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

Anadhocracyisflexible,decentralised, and able torespond rapidlyto change, though it may lack formal control systems.

Short cited term: “low formalisation, high adaptability” (L5M7 Study Guide, p. 64).

Added Valuearises whenever the customer perceives extra benefit.Lowering pricescan add value if thesupply chain reduces coststo support it sustainably.

Short cited term: “price reduction is a form of added value if supported by cost efficiencies.” (L5M7 Study Guide, p. 35)

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)

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)

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)

Process mappingvisually defineshow processes operate, revealinginefficiencies, duplication, and waste, and clarifies thecurrent process flow and responsibilities.

Short cited term: “identifies inefficiencies and highlights process waste” (L5M7 Study Guide, p. 73).

TQMis along-term philosophydemanding sustained commitment; benefits emerge gradually through continuous improvement.

Short cited extract: “TQM is a long-term commitment where results may not be immediate.” (L5M7 Study Guide, p. 118)

TQM is aholisticphilosophy requiringorganisation-wideadoption and leadership commitment; partial/isolated adoption undermines results. Short cited terms: “holistic,” “organisation-wide commitment” (L5M7 Study Guide, p.118).

Centralised procurementenables bettercost coordination, standardisation, and leverage through bulk purchasing, ensuring consistency across sites.

Short cited extract: “Centralised structures coordinate savings and achieve economies of scale.” (L5M7 Study Guide, p. 69)

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)

Amarket-oriented approachcentres oncustomer needs, designing offerings around satisfaction and experience rather than internal operations.

Short cited extract: “Market-oriented – focus on customer satisfaction and value creation.” (L5M7 Study Guide, p.55)

The guide distinguishes a simple chain from a“supply network,”emphasisingmulti-tier interdependencies. Short extract: “supply networks reflect multiple interdependent tiers.” (L5M7 Study Guide, p.4)

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)

ACost Leaderdetermines the market price standard and can influence both price reductions and increases. Their efficiency allows them to lead pricing trends.

Short cited term: “cost leader sets price standard in market.” (L5M7 Study Guide, p. 179)

ARed Oceanmarket ishighly competitivewith many firms fighting for market share, leading to price wars and reduced margins.

Short cited term: “red ocean = intense competition and saturated market.” (L5M7 Study Guide, p. 179)

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)

ISO 9001sets the framework forquality management systems(QMS), based on principles such as customer focus, leadership, and improvement. Short extract: “ISO 9001—quality management.” (L5M7 Study Guide, p.122)

Cost-plus pricingis based onactual material and labour costs plus an agreed marginfor overheads and profit.

Short cited extract: “Cost-plus = actual cost + agreed mark-up for profit/overheads.” (L5M7 Study Guide, p.191)

Trust in supply chains is built on components includingintegrity,competence,loyalty,openness, andfairness. Short extract: “key trust components: integrity, competence, loyalty, openness, fairness.” (L5M7 Study Guide, Domain 3.4 section)

JIT is aLeantechnique to minimise inventory and produce “only what is needed, when needed,” thereby removing waste from processes. Short cited phrase: “only when needed” (L5M7 Study Guide, p.111).

Effective quality measurement requiresSMART data—Specific,Measurable,Achievable,Relevant, andTime-bound—ensuring that data supports actionable improvement.

Short cited extract: “Data should be SMART to allow accurate performance analysis.” (L5M7 Study Guide, p.140)

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).

Differentiation Strategyinvolves offering products withunique attributesthat customers value and are willing to pay more for, thus achieving competitive advantage.

Short cited term: “differentiation – unique product features at premium price.” (L5M7 Study Guide, p. 177)