Strategic Supply Chain Management Practice Exam

What does the term 'sourcing' refer to in supply chain management?

1. Choosing where to sell the product

2. Identifying and negotiating with suppliers

3. Determining inventory levels needed

4. Setting prices for products offered

The correct answer is: Identifying and negotiating with suppliers

Sourcing in supply chain management specifically refers to the process of identifying, evaluating, and negotiating with suppliers to acquire the goods and services necessary for the production process. This includes not only selecting suppliers but also establishing the terms of engagement and pricing that will facilitate a mutually beneficial relationship. Effective sourcing is critical to ensuring a reliable supply of quality materials, optimizing costs, and managing supplier relationships over time, which can ultimately impact overall operational efficiency and competitiveness. In contrast, the other options pertain to different aspects of supply chain management. Choosing where to sell the product relates to distribution and marketing strategies, determining inventory levels focuses on inventory management practices, and setting prices impacts pricing strategy and market positioning. While these elements are important in their own right, they do not encompass the core activities and objectives associated with sourcing.