National Institute of Industrial Engineering, Mumbai

Name of the Faculty Prof Milind Akarte

Name of the Subject Strategic Procurement
Date of Examination 17-09-2021 (3.00 pm – 5.00 pm)
Batch (Junior/Senior) PGDMM Sr Batch
Module (I or V) Module 5
IC/PC/PE PE
Section (e.g., Section-A or like PGDIE-A) PGDMM

Part B – (10 Marks)

NOTE:
 Make suitable assumptions wherever requires
 Draw neat diagrams / flow charts wherever requires and add value to your answer.
 Show your computations clearly wherever requires

Answer ANYONE Questions.

Each question carries10 Marks.
Topic: Allocation of order quantity among suppliers (10 Marks)
Objective: Buyer wishes to minimize the aggregate purchase price subject to
the required level of quality, lead time, and service performance of supplier as
shown in the table below.
Question: Model and solve the problem to determine the purchase quantity
allocation among suppliers to minimize the aggregate purchase price.

Q.B1
Suppliers
criteria A B C required level
Price 10.2 10.5 11
Quality 91 94 98 95
Lead Time 30 25 24 25
Service 90 95 95 90

Topic: Supplier Scorecard (10 Marks)

1) What is supplier scorecard, and what are the objectives of the supplier
scorecard? (4 Marks)
2) Prepare a supplier scorecard system to measure the performance of a sample
supplier. The scorecard should measure the score in three heads, namely:
Q.B2 Quality, cost, and delivery. Each head should have at least 2 performance
measures. Compute the overall performance score of the sample suppliers.
(6 Marks
For example, delivery performance can be measured by on-time delivery,
Lead time reduction returns management and flexibility; Quality:
conformance to the specification, % of rejects, % of rework time,

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 responsiveness to quality issues; Cost: % of goods invoiced at the
contracted rate or less, price variation +2-10%)

Solve ANY TWO (5x2 = 10 Marks)

A. Enlist all the necessary steps in supplier selection and benchmarking process.
B. Explain briefly: How strategic procurement approach can provide competitive
Q.B3 advantage to an organization - state any 5 key points
C. Outline the necessary procedure followed in Make or Buy decision analysis at
the strategic level. Draw only the detailed flow chart (do not describe).

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 Part C – (30 Marks)
NOTE:
 Make suitable assumptions wherever requires
 Draw neat diagrams / flow charts wherever requires and add value to your answer.
 Show your computations clearly wherever requires

Solve Any TWO Questions.

Q. No
Each question carries 15 Marks

Purchase Portfolio Management (15 Marks)

XYZ limited is in the business of auto component manufacturing since last 15 years. Mr A,
head of strategic sourcing team, would like to define purchase strategies for the incoming
material based on the Kraljic’s portfolio matrix (KPM). The decision-making process also
involves two experts in addition to Mr A. Their opinion based on the experience and expertise
are also important to Mr A.

Hint: In the KPM, purchased items are classified by two dimensions; the profit impact of the
purchase and the complexity of the supply market (supply risk). Profit impact is defined in
terms of the volume purchased, the percentage of the total cost of purchases, the impact on
product quality and the impact on business growth. Supply risk is assessed in terms of Number
of Suppliers, Competitive Demand, and Substitution possibilities. The rating scale used by
the experts in quantifying the impact is as given below.

1 2 3 4 5
Very Low Low Medium High Very High

Question: Construct a flow chart of your methodology and show the classification of sample
5 items (A, B, C, D, and E) based on the opinions of all the team members. Also, recommend
Q. C1 the supply management strategy to be adopted for each item.

Profit Impact
% of Total Purchase Impact on Product Impact on Business
Item Volume Purchased
Cost Quality Growth
Ex.1 Ex.2 Ex.3 Ex.1 Ex.2 Ex.3 Ex.1 Ex.2 Ex.3 Ex.1 Ex.2 Ex.3
A 2 3 3 1 3 2 2 2 4 3 3 2
B 5 4 5 4 5 5 3 4 5 4 4 5
C 2 1 3 1 2 2 1 1 1 2 3 1
D 1 2 1 2 2 1 1 3 2 1 1 1
E 5 4 5 3 4 4 4 4 3 4 5 4

Supply Risk
Item Number of Suppliers Competitive Demand Substitution possibilities
Ex.1 Ex.2 Ex.3 Ex.1 Ex.2 Ex.3 Ex.1 Ex.2 Ex.3
A 4 5 5 4 4 5 3 4 5
B 1 2 1 2 3 2 1 2 1
C 5 3 4 4 4 4 3 4 5
D 1 2 2 1 1 3 2 1 2
E 5 3 4 4 4 4 3 4 5

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 Topic: Supplier segmentation based on Willingness and Capability (15 Marks)

A team of three experts involved in segmenting the suppliers based on the capability and
willingness of the suppliers. For evaluating the Supplier Capability, five criteria have been
identified. These are: Price, Delivery, Quality, Capacity, and Financial Position. Similarly,
for evaluating the willingness of the supplier four criteria has been identified, these are,
Commitment to Quality, Commitment to Openness, Willingness to share information and
Q. C2 Long-term relationship. The rating scale used to evaluate the criteria is as given below.

1 2 3 4 5
Very Low Low Medium High Very High

Question: Classify the four suppliers based on the two-dimensional matrix of Willingness
and Capability into type I, II, II and IV suppliers. Also provide the interpretation and
recommendation to the organization based on the supplier classification.

Classify the following 15 items into three groups (Ex, ABC) and propose the policies for
better management of each group. (15 Marks)
unit lead
Item cost time criticality demand obsolescence
I1 1359 8 L 102 L
I2 3011 20 M 334 M
I3 4936 29 H 210 H
I4 4059 22 L 416 L
Q. C3 I5 2852 30 M 93 M
I6 2167 24 H 125 H
I7 3349 29 L 287 L
I8 2066 29 M 309 M
I9 4265 10 H 280 H
I10 3936 22 L 156 L
I11 3678 15 M 260 M
I12 2047 13 H 276 H
I13 4306 12 L 150 L
I14 5005 31 M 183 M
I15 1852 16 H 134 H

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 Refer Question No C2: Topic: Supplier Segmentation based on Willingness and Capability.
Supplier 1 Supplier 2 Supplier 3 Supplier 4
Weights Expert 1 Expert 2 Expert 3 Expert 1 Expert 2 Expert 3 Expert 1 Expert 2 Expert 3 Expert 1 Expert 2 Expert 3
Price 4 4 1 2 2 2 3 1 1 2 2 1
Supplier Capability

Delivery 4 5 4 4 5 5 2 4 5 2 1 3
Quality 3 3 4 4 2 4 3 3 1 5 3 2
Capacity 5 1 2 5 3 5 3 5 2 1 2 3
Financial Position 5 5 3 1 4 1 5 2 3 1 5 5
Commitment to Quality 2 3 4 5 2 1 4 3 3 2 5 3
Willingness

Commitment to Openness 1 2 3 1 2 3 4 3 3 2 2 2
Supplier

Willingness to share
information 2 3 1 1 2 5 5 2 1 3 4 3
Long term relationship 1 3 2 4 1 3 3 3 4 5 2 4

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