Purchasing and Supply Strategy — Undated

KNEC Diploma in Supply Chain Management, Module III. Original examination questions with explained answers for revision. Answers are independently prepared for study and are not an official KNEC marking scheme.

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Question 1(a) — 10 marks

Highlight the role of strategic management in purchasing and supplies management.

Answer

  1. Aligns sourcing, inventory and logistics decisions with the organisation’s long-term objectives.
  2. Anticipates supply-market threats and prepares alternatives before disruption occurs.
  3. Directs scarce resources to purchasing priorities with the greatest organisational value.
  4. Coordinates departments and suppliers around agreed quality, cost and delivery requirements.
  5. Establishes measurable goals and review arrangements that support continual improvement.

Question 1(b) — 10 marks

Some organizations use budgets as a method of measuring supply chain performance. Explain the challenges of using this method.

Answer

  1. Budget estimates may be inaccurate when demand, prices or exchange rates change.
  2. Excessive emphasis on spending can overlook quality, delivery and customer-service outcomes.
  3. Staff may negotiate easy targets or shift costs to make results appear favourable.
  4. Rigid budgets may discourage justified responses to new risks or opportunities.
  5. Preparing detailed budgets and investigating variances can require substantial time and reliable records.

Question 2(a) — 10 marks

Describe the steps followed in the strategic planning process of an organization.

Answer

  1. Clarify mission, vision and the scope of the organisation’s activities.
  2. Analyse internal capabilities and the external environment.
  3. Set measurable strategic objectives and evaluate feasible alternatives.
  4. Select the strategy and prepare implementation plans, budgets and responsibilities.
  5. Implement, monitor results and revise actions or assumptions using feedback.

Question 2(b) — 10 marks

Highlight five transportation decisions that should be made at the strategic level of management in an organization.

Answer

  1. Choose whether to own transport capacity or use external logistics providers.
  2. Select the broad transport modes and network design suited to the business.
  3. Decide major terminal, depot and distribution-location investments.
  4. Set long-term carrier partnership, service and risk-management policies.
  5. Approve major fleet, infrastructure and transport-technology investments.

Question 3(a) — 10 marks

Explain five ways in which a supply chain officer may implement a supplier development strategy.

Answer

  1. Assess the supplier’s actual performance and agree priority capability gaps.
  2. Provide technical assistance or training in the required production and quality methods.
  3. Share appropriate demand forecasts and specifications to improve capacity planning.
  4. Cooperate on process improvement, value analysis and reduction of recurrent defects.
  5. Agree measurable improvement targets, review progress and provide suitable commercial support where justified.

Question 3(b) — 10 marks

Highlight five challenges that a supply chain officer may face when implementing a make policy for an organization.

Answer

  1. High capital and working-capital requirements can strain available finance.
  2. Shortages of technical skills can prevent efficient internal production.
  3. Uncertain demand may leave plant underutilised and increase unit costs.
  4. Meeting consistent quality and compliance requirements can be difficult during start-up.
  5. Obtaining reliable raw materials and maintaining equipment can create new supply and operating risks.

Question 4(a) — 10 marks

Outline five characteristics of the corporate level strategy in an organization.

Answer

  1. It concerns the organisation’s overall purpose and long-term direction.
  2. It determines the range of businesses and major markets in which the organisation participates.
  3. It allocates resources among business units and major activities.
  4. It addresses significant growth, integration, diversification or withdrawal choices.
  5. It is mainly the responsibility of top management and affects the organisation as a whole.

Question 4(b) — 10 marks

Explain five metrics that a supply chain officer may use to measure supply chain performance.

Answer

  1. Cost measures compare total landed or purchasing process costs with appropriate budgets or benchmarks.
  2. Delivery measures track on-time receipt and supplier lead time against commitments.
  3. Quality measures track defects, rejection rates and conformity to specifications.
  4. Inventory measures track turnover, stock availability and obsolete or slow-moving balances.
  5. Service measures track user satisfaction, order fulfilment and response to purchasing requests.

Question 5(a) — 10 marks

The supply chain manager of Lala Limited intends to formulate supply chain objectives for the company. Highlight the attributes that such objectives should have.

Answer

  1. Specific objectives state clearly the result required and the activity concerned.
  2. Measurable objectives include indicators that allow achievement to be assessed.
  3. Achievable objectives reflect realistic capabilities and available resources.
  4. Relevant objectives support corporate priorities and customer needs.
  5. Time-bound objectives specify when the required result should be achieved.

Question 5(b) — 10 marks

Highlight five advantages of adopting a centralised structure for supply chain activities in an organization.

Answer

  1. Consolidated demand increases negotiating strength and access to volume discounts.
  2. Common specifications and contracts improve standardisation across the organisation.
  3. Specialist purchasing staff can be used more efficiently.
  4. Central visibility improves control, reporting and prevention of duplicated purchases.
  5. Consistent supplier evaluation and policy application support quality and accountability.

Question 6(a) — 10 marks

Explain five ways in which a supply chain manager may enhance coordination between the supply chain strategy and the corporate strategy in an organization.

Answer

  1. Involve supply-chain leadership in corporate planning and review discussions.
  2. Translate corporate priorities into measurable sourcing, inventory and logistics objectives.
  3. Align purchasing budgets and resources with agreed corporate programmes.
  4. Use cross-functional teams and shared information to resolve conflicting requirements.
  5. Review common performance indicators and revise supply actions when corporate direction changes.

Question 6(b) — 10 marks

The management of Huduma Limited has appointed a team to prepare the supply policy for the organization. Highlight five features that the policy should have.

Answer

  1. Clear wording makes the intended requirement understandable to users.
  2. Consistency with corporate objectives and applicable requirements prevents conflicting instructions.
  3. Practicality makes the policy achievable with available resources and operating conditions.
  4. Defined scope, authority and responsibility support accountability.
  5. Controlled flexibility and review arrangements allow sensible adaptation as conditions change.

Question 7(a) — 10 marks

Explain five limitations of adopting the differentiation focus strategy in a purchasing organization.

Answer

  1. A narrow target segment limits the potential market and scale of operations.
  2. Specialist products and service requirements may increase sourcing and operating costs.
  3. Customers’ willingness to pay for the distinction may decline or change.
  4. Competitors may imitate the offering or serve the niche more effectively.
  5. Dependence on a small customer or supplier base increases exposure to concentrated demand and supply risks.

Question 7(b) — 10 marks

Highlight five challenges that may be encountered by organizations when measuring supply chain performance.

Answer

  1. Incomplete or inaccurate records can make indicators unreliable.
  2. Unclear objectives and unsuitable measures can produce misleading conclusions.
  3. Supply performance spans several departments, making responsibility and data ownership difficult to assign.
  4. External price movements and disruptions make fair comparisons over time difficult.
  5. Measurement systems, staff time and specialist analysis can be costly to maintain.
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