Certified Supply Chain Professional (CSCP) Practice Exam

What aspect does strategic sourcing focus on?

1. Contract negotiation

2. Total cost of ownership

3. Supplier diversity

4. Market research

The correct answer is: Total cost of ownership

Strategic sourcing emphasizes total cost of ownership (TCO) as it encompasses a comprehensive approach to procurement that considers not only the purchase price of goods and services but also all related costs throughout the lifecycle of a product. This includes expenses associated with acquiring, using, maintaining, and disposing of goods. By focusing on TCO, organizations aim to optimize their procurement processes, enhance value, and improve overall profitability. Total cost of ownership helps in evaluating suppliers based on their long-term considerations, allowing businesses to make informed decisions that can lead to better supplier relationships and collaboration. This method assists in identifying cost-saving opportunities that may not be apparent when solely considering initial purchase prices, thus leading to smarter sourcing strategies that align with organizational goals. In contrast, while contract negotiation, supplier diversity, and market research are all relevant elements of the procurement and supply chain process, they do not encapsulate the broader, more holistic approach that TCO represents in strategic sourcing. Each of these aspects plays a valuable role, but they are components of the larger framework that strategic sourcing supports.