L5M7 Achieving Competitive Advantage Through the Supply Chain (L5M7) Questions and Answers

Trust in supply chains is built on components includingintegrity,competence,loyalty,openness, andfairness. Short extract: “key trust components: integrity, competence, loyalty, openness, fairness.” (L5M7 Study Guide, Domain 3.4 section)

TheKraljic Matrixplotssupply riskagainstprofit (cost) impactto determine supplier strategy (leverage, bottleneck, routine, strategic).

Short cited extract: “Matrix axes – profit impact vs supply risk.” (L5M7 Study Guide, p. 83)

Anadhocracyisflexible,decentralised, and able torespond rapidlyto change, though it may lack formal control systems.

Short cited term: “low formalisation, high adaptability” (L5M7 Study Guide, p. 64).

Inventory valuation requires data onquantity in stockandunit purchase cost. These determine the total inventory value at any given time.

Short cited extract: “Inventory value = number of items × purchase cost.” (L5M7 Study Guide, p.147)

Technology enhancesbuyer access to data, broadening supplier choice and transparency, whichreduces supplier power.

Short cited term: “technology has reduced suppliers’ bargaining power” (L5M7 Study Guide, p. 66).

BPRbegins byappointing a process owner—a responsible individual to lead and oversee change before analysis or redesign begins.

Short cited extract: “Step one of BPR – appoint a process owner to take accountability.” (L5M7 Study Guide, p.169)

Dynamic Pricingadjusts prices in real time to reflectmarket demand and supply conditions, commonly used in commodities.

Short cited term: “dynamic pricing – prices adjust to demand fluctuation.” (L5M7 Study Guide, p. 189)

ANormal Distributionforms asymmetrical bell-shaped curve, representing probability distribution around a mean.

Short cited term: “normal distribution = bell-shaped curve.” (L5M7 Study Guide, p. 150)

Primary datais information collectedfirst-hand, includingsurveys, interviews, and questionnaires. Sandy’s approach aligns with primary data collection methods.

Short cited extract: “Primary data: original research such as questionnaires and interviews.” (L5M7 Study Guide, p.141)

On the relationship spectrum,arm’s-lengthis alow-collaborationstyle (onlyadversarialis lower), characterised by limited information sharing and short-term focus. Short cited term: “relationship spectrum … arm’s-length (low collaboration)” (L5M7 Study Guide, p.80).

Meeting expectations (B) is not exceeding them. Exceeding is demonstrated byunexpected extra valuesuch aslower-than-expected priceora free add-on. Short extract: “exceeding expectations—delighting customers with additional/unexpected value.” (L5M7 Study Guide, p.121)

Single-sourcingbuildsexclusive, strategic relationshipswith one supplier to secure priority service and joint improvement opportunities.

Short cited extract: “Single-sourcing – exclusivity to gain stronger commitment and collaboration.” (L5M7 Study Guide, p. 81)

Relationship effectiveness is damaged bymistrustand poorfeedback/communication. Spend level alone is not inherently harmful if expectations are aligned. Short cited terms: “trust,” “communication/feedback” (L5M7 Study Guide, p.93).

Understandingorganisational and national culturesupports collaboration, communication, and innovation across the chain. Cultural awareness enables smoother partnerships and shared values.

Short cited extract: “Cultural understanding assists collaboration and trust within supply-chain relationships.” (L5M7 Study Guide, pp. 58–59)

Multi-sourcingmaintainscompetitionand reduces dependency, promoting better pricing and performance from suppliers.

Short cited extract: “Multi-sourcing maintains competitive tension between suppliers.” (L5M7 Study Guide, p. 70)

Non-critical itemsinvolve low value and low risk, usually managed viatransactional or arm’s-lengthrelationships where trust plays a minor role.

Short cited term: “non-critical = low trust required.” (L5M7 Study Guide, p. 221)

Therelationship spectrumshows thattransactional relationshipsare theleast trust-based, focusing on short-term exchanges with minimal collaboration.

Short cited extract: “Transactional – low trust, short-term, low collaboration.” (L5M7 Study Guide, p.80)

Fixed pricingmaintains aconstant pricefor a defined period regardless of market changes, providing stability for both buyer and supplier.

Short cited extract: “Fixed pricing – price remains constant for an agreed duration.” (L5M7 Study Guide, p.188)

Cost-plus pricingis based onactual material and labour costs plus an agreed marginfor overheads and profit.

Short cited extract: “Cost-plus = actual cost + agreed mark-up for profit/overheads.” (L5M7 Study Guide, p.191)

ThePDCA Cycle—Plan, Do, Check, Act—provides a structured approach tocontinuous quality improvement. It begins with planning, implementing, monitoring, and then acting to refine the process.

Short cited extract: “The PDCA cycle – Plan, Do, Check, Act – underpins continuous improvement.” (L5M7 Study Guide, p.129)

TQM objectives focus oncustomer satisfaction, zero defects, and employee engagement, not financial planning.

Short cited extract: “TQM aims: customer focus, zero defects, continuous improvement – not financial planning.” (L5M7 Study Guide, p. 112)

Whenknowledge is low, members workindependently; highertechnological readinesscreates deliberate and structured IT use.

Short cited term: “low knowledge → independent working; high tech readiness → structured IT use.” (L5M7 Study Guide, p. 51)

Amarket-oriented approachcentres oncustomer needs, designing offerings around satisfaction and experience rather than internal operations.

Short cited extract: “Market-oriented – focus on customer satisfaction and value creation.” (L5M7 Study Guide, p.55)