance specification? Select TWO that apply.

• A.Product functions
• B.Product dimensions
• C.Brand name
• D.List of outcome
• E.Packaging requirements

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EV Inc is facing the following challenges:
1. The capital investment is enormous.
2. Most of company's working capital is in form of inventories, which include raw materials, work-in-progress and finished goods.
3. Competitors are increasingly deploying robotics and automation to boost productivity.
Which of the below business sectors does EV Inc belong to?

• A.Construction
• B.Manufacturing
• C.Financial services
• D.Retails

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