CORE Exam Dumps - ISM CPSM Questions and Answers

During an opportunity assessment review, it is crucial to focus first on high-value items as they represent the most significant potential for cost savings and impact on the company's bottom line. Within this category, both low risk and high-risk items should be analyzed to identify opportunities for improvement, risk mitigation, and value optimization. By targeting high-value items first, the company can achieve more substantial benefits from its procurement strategies.

References

Category Management in Purchasing: A Strategic Approach to Maximize Business Profitability by Jonathan O'Brien

Supply Chain Risk Management: Minimizing Disruptions in Global Sourcing by Robert Handfield and Kevin McCormack

Purpose of Business Review: Regular reviews are meant to foster collaboration, ensure alignment on goals, and address any issues proactively.

Relationship Building: Strengthening the business relationship helps in fostering trust and long-term cooperation.

Strategic Collaboration: By promoting collaboration, both parties can work together more effectively, potentially leading to innovation and continuous improvement.

References

Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2016). Purchasing and Supply Chain Management. Cengage Learning.

Burt, D. N., Petcavage, S. D., & Pinkerton, R. L. (2010). Supply Management. McGraw-Hill Education.

Clarification Needs: The supplier provided clarifications during the debriefing that could have increased their score if included initially.

Importance of RFP Process Understanding: Ensuring that the supplier understands the RFP process is crucial to avoid similar issues in future submissions. This step helps the supplier to provide more accurate and complete responses in the future.

Revising the RFP Process: Rather than cancelling the RFP, issuing a new one, or regrading submissions, verifying the supplier's understanding focuses on improving future interactions and clarity.

Preventing Future Issues: This approach helps in preventing similar issues with other suppliers and ensures a more efficient and effective RFP process.

References

National Institute of Governmental Purchasing (NIGP). (n.d.). Best Practices for Debriefing Suppliers.

APQC. (2019). RFP Management: Best Practices.

The firm is facing shrinking profits on a product that requires high-tech parts with strict specifications. While the contract for these parts has been renegotiated for lower costs, further actions are needed to reduce product costs and improve margins.

Conduct a quality function deployment (QFD) analysis: This helps in translating customer needs into specific engineering requirements but may not directly address cost reduction.

Issue a request for information (RFI) to other suppliers: This might identify potential new suppliers but does not guarantee cost savings or immediate improvement.

Review the part requirements and design with engineering: This is the best course of action as it can uncover opportunities to simplify the design, use alternative materials, or modify specifications to reduce costs without compromising quality.

Renegotiate pricing with the current supplier: Since the contract was recently renegotiated, further price reductions may not be feasible immediately.

Therefore, the most effective course of action is to review the part requirements and design with engineering to identify potential cost-saving opportunities.

References:

Institute for Supply Management (ISM) guidelines on cost management.

Engineering and design collaboration for cost reduction strategies.

Assess Risk: Understand the risk associated with terminating a supplier and the impact on the supply chain.

Continuity of Supply: Ensuring that there is no disruption in the supply of critical materials or services is paramount.

Strategic Planning: Developing a comprehensive exit strategy that includes alternative suppliers or contingency plans.

Minimizing Impact: Minimize any negative impact on production schedules, customer commitments, and overall supply chain stability.

References

Supplier Exit Strategies

Risk Management in Supply Chain

Continuity Planning Resources

In a situation where there is a disagreement among business units about the risk and value of desktop computers, the supply manager should consider the different perspectives and categorize the desktops accordingly. Dividing the desktop computers into two groups (high risk/high value and low risk/low value) accommodates the varying needs and assessments of different business units. This approach allows the sourcing strategy to be tailored to meet the specific requirements of each group, ensuring that both critical and non-critical needs are addressed appropriately.

References:

Kraljic, P. (1983). Purchasing must become supply management. Harvard Business Review.

CIPS (Chartered Institute of Procurement and Supply). (2021). Procurement and Supply Chain Management.

PQR, Inc.'s CEO has directed supply management to provide wing flap inventory at the lowest cost while meeting the goal of multinational market expansion. The options given are:

Option A suggests purchasing refurbished parts from a non-certified repair shop with an extended warranty. While this is the lowest cost option, using non-certified parts can compromise quality and regulatory compliance, which is critical in the aerospace industry.

Option B involves manufacturing the parts internally, which is the most expensive option at $11,000 per part.

Option D proposes purchasing materials from an outside manufacturer at $10,000 per part, which is still more expensive than repairing internally.

Option C, acquiring resale parts and repairing them internally, costs $9,000 per part. This option ensures the parts meet PQR's quality standards and regulatory requirements, as PQR can control the repair process. It balances cost efficiency and quality, making it the best course of action to meet the CEO's directive.

References:

Cost-benefit analysis in supply chain management.

Aerospace industry standards and regulations on part certification.

Regular performance reviews are crucial for suppliers that have a significant impact on the organization:

Standard: These suppliers typically provide routine products or services, and while performance reviews are important, they may not be the most critical.

Key: Key suppliers are important, but they are usually not as critical as strategic suppliers.

Strategic: Strategic suppliers provide goods or services that are vital to the organization’s long-term success, requiring regular performance reviews to ensure alignment and continuous improvement.

Commodity: Commodity suppliers provide widely available products, making performance reviews less critical compared to strategic suppliers.

Therefore, it is most important to conduct regular performance reviews with strategic suppliers.

References:

Strategic supply chain management literature.

Best practices in supplier performance management.

Conducting a reverse auction with a clear statement of work is the best course of action for a firm wanting to have all temporary labor services provided by one supplier at the lowest possible cost. A reverse auction allows suppliers to bid against each other in real-time, driving down the price. Providing a clear statement of work ensures that all bidders understand the requirements and can offer competitive pricing for the same set of services, ultimately resulting in cost savings for the firm.

References:

Jap, S. D. (2003). An Exploratory Study of the Introduction of Online Reverse Auctions. Journal of Marketing.

CIPS (Chartered Institute of Procurement and Supply). (2021). Procurement and Supply Chain Management.

Sales Representative’s Promise: The sales representative from XYZ Company provided documentation that the product would meet or exceed ABC's specifications.

Express Warranty: An express warranty is created when a seller makes a promise or provides assurance that a product will meet certain standards or specifications.

Non-Conforming Goods: Upon inspection, the product did not meet the required specifications and could not be used for its intended purpose.

Buyer's Rights: Under the Uniform Commercial Code (UCC) and similar laws, the buyer has the right to return non-conforming goods and seek a full refund when an express warranty has been breached.

Conclusion: ABC is entitled to return the product and receive a full refund due to the breach of the express warranty.

References

UCC (Uniform Commercial Code). (n.d.). Article 2 - Sales.

ISM. (n.d.). Managing Warranties and Product Non-Conformance.