Strategic Sourcing Quiz

What is the primary goal of strategic sourcing?

• To enhance marketing strategies

• To increase product variety

• To reduce costs

• To maximize supplier relationships

What is a common risk in strategic sourcing?

• Supplier insolvency

• Increased product variety

• Higher marketing costs

• Reduced supplier relationships

Discuss major risks in global sourcing

Recommendations to mitigate the risks

1. What is the primary purpose of creating a balanced scorecard in the RFX process?

• A) To increase the number of bidders in an auction

• B) To fairly consider all requirements and constraints for better decision-making
  

• C) To reduce the overall cost of procurement
  

• D) To provide automatic bidding in an auction

In a sealed bid auction, what information is available to the bidders?

• A) The exact bids of all other participants

• B) The highest bid placed in the auction

• C) Their relative rank without seeing other bids

• D) The lowest bid submitted

What happens in a Reserve Price auction if the reserve price is not met?

• A) The auction is automatically restarted

• B) The highest bidder wins the auction

• C) The buyer is not obligated to make an award

• D) The auctioneer reduces the reserve price

How does a Dutch auction function?

• A) Bidders place increasing bids until the highest bid wins

• B) Bidders can bid on partial lots, and the buyer pays the highest successful bid price

• C) The buyer accepts the first bid that meets or exceeds the reserve price

• D) The lowest bidder automatically wins

What is a key characteristic of a Vickrey auction?

• A) The highest bidder wins and pays their bid amount

• B) The second-lowest bidder is awarded the contract

• C) The auction stops when only one bidder remains

• D) Bidders compete for partial lots of a contract

Let’s say a rare painting is being auctioned using a Vickrey Auction.

Bidders and Their Bids:

Alice: RM10,000

Bob: RM8,500

Charlie: RM7,000

Who Wins and How Much Do They Pay?

Alice wins because she has the highest bid (RM10,000).

But instead of paying RM10,000, she only pays Bob’s bid (RM8,500).

What's the purpose or benefit to use such an odd method?

Answer explanation

In a first-price auction, the winner might overestimate the value and overpay. The second-price auction mitigates this risk by capping the winner’s payment at the second-highest bid.This method is commonly used in online ad auctions (e.g., Google Ads, eBay)