CORE Exam Dumps - ISM CPSM Questions and Answers

Developing a category management plan involves a thorough understanding of both the internal needs and external market conditions. Collecting spend data provides insight into purchasing patterns, volumes, and costs, which is crucial for effective category planning. Additionally, aligning with the business strategy from stakeholders ensures that the category plan supports the overall objectives and priorities of the organization. This comprehensive approach allows for more strategic sourcing and management of the category.References:

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

CIPS Category Management guidelines.

Company's Limitations: The firm is young and lacks design expertise.

Performance Specifications: Developing detailed performance specifications focuses on what the new device should achieve rather than how to design it.

Leveraging Supplier Expertise: This approach allows potential suppliers to use their design expertise to meet the performance requirements, which is beneficial given the company's lack of design capability.

Ensuring Quality and Innovation: By setting clear performance criteria, the company ensures that the new product meets market needs and leverages suppliers' strengths to deliver innovative solutions.

References

ISM. (n.d.). Developing Specifications and Standards in Procurement.

Harvard Business Review. (2016). How to Develop Effective Product Specifications.

In the Kraljic matrix, a product with high business impact and low supply market complexity is categorized as a leverage item. Leverage items have a significant impact on the business and are typically sourced from multiple suppliers, allowing the buyer to leverage their purchasing power to obtain favorable terms and conditions.

References

Purchasing Must Become Supply Management by Peter Kraljic, Harvard Business Review

Supply Chain Management: Strategy, Planning, and Operation by Sunil Chopra and Peter Meindl

The greatest benefit of a supplier day/forum is providing attendees with insight into the buying company's new initiatives and strategic imperatives. This transparency helps align the supplier's efforts with the company's goals, fostering better collaboration and innovation. While other benefits such as seeing product usage (A), benchmarking against competition (C), and meeting the supply management team (D) are valuable, understanding the strategic direction is paramount for long-term partnership and success. References: Supply chain collaboration and communication strategies, supplier relationship management best practices.

When a supplier states that a product is covered by a government contract, implying that they cannot offer a lower price, it is essential for the supply manager to verify this claim. The supply manager should require the supplier to provide specifics on the government contract restrictions. This will help determine if the price is indeed fixed by the government or if there are other negotiable aspects. By understanding the exact restrictions, the supply manager can better navigate the negotiation process, ensuring compliance while potentially identifying areas for negotiation that are not restricted.

References:

Federal Acquisition Regulation (FAR) guidelines on government contracts.

"The Art of Negotiation" by Michael Wheeler.

Institute for Supply Management (ISM) guidelines on government contract negotiations.

When negotiating a contract involving sensitive employee data, including social security numbers, it is crucial to consult the legal department. The legal team can provide guidance on the implications of liability caps, data protection regulations, and potential risks associated with data breaches. They ensure that the contract complies with applicable laws and that the company's interests are adequately protected. References: Contract law, data protection regulations, best practices in supplier management for sensitive data.

The best description of the strategic sourcing process is D. A series of actions to identify suppliers to provide needed products/services for the organization. Strategic sourcing is a systematic and data-based approach for optimizing an organization’s vendor base and improving overall value propositions for software and services1. It involves planning, managing, and optimizing supply chain activities, which includes identifying suitable suppliers2.

The firm initially agreed to buy ethylene at $1000 per metric ton but renegotiated to $890 per metric ton after 3 months. For the first three months, the price difference is cost avoidance because the market price was $900 per metric ton, and the firm avoided paying this price. For the remaining nine months, the difference between the original contract price ($1000) and the renegotiated price ($890) represents a cost reduction.

Cost avoidance: (900 - 890) * 200 * 9 = $180,000

Cost reduction: (1000 - 890) * 200 * 9 = $198,000 Total savings: $264,000 cost reduction + $240,000 cost avoidance. References: Cost management principles in procurement, cost avoidance vs. cost reduction strategies.

Identify the Issues: The supply manager should first clearly outline the specific issues with Supplier X, such as the price increases and declining technical support.

Develop Win-Win Scenarios: Before entering negotiations, it is essential to develop scenarios that can create mutual benefits for both MNO, Inc. and Supplier X. This approach fosters a collaborative relationship rather than an adversarial one.

Long-term Value: By focusing on long-term value, the supply manager can address the current issues and also set a precedent for future interactions. This may involve proposing solutions like better support mechanisms or more favorable pricing structures in exchange for commitments from MNO.

Collaborative Relationship: Building a collaborative relationship helps in negotiating terms that are beneficial and sustainable for both parties. This includes working together to find efficiencies or improvements that can lead to cost savings or enhanced service levels.

References:

CIPS: "Guide to Supplier Relationship Management"

ISM: "Negotiation Strategies for Long-Term Supplier Relationships"

Scenario Overview: The supply manager issued an RFQ to five suppliers; three declined, and the remaining two raised concerns about risk and pricing.

Conference Outcome: A conference revealed that only three tolerances were critical, leading to a revised RFQ.

Value Engineering: This process involves evaluating a project to reduce costs while maintaining quality by identifying essential versus non-essential specifications.

Supply Manager’s Role: By facilitating this discussion, the supply manager helped reduce project costs and risks, demonstrating the principles of value engineering.

References

CIPS. (n.d.). Value Engineering in Procurement.

ISM. (n.d.). Cost Management and Value Engineering.