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

BPRexamines and redesignsworkflows and processesto remove waste and maximise efficiency and customer value.

Short cited extract: “BPR – radical review of workflows to achieve major efficiency improvements.” (L5M7 Study Guide, p. 111)

According toMichael Porter’s Value Chain,primary activitiesincludeinbound logistics, operations, outbound logistics, marketing and sales, and service.Procurement and HRaresupport activities.

Short cited term: “primary activities – logistics, operations, marketing and sales” (L5M7 Study Guide, p. 76).

The guide listsquality,innovation, andtime-to-marketamong ways supply chains createadded value(others include price/cost reduction and risk reduction). Short extract: “added value may be created through quality, innovation and time-to-market.” (L5M7 Study Guide, p.27)

Theautomotive industryusessupplier tiering, assigning responsibility to different supplier levels (Tier 1, Tier 2, etc.) for efficiency and control.

Short cited extract: “Automotive sector commonly applies supplier-tier structures.” (L5M7 Study Guide, p. 115)

TheSCQFintegrates factors that promote long-term excellence across the chain:leadership, stakeholder commitment, sustainability, information management, and continuous improvement. These underpin effective quality and performance.

Short cited term: “key features include sustainability, information and continuous improvement.” (L5M7 Study Guide, p. 34)

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)

Offshoring typically seekscost reduction(e.g., labour arbitrage) while maintaining service/output levels; other motives are secondary. Short cited term: “cost reduction/advantages” (L5M7 Study Guide, domain 1.4 discussion).

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)

AnAgilesupply chain prioritisesflexibility and responsivenessto customer and market changes—ideal for dynamic industries like electronics.

Short cited extract: “Agility = rapid response to changing demand.” (L5M7 Study Guide, p.155)

Open-Book Costingfosterstrust and collaborationby ensuring both parties share detailed cost data and maintain open, transparent communication.

Short cited extract: “Open-book costing requires transparency and communication between partners.” (L5M7 Study Guide, p.193)

Supply chains are characterised bythree primary flows– materials, information, and finance. “Decision flow” is not a recognised category.

Short cited term: “three main flows: material, information, finance.” (L5M7 Study Guide, p. 155)

According toPorter’s Five Forces, new automated competitors represent athreat of new entrants, introducing innovation and market pressure.

Short cited extract: “New entrants increase competition and threaten existing players.” (L5M7 Study Guide, p.56)

The main relationship drivers aretrust, communication, duration, and problem-solving. Finance alone does not define the relationship type.

Short cited extract: “Key relational attributes: trust, communication, duration, joint problem-solving.” (L5M7 Study Guide, p. 80)

TheModeis the value thatappears most oftenin a dataset, distinguishing it from themean(average) andmedian(middle value).

Short cited term: “mode = most frequent value.” (L5M7 Study Guide, p. 149)

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)

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).

Atightly coupledsupply chain exhibitshigh interdependencebetween members; decisions by one partner affect all others.

Short cited extract: “Tightly coupled = high interdependence between supply-chain partners.” (L5M7 Study Guide, p. 82)

A downstream supplier influencesmost aspects of qualitybutnot customer perception, which is shaped bymarketing and brand functions.

Short cited term: “except customer perception, influenced by marketing” (L5M7 Study Guide, p. 30).

Quality assurance (QA)isproactive, including activities such assupplier approval/vetting;inspectionis reactive sampling of outputs. Short extract: “QA—proactive systems e.g., supplier approval; inspection—sampling outputs.” (L5M7 Study Guide, p.123)

Value flowsdownstream, originating with suppliers and moving toward the end customer. A typical chain is tiered suppliers → OEM/producer → distributors/retailers → customer. Short cited term: “value moves downstream” (L5M7 Study Guide, p.4).

ASpend Analysisidentifies where money is spent and with which suppliers—vital to determine consolidation opportunities before rationalising the base.

Short cited term: “spend analysis precedes supplier rationalisation.” (L5M7 Study Guide, p. 203)

Rationalisationincludesreducing supplier numbersand practices such astier-skippingto simplify the network and reduce cost/complexity. Short extract: “rationalisation—reduce supplier base; consider tier-skipping.” (L5M7 Study Guide, p.11)

The study guide describes how demand variabilityamplifies upstreamin the chain—commonly termed the“bullwhip effect.”This is introduced when explaining basic supply-chain dynamics and flows. Short extract: “demand changes become amplified upstream (bullwhip effect).” (L5M7 Study Guide, p.4)