CPIM Practice Exam

If an organization wants to reduce risk when selecting suppliers, which method is most appropriate?

1. Single-source supplier

2. Sole-source supplier

3. Multisourcing

4. Purchase requisition

The correct answer is: Multisourcing

Choosing to adopt multisourcing as a method for selecting suppliers is particularly effective for reducing risk. This strategy involves engaging multiple suppliers for the same products or services. By diversifying the supplier base, an organization can mitigate risks associated with relying heavily on a single supplier, which may include disruptions due to supply chain issues, political instability, financial instability, or operational failures. With multiple suppliers, the organization benefits from increased flexibility and can adjust orders between suppliers if one encounters difficulties. This approach not only enhances reliability but also fosters competition among suppliers, potentially leading to better pricing, quality improvement, and innovation. Having multiple sources helps ensure continuity in supply and can provide leverage in negotiations. In contrast, relying on a single-source or sole-source supplier significantly increases risk as it creates a dependency on one entity. If something happens to that supplier, the organization may face significant challenges or disruptions. A purchase requisition, while an important administrative tool in procurement, does not directly address supplier risk management. Thus, multisourcing is the most appropriate method for reducing risk in supplier selection.