Supplier Relationship and Performance Management

Introduction

Procurement does not end when a purchase order is issued. An organisation obtains value only when suppliers consistently provide the required quality, quantity, timing, service and compliance at an acceptable total cost. Supplier relationship and performance management (SRPM) is the systematic process of selecting, classifying, monitoring, developing and collaborating with suppliers so that supply objectives support organisational strategy.

A transactional approach treats suppliers mainly as sources of price quotations. A professional procurement function recognises that suppliers may also provide technical knowledge, innovation, capacity, risk protection and process improvement. However, not every supplier requires the same level of attention. Effective management therefore combines supplier segmentation, measurable performance indicators, regular reviews, corrective action, dispute resolution and relationship governance.

This chapter presents practical frameworks suitable for procurement and inventory professionals. It explains how to distinguish strategic suppliers from routine suppliers, design useful scorecards, manage quality and delivery, resolve disputes, develop supplier capability and select an appropriate level of collaboration.

Learning Objectives

By the end of this chapter, the learner should be able to:

1. Segment suppliers using supply risk and business impact.
2. Design meaningful supplier key performance indicators (KPIs) and scorecards.
3. Measure and improve supplier quality, delivery and service performance.
4. Apply a structured process for preventing and resolving disputes.
5. Explain supplier development and collaborative relationship models.
6. Recommend governance arrangements for different supplier categories.
7. Interpret supplier performance information ethically and use it for decisions.

1. The Nature and Purpose of Supplier Relationships

A supplier relationship is the pattern of commercial, operational and interpersonal interactions between a buying organisation and a supplier. It includes the contract, purchase orders, information exchanges, payment arrangements, performance reviews, problem-solving activities and expectations about future business.

Supplier relationship management is broader than supplier evaluation. Evaluation asks, “How has the supplier performed?” Relationship management also asks, “What relationship is appropriate, what outcomes are required, and how can both parties improve?”

The main purposes of SRPM are to:

• secure reliable supply and protect production or service continuity;
• achieve required quality and total cost, rather than merely a low purchase price;
• identify and reduce supply, compliance, financial and reputational risks;
• encourage supplier improvement and innovation;
• clarify responsibilities and provide evidence for corrective action;
• create fair, transparent and professional commercial relationships.

Relationships exist on a continuum. A routine purchase may require electronic ordering and standard contract terms only. A strategic relationship may require joint planning, executive sponsorship, shared technology roadmaps and open-book cost analysis. Excessive collaboration consumes time and may expose sensitive information; insufficient collaboration can leave major risks unmanaged.

Relationship principles

Professional relationships should be based on clarity, proportionality, reciprocity and integrity. The buyer should communicate specifications, forecasts and approval requirements accurately. The supplier should provide truthful information about capability, capacity, risks and performance. Both parties should define escalation routes and document decisions.

Relationships must not compromise competition or ethical conduct. A close relationship is not a licence for preferential treatment, undisclosed gifts, conflicts of interest or informal changes to contract requirements.

2. Supplier Segmentation

Supplier segmentation groups suppliers according to characteristics that affect how they should be managed. The most widely used starting point is the purchasing portfolio matrix associated with Peter Kraljic. It considers two dimensions:

• Business impact: the effect of the purchased item or service on cost, revenue, operations, customer service or strategic capability.
• Supply risk: the likelihood and consequence of disruption, considering scarcity, market concentration, switching difficulty, geographic exposure, logistics vulnerability and supplier financial health.

The resulting categories are shown below.

Segmentation should be based on the item, service and supply market, not solely on the supplier’s total sales value. One supplier may provide both routine packaging and a critical component; these should not automatically receive identical treatment.

Additional segmentation criteria

A procurement team may refine the matrix by considering:

• annual expenditure and total cost of ownership;
• criticality to health, safety, production or customers;
• substitutability and time required to qualify an alternative;
• technological or intellectual-property dependence;
• supplier financial stability and capacity;
• sustainability, human-rights and regulatory exposure;
• data-security and cyber risk for digitally connected suppliers;
• geographical, political and transport risk.

Segmentation is not permanent. It should be reviewed when demand changes, a supplier’s financial position deteriorates, regulations change, a new technology appears or an alternative source becomes available.

Practical segmentation process

1. Create a complete supplier and category spend file.
2. Identify the goods or services supplied and their operational consequences.
3. Assess business impact and supply risk using agreed definitions.
4. Validate ratings with operations, finance, quality, risk and users.
5. Assign relationship objectives, review frequency and approval authority.
6. Record the segment and review date in the supplier master or SRM system.

A simple scoring method may support discussion. For example, a team can rate impact and risk from 1 to 5, where 1 is very low and 5 is very high. The scores are decision aids, not objective truths. Written evidence should accompany a rating, and a high-risk safety or regulatory issue should not be hidden by averaging scores.

3. Supplier Performance Management

Supplier performance management converts contractual and operational expectations into evidence-based monitoring and improvement. It should answer four questions:

1. What outcome is required?
2. How will it be measured?
3. What evidence will be accepted?
4. What action follows a result that is below, at or above target?

Key performance indicators

A KPI is a defined measure used to assess performance against an objective. A useful supplier KPI has a clear definition, data source, owner, measurement period, target, tolerance and escalation rule.

Common supplier KPI families include:

KPIs should measure outcomes important to the buying organisation. Measuring many weak indicators creates administrative burden and encourages gaming. For example, a supplier may achieve a delivery date by splitting an order into several shipments, while the buyer experiences additional handling and inventory cost. Definitions must therefore be precise.

Important performance measures

On-time delivery rate is commonly calculated as:

The numerator and denominator must use the same delivery population and agreed date rule. The organisation must specify whether early deliveries count as on time, how partial deliveries are treated and whether buyer-caused changes are excluded.

OTIF generally requires both timing and complete quantity:

A shipment is counted as successful only when it satisfies both conditions. OTIF is therefore usually no higher than the separate on-time and in-full rates for the same population.

Defect rate can be expressed as:

For low-volume or high-value items, a defect count per million opportunities may be more informative, but the opportunity definition must be stable. A defect rate based on units is not directly comparable with a rate based on line items or batches.

Weighted scorecard performance may be calculated as:

Here, wᵢ is the weight assigned to KPI i, and sᵢ is the supplier’s normalised score for that KPI, usually on a 0–100 scale. The score is dimensionless. Weights should reflect business priorities, and a critical failure may require escalation even when the weighted average is acceptable.

Worked example: a supplier scorecard

An organisation weights delivery at 40%, quality at 35% and responsiveness at 25%. A supplier receives scores of 92, 96 and 80 respectively. The overall score is:

The score is 90.4 out of 100. If the organisation defines 90 or above as “preferred,” the supplier qualifies on the composite score. Nevertheless, the responsiveness score of 80 may require an improvement action. A composite score must not conceal a serious safety, ethical or continuity failure.

Scorecard design and governance

A scorecard should state:

• KPI name and operational definition;
• formula, unit and data source;
• target, tolerance and performance bands;
• reporting period and responsible owner;
• treatment of exceptions and buyer-caused events;
• corrective-action and escalation requirements;
• supplier right to review evidence and challenge errors.

Data should be agreed before it is used for sanctions or allocation decisions. Automated data from enterprise resource planning, warehouse and quality systems can improve timeliness, but master-data errors and inconsistent timestamps may produce misleading results. A human review remains important for context.

4. Managing Quality Performance

Supplier quality means conformance to agreed requirements, fitness for intended use and consistency over time. Quality requirements may include dimensions, materials, functionality, service levels, documentation, packaging, traceability and regulatory certification.

Quality management begins before award. Specifications should be clear, measurable and free from unnecessary restrictions. Supplier qualification may include capability assessment, sample approval, process audits, certifications and review of historical performance.

Quality assurance and quality control

Quality assurance is preventive: it designs processes to reduce the likelihood of defects. Quality control is detective: it inspects or tests outputs to identify non-conformance. Inspection alone does not guarantee quality; it may detect defects after value has already been added and may shift excessive cost to the buyer.

Useful practices include:

• approved specifications and change-control procedures;
• first-article or sample approval before production;
• incoming inspection based on risk;
• process capability and control plans for critical characteristics;
• traceability of batches, serial numbers and certificates;
• root-cause analysis for recurring non-conformances;
• corrective and preventive action (CAPA);
• supplier audits proportionate to risk.

When a defect occurs, the immediate response should contain the problem: identify affected stock, protect customers, stop further use where necessary and establish disposition. The longer-term response should identify the underlying cause rather than merely replace defective units. Tools such as the five whys, cause-and-effect diagrams and the Plan–Do–Check–Act cycle can support this work.

Acceptance criteria and sampling plans should be agreed with quality specialists. A procurement employee should not invent statistical acceptance rules without understanding lot size, defect severity, sampling risk and applicable standards.

5. Managing Delivery and Continuity Performance

Delivery performance is influenced by demand information, production capacity, material availability, transport, customs, documentation and the buyer’s own ordering behaviour. A fair assessment distinguishes supplier failure from buyer-caused changes, inaccurate forecasts or late approvals.

Delivery management should address:

• confirmed order dates and acknowledgement requirements;
• lead-time definitions and manufacturing versus transit time;
• minimum order quantities and order flexibility;
• advance shipping notices and documentation;
• capacity commitments and allocation rules;
• escalation for late or at-risk orders;
• recovery plans and alternative supply options.

For critical materials, performance management should be linked to business continuity. Possible controls include dual sourcing, approved substitutes, strategic safety stock, supplier business-continuity plans, geographic diversification and periodic disruption exercises. These controls have costs, so they should be justified by risk and consequence.

A supplier’s perfect delivery record during stable demand may not demonstrate resilience. Scenario-based reviews can ask how the supplier would respond to demand surges, a cyber incident, a transport shutdown or loss of a key production site.

6. Supplier Reviews and Corrective Action

Supplier reviews should be proportionate to the supplier segment. Routine suppliers may be monitored through dashboards and exception reports. Strategic suppliers may require monthly operational meetings, quarterly business reviews and annual executive reviews.

A productive review normally includes:

1. confirmation of data and performance trends;
2. discussion of achievements and emerging risks;
3. analysis of causes, not only symptoms;
4. agreed actions, owners and due dates;
5. review of innovation, cost, capacity and sustainability opportunities;
6. documented escalation where commitments are not met.

Corrective action should be specific and time-bound. “Improve delivery” is inadequate. “Add a second weekly production-planning review and achieve at least 95% OTIF for the next eight weeks” is more actionable, provided the target is realistic and the measurement method is defined.

A typical escalation sequence is informal clarification, documented corrective action, senior management review, commercial remedy and—if appropriate—reallocation or termination. The contract determines available remedies, but commercial action should be consistent with evidence and due process.

7. Dispute Resolution

Disputes may concern price adjustments, specification interpretation, delivery responsibility, invoice discrepancies, warranty, intellectual property, service credits or alleged non-performance. A dispute is not necessarily evidence of a bad relationship; poorly defined requirements and weak change control often create disputes.

Preventive mechanisms

Contracts should define:

• scope, specifications and acceptance criteria;
• pricing, taxes, currency and adjustment mechanisms;
• delivery terms and transfer of risk;
• forecasting and order-change rules;
• inspection, warranty and non-conformance rights;
• confidentiality, intellectual property and data protection;
• compliance, audit and records requirements;
• escalation, mediation, arbitration or court jurisdiction;
• termination and transition assistance.

A structured resolution process

First, preserve evidence: purchase orders, specifications, correspondence, inspection records, delivery logs and invoices. Second, separate facts from assumptions and identify the precise issue. Third, allow each party to explain its position. Fourth, assess the contract, applicable law and commercial impact. Fifth, develop options, such as replacement, rework, credit, revised schedule, shared cost or process change. Sixth, document the agreement and monitor completion.

Negotiation should be conducted by people with suitable authority. Legal advice is appropriate for significant liability, regulatory exposure, termination, intellectual property or threatened litigation. Mediation may preserve a valuable relationship by using a neutral facilitator. Arbitration or litigation may be necessary where voluntary settlement fails, but these routes can be costly and slow.

Professional dispute resolution avoids threats, personal criticism, retaliation and unilateral changes outside the contract. It also avoids concealing a buyer’s own contribution to the problem.

8. Supplier Development

Supplier development is a deliberate effort by a buying organisation to improve a supplier’s capability or performance. It is most justified when the supplier is important, alternatives are limited, improvement is feasible and the expected benefit exceeds the cost and risk.

Development activities may include:

• sharing process-improvement methods;
• technical training and specification clarification;
• joint root-cause analysis;
• tooling or equipment support under a documented agreement;
• assistance with quality systems, planning or data exchange;
• joint cost and waste reduction;
• help in achieving relevant safety or sustainability standards;
• phased qualification of additional capacity or locations.

Supplier development does not mean doing the supplier’s job indefinitely. The parties should define objectives, milestones, resources, intellectual-property ownership and exit criteria. The buyer should avoid creating dependency or transferring proprietary knowledge without protection.

A development plan can use the following structure:

9. Choosing the Appropriate Relationship Model

The relationship should match value, risk and mutual dependence. Common models include:

• Transactional: standard specifications, competition and limited information exchange. Suitable for routine, low-risk purchases.
• Preferred supplier: a supplier receives repeat business because it performs well, while competition and performance review remain active.
• Framework or alliance arrangement: agreed terms support repeated call-offs and coordinated planning.
• Partnership or strategic collaboration: parties share plans, investment, innovation and risk-management activities.
• Integrated relationship: systems, processes and teams are closely connected, often for critical long-term supply.

Collaboration should be governed rather than assumed. A strategic supplier may require a joint steering committee, operational working groups, shared KPI definitions, escalation rules and executive sponsors. Information sharing should follow the principle of need, accuracy and authorised access. Collaboration that reduces genuine competition may also raise competition-law concerns, particularly when sensitive pricing or market information is shared.

10. Technology, Data and Artificial Intelligence

Supplier relationship platforms can combine contracts, purchase orders, performance results, risk alerts, audits and action plans. Electronic data interchange and application programming interfaces can improve order visibility. Dashboards help users identify trends, but visualisation is not analysis unless definitions and data quality are controlled.

Analytics may identify late-delivery patterns, concentration risk or relationships between defects and production conditions. Artificial intelligence may assist with document extraction, supplier-risk monitoring, anomaly detection and forecasting. It should support, not replace, professional judgement. Important controls include:

• validating data provenance and model accuracy;
• testing for bias against supplier size, geography or language;
• protecting confidential prices, designs and personal information;
• maintaining human approval for high-impact decisions;
• explaining the evidence behind supplier classifications or sanctions;
• ensuring that automated monitoring does not reward misleading behaviour.

Technology cannot compensate for unclear specifications, poor governance or an unfair measurement system.

11. Ethics, Governance and Sustainability

Supplier management involves power imbalances and access to commercial information. Ethical procurement requires fair competition, confidentiality, avoidance of conflicts of interest, accurate records and consistent treatment. Employees should declare personal interests and follow rules on gifts, hospitality and contact with bidders.

Sustainability management should be risk-based and evidence-based. Buyers may assess labour conditions, forced-labour risk, environmental permits, emissions, waste, responsible sourcing and community impacts. Requirements should be proportionate and supported by verification. Passing every requirement to small suppliers without assistance may exclude capable businesses without improving outcomes.

Governance should define who may approve suppliers, change specifications, accept non-conforming goods, waive controls and terminate contracts. Segregation of duties reduces fraud risk: the person requesting a purchase should not unilaterally approve the supplier, receipt and payment.

12. Illustrative Case: Northstar Medical Devices

Background

Northstar Medical Devices purchases a specialised sterile component from MedCore, its only currently qualified supplier. The component has high business impact and high supply risk, so it is classified as strategic. Northstar’s scorecard weights OTIF at 40%, quality at 35%, documentation at 15% and responsiveness at 10%.

Problem

Over two quarters, OTIF fell from 96% to 87%, while documentation errors increased. Two lots were quarantined because certificates did not match batch numbers. Production was not stopped, but planners began holding additional inventory and expediting shipments. Northstar initially considered imposing a penalty.

Analysis

A joint review found three causes. First, Northstar had changed its forecast frequently without distinguishing firm orders from indicative demand. Second, MedCore had introduced a new planning system and had not trained all users. Third, the certificate template allowed manual entry of batch numbers. The data showed genuine supplier failures, but also buyer-generated volatility.

The team calculated the score using current scores of OTIF 87, quality 92, documentation 70 and responsiveness 85:

The composite score was 86.0, below Northstar’s preferred-supplier threshold of 90. More importantly, documentation performance created regulatory and product-release risk that could not be ignored because of the average score.

Approach and solution

Northstar and MedCore agreed to a 90-day recovery plan. Northstar introduced a frozen six-week schedule and labelled later forecasts as indicative. MedCore assigned a planning lead, trained users and added barcode validation to certificate preparation. Both parties established a weekly exception meeting. Northstar also began qualification work on a second source, not as an immediate replacement but as a continuity measure.

The contract and quality agreement were clarified to define OTIF, treatment of buyer-caused changes, certificate requirements and escalation. A joint audit verified corrective actions rather than relying only on verbal assurances.

Outcome

At the end of the period, OTIF reached 95%, documentation errors fell to zero for three consecutive lots and the scorecard rose above 90. Northstar reduced emergency freight and avoided an adversarial dispute. The second-source programme continued because improved performance did not eliminate concentration risk.

Learning points

The case demonstrates that performance data must be interpreted in context; buyer behaviour can contribute to supplier failure. It also shows why critical dimensions should have individual escalation rules, why corrective action needs verifiable evidence and why supplier development and dual sourcing can be complementary rather than competing strategies.

13. Limitations and Common Mistakes

Supplier performance systems can fail when targets are unrealistic, data definitions differ, buyers measure what is easy rather than what matters, or scorecards are used only to punish. Other common mistakes include changing KPIs without notice, ignoring low-frequency catastrophic risks, evaluating suppliers solely on price, treating all suppliers identically and failing to close corrective actions.

A scorecard is an imperfect representation of performance. Qualitative information—such as a supplier’s openness during a crisis—may be important but difficult to quantify. Conversely, qualitative judgement can become subjective or discriminatory. The strongest systems combine reliable measures, documented judgement and supplier dialogue.

Best-Practice Checklist

• Segment suppliers using business impact and supply risk.
• Match governance effort to criticality and potential consequence.
• Define KPI formulas, data sources, exclusions and targets before measurement.
• Use both trend information and current-period results.
• Separate buyer-caused events from supplier-caused events.
• Escalate critical failures independently of composite scores.
• Investigate root causes and verify corrective action.
• Keep contracts, specifications and change approvals aligned.
• Develop important suppliers where capability improvement is feasible.
• Maintain alternatives and continuity plans for high-risk supply.
• Protect confidential information and avoid conflicts of interest.
• Review segmentation, scorecards and relationship models periodically.

Chapter Summary

Supplier relationship and performance management ensures that procurement creates dependable operational and strategic value after contract award. Supplier segmentation, particularly by business impact and supply risk, enables organisations to allocate attention proportionately. Routine suppliers may be managed through automation, while strategic suppliers require joint planning, senior governance and continuity measures.

KPIs and scorecards translate expectations into measurable evidence. Delivery, OTIF, quality, responsiveness, compliance, capacity and sustainability measures are useful when definitions, data sources, targets and escalation rules are explicit. Weighted scores can summarise performance, but critical failures must not be hidden by an average.

Quality management should emphasise prevention, traceability, root-cause analysis and verified corrective action. Delivery management must consider forecasts, capacity, logistics and the buyer’s own behaviour. Disputes are best prevented through clear contracts and resolved through evidence, structured negotiation and proportionate escalation.

Supplier development improves capability when the supplier is important and improvement is feasible. Relationship models range from transactional purchasing to strategic collaboration, and the appropriate model depends on value, risk and mutual dependence. Technology and AI can improve visibility and analysis, but require data governance, human oversight, confidentiality controls and ethical use. Effective SRPM is therefore both a measurement discipline and a professional relationship practice.

Key Terms

Supplier relationship management: A coordinated approach to managing supplier interactions, performance, risk and development.

Supplier segmentation: Grouping suppliers according to characteristics that determine appropriate management.

Business impact: The effect of a supplied item or service on cost, operations, customers or strategic capability.

Supply risk: The likelihood and consequence of disruption or failure in obtaining supply.

Strategic supplier: A supplier with high business impact and high supply risk.

Leverage supplier: A supplier providing high-impact purchases in a relatively competitive supply market.

Bottleneck supplier: A supplier or item with high supply risk but relatively low business impact.

KPI: A key performance indicator used to measure achievement of an objective.

Scorecard: A structured set of supplier performance measures and targets.

OTIF: On-time-in-full delivery performance.

Defect rate: The proportion of received units that fail agreed requirements.

Corrective action: Action taken to eliminate the cause of a detected problem.

Preventive action: Action taken to reduce the likelihood of a potential problem.

Supplier development: Buyer-supported activity intended to improve supplier capability or performance.

Supplier audit: A systematic examination of supplier processes, records or controls.

Total cost of ownership: All relevant costs incurred over the life of acquiring, using and disposing of an item or service.

Dispute resolution: The structured process of addressing and settling a disagreement.

Relationship governance: The roles, forums, rules and escalation arrangements used to manage a relationship.

Supply continuity: The ability to maintain required supply during disruption or change.

CAPA: Corrective and preventive action used to control non-conformance and prevent recurrence.

Review Questions

Short Answer Questions

1. What are the two primary dimensions in the supplier portfolio matrix?
2. Define OTIF and explain why it is stricter than on-time delivery alone.
3. State three characteristics of a well-designed supplier KPI.
4. What is the difference between quality assurance and quality control?
5. Give two examples of supplier development activities.

Long Answer Questions

1. Explain how supplier segmentation should influence review frequency, governance and performance expectations.
2. Discuss the benefits and limitations of weighted supplier scorecards.
3. Describe a structured process for managing a recurring supplier quality problem.
4. Compare transactional, preferred-supplier and strategic collaborative relationships.
5. Explain how contracts, ethical conduct and governance controls reduce supplier disputes and procurement risk.

Analytical / Application Questions

1. A supplier has high business impact but low supply risk. Recommend a management approach and justify the KPIs and sourcing tactics you would use.
2. A supplier’s composite score is above target, but it has experienced a serious safety non-conformance. Explain how the buyer should respond and why the average score is insufficient.
3. A supplier’s delivery performance declines after the buyer repeatedly changes forecasts. Design a joint corrective-action plan that fairly assigns responsibilities while protecting supply continuity.

Multiple Choice Questions with Answers

Question 1

Which two dimensions are central to the supplier portfolio matrix?

A. Supplier age and employee size

B. Business impact and supply risk

C. Invoice value and payment terms

D. Geographic distance and product colour

Correct Answer: B. Business impact and supply risk

Question 2

An order is counted as OTIF when it is:

A. Delivered early, regardless of quantity

B. Delivered on the promised date, regardless of quality

C. Delivered on time and in the required quantity

D. Invoiced before the delivery date

Correct Answer: C. Delivered on time and in the required quantity

Question 3

A supplier scorecard weights delivery at 40%, quality at 35% and responsiveness at 25%. Scores are 90, 80 and 100 respectively. What is the overall score?

A. 86

B. 88

C. 90

D. 92

Correct Answer: B. 88

Question 4

Which activity is primarily preventive quality management?

A. Sorting defective goods after receipt

B. Rejecting an invoice

C. Designing a process control plan for critical characteristics

D. Issuing a late-delivery penalty

Correct Answer: C. Designing a process control plan for critical characteristics

Question 5

What is the most appropriate first response when a serious supplier defect is discovered?

A. Immediately terminate every supplier contract

B. Contain the affected material and protect operations or customers

C. Ignore it until the quarterly review

D. Change the scorecard weights retrospectively

Correct Answer: B. Contain the affected material and protect operations or customers

Question 6

Which supplier category normally requires the highest level of joint planning and governance?

A. Routine supplier

B. Leverage supplier

C. Strategic supplier

D. Occasional office-supply vendor

Correct Answer: C. Strategic supplier

Question 7

Which statement best describes supplier development?

A. A method for avoiding all supplier audits

B. Buyer-supported activity intended to improve supplier capability or performance

C. A requirement that suppliers permanently reduce prices

D. The automatic replacement of an underperforming supplier

Correct Answer: B. Buyer-supported activity intended to improve supplier capability or performance

Question 8

Why should a critical failure sometimes trigger escalation even when the weighted score is acceptable?

A. Weighted scores always measure only price

B. Averages can conceal serious safety, compliance or continuity risks

C. Suppliers cannot challenge scorecard data

D. Composite scores have no mathematical meaning

Correct Answer: B. Averages can conceal serious safety, compliance or continuity risks

Question 9

Which practice best helps prevent supplier disputes?

A. Relying on verbal changes to specifications

B. Leaving acceptance criteria undefined

C. Documenting scope, specifications, responsibilities and change-control rules

D. Sharing confidential competitor prices

Correct Answer: C. Documenting scope, specifications, responsibilities and change-control rules

Question 10

What is an important control when using AI for supplier-risk decisions?

A. Allowing the model to make all termination decisions without review

B. Ignoring data quality because algorithms correct all errors

C. Maintaining human oversight and validating data and model outputs

D. Removing all supplier access to performance evidence

Correct Answer: C. Maintaining human oversight and validating data and model outputs