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OMGT Exam 2 Questions with Complete Answers
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OMGT Exam 2 Questions with Complete Answers
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OMGT Exam 2 Questions with CompleteAnswers
What is portfolio analysis? - Answer-a structured approach used by decision makers to
develop a sourcing strategy for a product or service, based on the value potential and
the relative complexity or risk represented by a sourcing opportunity.
Portfolio Analysis- Name the four quadrants. - Answer-routine
leverage
bottleneck
critical
Describe what happens in portfolio analysis. - Answer-o In portfolio analysis, the
products or services to be sourced are assigned to of four strategic quadrants, based on
their relative complexity and/or risk impact to the firm and their potential value. In
general, the more money a company spends on a particular good or service, the higher
its value potential. Depending on what quadrant a product or service is assigned to, the
buying firm can then identify the most appropriate sourcing strategy, tactics, and
actions.
Describe the Routine Quadrant. - Answer-products or services in the routine quadrant
are readily available and represent a relatively small portion of a firm's purchasing
expenditures. Typical examples include office supplies, cleaning services, and the like.
The sourcing strategy thereof becomes one of simplifying the acquisition process,
thereby lowering the costs associated with purchasing items in this quadrant. Specific
actions can include automating the purchasing process, reducing the number of
suppliers used, and using electronic data interchange (EDI) or purchase cards to
streamline payment.
Describe the Leverage Quadrant. - Answer-Products or services in the leverage
quadrant tend to be standardized and readily available, and they represent a significant
portion of spend. The sourcing strategy therefore focuses on leveraging the firm's
spending levels to get the most favorable terms possible. A preferred supplier is a
supplier that has demonstrated its performance capabilities through previous purchase
contracts and therefore receives preference during the supplier selection process.
Preferred suppliers are frequently awarded business, with the understanding that they
will reduce the cost of supplying these items in return for significant order volumes and
multiple-year contracts. A high level of service is also expected, which may include such
services as on-site inventory management by the supplier and e-purchasing.
Describe the Bottleneck Quadrant. - Answer-"Bottleneck" products or services have
unique or complex requirements that can be met only by a few potential suppliers. In
this case, the primary goal of the sourcing strategy is to not run out; in effect, the goal is
to ensure supply continuity. This might involve carrying extra inventory to protect
, against interruptions in supply or contracting with multiple vendors to reduce supply
chain risks.
Describe the Critical Quadrant. - Answer-Like bottleneck items, products or services in
the critical quadrant have complex or unique requirements coupled with a limited supply
base. The primary difference is that these items can represent a substantial level of
expenditure for the sourcing firm. In cases such as this, the sourcing firm will spend
considerable time negotiating favorable deals and building partnerships with suppliers,
as well as preparing contingency plans in case of an interruption in supply.
Bottleneck- Describe the strategy, tactics, and actions. - Answer--Strategy: ensure
supply continuity
-Tactics: decrease uniqueness of suppliers, manage supply
-Actions: widen specification, increase competition, develop new suppliers, medium-
term contracts, attempt competitive bidding
Critical-Describe the strategy, tactics, and actions. - Answer--Strategy: from
partnerships with suppliers
-Tactics: increase role of selected suppliers
-Actions: heavy negotiation, supplier process management, prepare contingency plans,
analyze market/competitions, use functional specifications
Routine-Describe the strategy, tactics, and actions. - Answer--Strategy: simplify
acquisition process
-Tactics: increase role of systems, reduce buying effort
-Actions: rationalize supplier base, automate requisitioning (ex: EDI, purchase cards),
stockless procurement, minimize admin. costs, little negotiating
Leverage-Describe the strategy, tactics, and actions. - Answer--Strategy: maximize
commercial advantage
-Tactics: concentrate business, maintain competition
-Actions: promote competitive bidding, exploit market cycles/trends, procurement
coordination, use industry standards, active sourcing
High complexity or risk impact and high value potential: - Answer-Critical
-Critical to profitability and operations
-Few qualified sources of supply
-Large expenditures
-Design and quality critical
-Complex and/or rigid specification
High complexity or risk impact and low value potential: - Answer-Bottleneck
-Complex specifications requiring complex manufacturing or service process
-Few alternate productions/sources of supply
-Big impact on operations/maintenance
-New technology or untested processes
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