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Supply Management Core Exam Questions and Answers

Question 1

When developing a sourcing strategy, which of the following is the BEST source of data on the spend profile of a category?

Options:

A.

A sales representative from the supplier

B.

An internal stakeholder

C.

Information from an internal database

D.

The Internet

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Question 2

A small electronics manufacturer patents a new device for securing internet servers. While this device consists of standard components and is simple to manufacture, it also contains proprietary engineering and design elements not widely known in the marketplace. After receiving a large order, which exceeds the company's current manufacturing capacity, the firm's supply management department is tasked with outsourcing the manufacture of the device to the most competitive sources available. As the supply management team evaluates selected suppliers, which of the following should be given the MOST consideration?

Options:

A.

Component part availability

B.

Risks to the company's intellectual property

C.

Logistical vulnerabilities associated with offshore suppliers

D.

Reduced product quality

Question 3

A supply manager for DEF Inc. meets with the firm's operations team to discuss the requirements for a new piece of equipment. The team establishes the specifications, and the supply manager begins contacting suppliers. The supply manager finds that almost everything specified is outside the normal features of the equipment and will require custom modifications. These modifications will raise the cost to 2.5 times the amount budgeted. In this situation, which of the following should the supply manager do?

Options:

A.

Review the specifications to ensure alignment between what is available and what is requested

B.

Negotiate with the suppliers to get a price closer to the budgeted cost

C.

Purchase the equipment as specified by the operations team and quoted by the suppliers

D.

Source new suppliers for the equipment with better prices

Question 4

A procurement manager solicits bids for renovation of a building and writes a service level agreement. The agreement includes language regarding the proper disposal of waste. This is an example of a(n)

Options:

A.

regulatory requirement

B.

zead time requirement

C.

cost goal

D.

engineering specification

Question 5

A company that makes specialized equipment for a very competitive industry relies on several critical engineered imported components. The components present a high degree of risk that could impact the future growth of the company. Given this situation, which of the following is the BEST course of action for the buying organization to take when preparing for negotiations with suppliers?

Options:

A.

Ask suppliers to analyze potential sources of risk for all components and raw materials

B.

Change sources of any components or raw materials that are imported from high-risk countries

C.

Require suppliers to provide risk insurance, with the buying organization listed as contingency beneficiary

D.

Determine with senior management and internal stakeholders the acceptable levels of risk for each product

Question 6

A supply manager Is evaluating bids for a new delivery van. Supplier J, which has provided similar equipment in the past, quotes a price of $50,000. Supplier K quotes a price of $52,500, but Includes an offer to buy back the van at the end of five years for $3,000. Both suppliers' bids meet specifications and delivery requirements. At a 10% opportunity cost of capital, and with the 5-year present value of $1 at $.62, which supplier should the supply manager choose, and why?

Options:

A.

Supplier K, as the firm will save $500

B.

Supplier J, as it provides the best value

C.

Supplier J, based on prior satisfactory performance

D.

Supplier K, to save money over the van's life cycle

Question 7

Which of the following will be MOST useful for gathering market intelligence and data on the general capabilities of potential suppliers?

Options:

A.

Request for information (RFI)

B.

Statement of work (SOW)

C.

Request for proposal (RFP)

D.

Price quotes

Question 8

Motivated by public relations considerations, a company decides to insource the manufacture of a major product. This decision was MOST likely made to bring about

Options:

A.

improved community ties

B.

increased profit margins

C.

shorter lead times

D.

decreased product risk

Question 9

During its first annual business review, a supplier requests an increase in pricing. The supplier’s survey results show a rating of 2.9 out of 5 possible points (with 3.0 being acceptable). Market indices indicate that the supplier's industry has experienced no price increase. In this situation, which of the following is the BEST course of action for the buyer to take?

Options:

A.

Ask the supplier to respond to the survey results item by item, to determine the efficacy of the request

B.

Review the survey results with the supplier asking how it plans to address the concerns, and discuss the economic factors supporting the price increase

C.

Reestablish service level agreement expectations and deny any increase at this time

D.

Inform the supplier that the market indices do not support an increase, and issue a 30-day cure letter warning of contract breach based on the survey results

Question 10

Consider the following supplier terms for the same product:

Supplier A:2%/15, Net 30

Supplier B:4°/o/5, Net 30

Which supplier's terms are more advantageous to the buying organization?

Options:

A.

Supplier B

B.

Cannot be determined based on the above information

C.

Supplier A

D.

The terms are equivalent

Question 11

MNO Inc. is a U.S.-based manufacturing company that imports sub-assemblies from Asia and incorporates them into several products. The firm orders in large quantities to obtain the lowest price per unit, and then pulls the items as required to produce finished goods. MNO wishes to improve its cash flow and seeks ways to reduce the impact of import duties. Which of the following Is the BEST approach for the company to use?

Options:

A.

Review tariff classifications for potential savings opportunities

B.

Place goods in a bonded warehouse and delay duty payment

C.

Apply for duty refunds when goods are exported

D.

Obtain a temporary import bond

Question 12

A procurement specialist reviews a report from a financial agency about a potential supplier. The report reveals that the supplier had a lien against some of its assets a few years ago, that the supplier has had several delayed payments over the last few months, and that the supplier's debt-to-equity ratio equals 2.0. Which of the following is the BEST course of action for the procurement specialist to take?

Options:

A.

Inform senior management of the potential supplier's financial status

B.

Exclude the supplier from the bidding process

C.

Inform current suppliers about the potential supplier's financial status

D.

Use the information in considering whether to qualify the supplier

Question 13

A sourcing manager is negotiating a contract with a human resources supplier that has access to employee data, including social security numbers. The supplier proposes an annual cap of $10,000 on overall liability. In this situation, which of the following is the MOST important stakeholder for the sourcing manager to consult in regard to this supplier?

Options:

A.

Risk Management

B.

Operations

C.

Legal

D.

Information Technology (IT)

Question 14

A corporation acquires a startup company, with the objective of branching out into a new product line. The firm's procurement team needs to enlarge the supply base in order to meet the new production requirements. Which of the following is the BEST way for the team to ensure suppliers are aligned with organizational goals?

Options:

A.

Contact current suppliers to determine their maximum production capacity at the necessary quality levels

B.

Conduct market research to Identify characteristics needed by potential suppliers

C.

Facilitate meetings between internal stakeholders and external stakeholders

D.

Compare the firm's vision and mission to potential suppliers' capabilities

Question 15

A US-based manufacturing firm receives a quoted price for an item from an offshore supplier of $.40 each (in US dollars), delivered duty paid to its US plant per Incoterms® 2020 rules, in minimum quantities of 20,000 units. The buying organization uses 80,000 units per year, and the carrying cost is 25%. The item price is fixed for one year. What are the total costs of purchasing annual requirements from this supplier?

Options:

A.

$36,000

B.

$33,000

C.

$32,000

D.

$40,000

Question 16

A company buys electronic connectors in lot sizes of 5000 units at a price of $1.00 per unit, including freight. This connector has an annual usage of 80,000 units. The carrying cost is 25% per year. Assuming a constant consumption rate, what are the annual carrying costs for the connectors?

Options:

A.

$7250

B.

$625

C.

$5000

D.

$1875

Question 17

A company buys 200 metric tons of ethylene per month. The firm has a one-year agreement with Supplier X to buy the ethylene at $1000 per metric ton. After 3 months, the market price drops to $900 per metric ton, and the firm renegotiates the price to $890 per metric ton for the remaining contract term.

What savings should be reported?

Options:

A.

$264,000 cost reduction and $240,000 cost avoidance

B.

$18,000 cost reduction and $180,000 cost avoidance

C.

$24,000 cost reduction and $240,000 cost avoidance

D.

$198,000 cost reduction and $198,000 cost avoidance

Question 18

A software design firm has traditionally done most of its work in-house, including support services and distribution management. The firm is planning a large expansion, and is evaluating how the various departments can support It. The chief executive officer (CEO) recommends concentrating on core competencies to increase the firm's agility and emphasize what differentiates them from competitors. Which of the following is the BEST way supply management can support this recommendation?

Options:

A.

Conduct a spend analysis on strategic items

B.

Develop and implement an organization-wide strategic sourcing plan

C.

Develop better e-procurement processes

D.

Identify opportunities to outsource non-core business functions

Question 19

DEF, Inc. conducts a Request for Information (RFI) to identify suppliers who will be invited to participate in a Request for Proposal (RFP) for technical support. The RFI requires audited financial statements. DEF receives an inquiry from a publicly traded supplier asking if their 10K statement will suffice, and a privately held supplier states that it will only provide its audited financial statement after receiving a nondisclosure agreement from DEF.

Given this situation, which of the following is the BEST course of action for DEF to take?

Options:

A.

Issue a revision to the current RFI listing alternate methods and conditions acceptable in demonstrating financial health

B.

Maintain the requirement for audited financial statements so that all respondents are graded on the same basis

C.

State that DEF reserves the right to use information other than that received in response to the RFI to evaluate respondents' financial condition

D.

Negotiate with all respondents for more financial information

Question 20

Which of the following refers to a method of formally evaluating suppliers, conducting site visits, and providing supplier training?

Options:

A.

Supplier development

B.

Supplier partnership

C.

Supply chain management

D.

Early supplier Involvement

Question 21

A university is evaluating its student registration software. The current system, purchased from Supplier A, has been in place for five years and works well, but may be outdated. A new system provided by Supplier B includes an online chat feature, which Supplier A's system currently does not have. While the costs for the two systems are essentially the same, Supplier B's system has an additional one-time implementation cost of $250,000. Supplier A informs the university It will provide its own online chat option for a one-time fee of $50,000.

The university calculates that switching to any new platform will involve migration costs. In this situation, the BEST course of action for the university is to

Options:

A.

negotiate with Supplier A to have the new platform implemented under $50,000

B.

continue with Supplier A, as the migration costs will be too high

C.

conduct an RFx stating new requirements, and add the migration costs to the evaluation criteria

D.

request Supplier A provide a single source justification, and implement the change by paying $50,000

Question 22

A supplier's willingness to deal with rejected materials, fill surges in orders, and provide technical support will be MOST affected by which of the following?

Options:

A.

Creating teaming agreements with suppliers

B.

Negotiating Inclusive terms and conditions

C.

Maintaining good supplier relationships

D.

Including such conditions in the statement of work

Question 23

A buying company concludes the request for proposal (RFP) process and signs a contract for its primary logistics provider. Company policy requires that the supply manager notify and debriefall unsuccessful bidders. During these debriefings, one of the bidders—Supplier X— states that it will offer a price discount lower than that of the successful bidder. Supplier X's proposal is very strong, and the firm has a track record of success with the buying company. Given this situation, which of the following is the BEST course of action for the supply manager to take?

Options:

A.

Escalate Supplier X's proposal to executive management

B.

Re-open the RFP for all suppliers to re-submit proposals

C.

Reject Supplier X's offer

D.

Withdraw the award from the selected bidder and re-award the contract to Supplier X

Question 24

A supply management department obtains executive support to adopt category management. Which of the following is a key step in establishing the categories to be managed?

Options:

A.

Developing a category management governance structure

B.

Conducting a Pareto analysis

C.

Developing category-specific action plans

D.

Conducting a spend and forecast analysis

Question 25

What is the landed cost per unit for the following item?

Item cost$.76

Packaging for shipment$.02

Shipping from Indonesia$.14

Duty$.03

Customs clearance$.10

Storage at buyer’s warehouse$.09

Shipment from warehouse to plant$.06

Options:

A.

$1.14

B.

$1.03

C.

$1.05

D.

$1.20

Question 26

An organization selects a supplier for a complex system implementation that will be conducted in several stages. Prompt initiation of the project is necessary in order to maintain the schedule, but the stakeholders have not yet defined the later milestones and deliverables. Which of the following would be the MOST appropriate course of action for the buying organization to take regarding the statement of work (SOW) for this project?

Options:

A.

Create an initial SOW to allow the supplier to begin the first phase, with provisions for negotiating subsequent SOWs for full project implementation

B.

Provide a SOW with all requirements available thus far, and include procedures for internal customers to make changes via contract amendments

C.

Issue a general letter of intent so that the supplier can start mobilizing and avoid delays

D.

Postpone any type of agreement with the supplier until all requirements are fully defined

Question 27

TUV Inc., a small manufacturing firm, hopes to rebuild its customer base and return to profitability after a period of losing market share. Negotiations with a key supplier will be an important factor in this turnaround if target costs and pricing can be worked out.

Given this situation, which of the following would create the MOST challenging constraints In negotiations?

Options:

A.

Demand for the supplier's products from competitors

B.

Need for flexible delivery schedules

C.

Troubled financial history of TUV

D.

Unpredictable future volume

Question 28

Due to growth, a private school system finds that its costs for support, including maintenance and janitorial services, have increased dramatically. Though supply management generally does a good job in managing service contracts, there Is no strategic plan or systematic method for reviewing costs on a long-term basis.

The school's board has made the development of a strategic plan the supply manager's priority assignment for the next school year. Given this situation, which of the following should be the supply manager's FIRST step in developing this plan?

Options:

A.

Determine how supply management can minimize costs and reduce risks

B.

Create specific goals and objectives for addressing changes in how support services are to be managed

C.

Meet with the board chair to discuss organization-level strategies impacted by support services

D.

Identify opportunities to make specific changes In the purchasing and contracting processes

Question 29

A business unit conducts discussions with key management members that Include category overviews, contracting executive summaries, local content spending plans, sourcing timelines, and cost management/value creation. These presentations can BEST be described as which of the following?

Options:

A.

Commodity segmentation

B.

Contracting plan

C.

Spend analysis

D.

Category action plan

Question 30

EFG uses specialized components from Supplier A in the manufacture of state-of-the-art testing equipment. Supplier A has been very successful in meeting EFG's stringent quality specifications, which has been critical for EFG.

EFG learns that Supplier A plans to acquire a smaller firm which makes components similar to those under contract with EFG. EFG is concerned that the supplier may transfer its contract to the new subsidiary, leading to compromises in quality. Given this situation, which of the following is the BEST course of action for EFG to take?

Options:

A.

Negotiate with Supplier A to remove the changes clause from the contract

B.

Negotiate with Supplier A to strengthen the indemnification clause in the contract

C.

Negotiate with Supplier A to add a consent of assignment clause to the contract

D.

Take no action, as Supplier A must supply the chips at the same quality level no matter who manufactures them

Question 31

A firm wants to leverage supply contracts by making maintenance, repair, and operations (MRO) supplies available to all of its subsidiaries. Which of the following is the MOST efficient and cost-effective way to provide product details to potential users?

Options:

A.

Require suppliers to provide secure ordering portals tailored to specific contracts

B.

Conduct train-the-trainer sessions for supply management staff at the subsidiaries

C.

Create internal online catalogs with ordering instructions and links to suppliers' sites

D.

Email a list of suppliers' websites to contacts at each subsidiary

Question 32

A company's accounting department implements a new system to track liabilities for capital assets. The reports developed by this system exclude some important indirect procurement data (e.g., transactions related to test equipment), as this information is tracked by another system. Which of the following is the BEST course of action for the firm to take in this situation?

Options:

A.

Estimate the total debts and assets being tracked outside the system and correct any large variances on a quarterly basis

B.

Notify senior management that reports from the new system may understate the company's debts and assets

C.

Notify the entire organization of the issue during the next iteration of the tool

D.

Take no action, as the aggregate numbers reported to shareholders will not be severely affected

Question 33

A supply manager needs to develop additional raw material suppliers in support of a category management plan created for a specific region. The project has been approved by senior management and the team has been selected. Which of the following is the NEXT step the supply manager should take?

Options:

A.

Review the scope of the project in a team planning meeting

B.

Issue a contract to a current supplier who says it can service the region

C.

Conduct market research to identify possible suppliers

D.

Assign team members various activities within their disciplines

Question 34

Supplier X provides software critical to production at EFG Corporation. Supplier X informs EFG that the software version it currently uses will no longer be supported and recommends an upgrade to a newer version. However, EFG is very pleased with the performance of the current version, and the costs for upgrading are prohibitive at this time. EFG wants to find incentives for Supplier X to continue supporting EFG's needs. In this situation, which of the following would be the BEST course of action for EFG to take?

Options:

A.

Request Information on the newer software version to persuade top management of its value

B.

Contact EFG's legal department to review the liquidated damages clause in the contract with Supplier X

C.

Identify additional business opportunities for Supplier X at EFG, as part of their ongoing relationship

D.

Stress that failure to offer support will result in negative references for Supplier X

Question 35

In preparation for an upgrade to several of its business processes, a firm needs to provide training for key staff members. The firm's supply manager wants to be sure any solicitation for services uses up-to-date specifications and will attract good potential sources. Which of the following should be the FIRST step in accomplishing this?

Options:

A.

identifying suitable training packages and requesting bids for delivering them

B.

Inviting potential trainers to present their programs to a team of users

C.

Sending results-based Requests for Proposals (RFP) to known suppliers

D.

Issuing a Request for Information (RFI) to identify products and/or sources

Question 36

FGH, Inc. has purchased components from Supplier A for many years. The supplier's performance has been very good, with reliable deliveries and consistently high quality. As contract renewal approaches, Supplier A informs FGH's supply manager that a significant price increase is anticipated, based primarily on the costs of building a new production facility. The supply manager has been directed to negotiate a new contract with Supplier A only if it agrees to maintain current pricing. Which of the following is the BEST way for the supply manager to prepare for negotiations with Supplier A?

Options:

A.

Determine if the parts made by Supplier A can be produced elsewhere

B.

Discuss alternate product designs with engineering

C.

Enlist FGH's executive management to participate in negotiations

D.

Research into whether Supplier A's recent expansion costs are reasonable

Question 37

A supply manager for JKL, Inc. finds a potential new supplier for an item included In a finished product. Quality and service are comparable to those of the current supplier, and the new supplier's cost per unit is $.03 lower than that of the current supplier. Making the transition to the new supplier will require changes to operations costing approximately $12,000. How many units would JKL need to buy in order to justify changing suppliers?

Options:

A.

400,001

B.

40,001

C.

36,001

D.

360,001

Question 38

An operations manager wants to replace the existing fleet of aging vehicles owned by the company. The operations manager presents the supply manager with a list denoting the quantity, makes and models currently in operation:

Quantity

Brand A - 4X4 SUVs15

Brand B - Midsize Cars5

Brand C - Compact Cars45

Which of the following is the BEST course of action for the supply manager to take?

Options:

A.

Request quotations for the listed quantities of vehicles, using generic specifications and performance requirements

B.

Request quotations for the listed makes and models of vehicles, with forecasted quantities to meet current and future needs

C.

Request quotations using generic specifications and performance requirements, with forecasted quantities to meet current and future needs

D.

Request quotations for the makes, models and quantities of vehicles specified on the list

Question 39

When developing a category management plan, which of the following is the BEST reason for soliciting cross-functional input?

Options:

A.

It facilitates Input from stakeholders and other functional areas to ensure a long-term solution.

B.

It provides an opportunity to demonstrate non-linear leadership.

C.

It allows the category manager to gain important insights from the supply management team.

D.

It enables the category manager to resolve conflicting views and priorities for goods or services.

Question 40

The ability to explain how and why decisions are made in support of business plans is important because it allows a supply manager to

Options:

A.

influence internal stakeholders

B.

reduce the amount of needed input from key stakeholders

C.

align goals to supply management's mission

D.

prevent supply chain disruptions

Question 41

One of TUV Company's largest suppliers has been performing poorly, and the quality of its services does not meet the needs of a particular stakeholder. Which of the following is the BEST way for TUV's supply manager to evaluate how to establish service level agreements (SLAs) to improve the performance of this supplier?

Options:

A.

Request that the supplier provide a set of metrics to be used in measuring performance

B.

Develop measurements of supplier performance with the stakeholder, and include those measurements in an amendment to the contract

C.

Notify the supplier that its level of performance is not acceptable, and renegotiate contract pricing to reflect the supplier's performance

D.

Notify the supplier of the performance issues, and terminate the contract if the supplier does not correct performance within thirty days

Question 42

A supplier's willingness to deal with rejected materials, fill surges in orders, and provide technical support will be MOST affected by which of the following?

Options:

A.

Creating teaming agreements with suppliers

B.

Negotiating Inclusive terms and conditions

C.

Maintaining good supplier relationships

D.

Including such conditions in the statement of work

Question 43

DEF, Inc. is a multinational oil company expanding into a new geographic region. The firm's policy is to purchase locally for its operations whenever possible. Thus, DEF needs to find sources of materials, basic equipment, and standard bulk items within the new region. Which of the following should DEF do FIRST?

Options:

A.

Issue a Request for Quotation (RFQ)

B.

Conduct a suppliers' conference

C.

Issue a Request for Information (RFI)

D.

Issue a Request for Proposal (RFP)

Question 44

An automobile manufacturer learns that its supplier for brake parts cannot maintain a steady workforce of machinists. In this instance, it is likely that the manufacturer failed to examine which of the following during supplier performance evaluations?

Options:

A.

Labor stability

B.

Quality metrics

C.

Financial stability

D.

Business continuity

Question 45

DEF Inc. receives several batches of inferior quality products from a supplier. Although all of the samples provided by this supplier met or exceeded specifications, it is learned that the facility used to produce the samples is in a different location than the regular production facility, and that the production environment could affect quality.

DEF could have prevented this situation by doing which of the following?

Options:

A.

Requesting and testing samples from all possible supplier manufacturing locations

B.

Requesting larger samples from the supplier prior to going into production

C.

Requiring the supplier to provide assurance that its products will meet the required specifications

D.

Placing stricter quality controls in the receiving dock to prevent defective products from being accepted into inventory

Question 46

A luxury scarf manufacturer located in Europe selects a fine wool supplier in Australia. The manufacturer's supply manager wants to ensure timely monthly deliveries while keeping transportation costs reasonable. Which of the following actions by the supply manager is MOST likely to meet the scarf company's needs?

Options:

A.

Utilize a freight forwarder to schedule and track shipments

B.

Select a consistent Incoterms ® 2020 rule for all shipments

C.

Require the freight carriers to provide real-time tracking

D.

Include a routing guide within the service level agreement

Question 47

The procurement officer for a publicly-traded U.S. company completes a 409 filing with the Securities and Exchange Commission (SEC), due to a number of supplier deliveries being missed that impact revenue forecasts. The procurement officer's NEXT step should be to

Options:

A.

review with the legal department what actions can be taken against suppliers with late deliveries

B.

document a corrective action plan

C.

determine what changes can be made to contracts to ensure suppliers meet delivery deadlines

D.

terminate contracts with suppliers who have been late with deliveries

Question 48

Which of the following is the PRIMARY reason an organization's executive team and internal stakeholders should be aligned on the definitions of cost savings reporting?

Options:

A.

To ensure financial professionals can audit the cost savings reporting process

B.

To ensure price baselines can be adjusted for comparison purposes overtime

C.

To ensure appropriate risk management strategies are being adopted

D.

To ensure supply management is adding value

Question 49

A supply manager works with engineering on an aerospace project. A request for quotation (RFQ) Is distributed to five potential suppliers, three of whom respond that they are not interested In the project. The two remaining suppliers say they are interested, but a high level of risk involving tight tolerances will force them to raise prices significantly, and neither will accept a firm fixed price contract. The supply manager arranges a conference with engineering and both suppliers. During this conference, it is determined that only three of the tolerances are truly critical. Based on this conference, a revised RFQ is issued.

This scenario is an example of which of the following aspects of supply management?

Options:

A.

Acting as a liaison between stakeholders

B.

Negotiating a contract award

C.

Facilitating value engineering

D.

Resolving conflicts between stakeholders

Question 50

A supply manager is preparing the department's budget for the next year. Which of the following is the FIRST step in this process?

Options:

A.

Controlling expenditures during the budgetary year

B.

Reviewing the organization's goals

C.

Defining the needed resources

D.

Presenting the budget for review

Question 51

A supply manager seeks bids on a new piece of capital equipment. The equipment is budgeted at $115,000. Three suppliers send in bids of $110,000, $114,000 and 5135,000. After receiving the bids, additional negotiations with the low bidder result in a final cost of $105,000. In this situation, what should the baseline value be for calculating cost avoidance?

Options:

A.

$114,000

B.

$135,000

C.

$110,000

D.

$115,000

Question 52

A U.S.-based supply manager wants to reduce the number of defective parts arriving from an outsourced supplier located in Malaysia. Which of the following is MOST likely to help achieve this goal?

Options:

A.

COPC 2000

B.

Six Sigma

C.

Sarbanes-Oxley

D.

Lean manufacturing

Question 53

During negotiations, each side adopts a point of view, and then both parties work to close the gap by exchanging concessions. Which of the following tactics is being used?

Options:

A.

Positional bargaining

B.

Logical reasoning

C.

Power and influence

D.

Relational persuasion

Question 54

CDE, Inc. contracts with a supplier for the fabrication of trade show booths and displays. The contract is on a cost-plus fixed fee (CPFF) basis, with the supplier's agreed-upon fee set at $15,000

and the estimated allowable cost of materials set at $20,000, for a total of $35,000. The supplier is able to bring down total material costs to $18,500. Given this situation, how much can the

supplier bill CDE for the project?

Options:

A.

It will depend upon the profit margin allowed by the contract

B.

$35,000

C.

$33,500

D.

Up to $35,000, based on CDE's acceptance of components

Question 55

A supply manager Is conducting negotiations with a supplier. The supplier states that it cannot offer a lower price because the product under negotiation is covered by a government contract. In this situation, the supply manager should

Options:

A.

offer to reduce the order quantity

B.

negotiate the other terms and conditions, and return to the issue of price at a later time

C.

conclude that this is in fact the best price that the supplier can legally offer

D.

require the supplier to provide specifics on the government contract restrictions

Question 56

A local utility's supply manager is preparing a solicitation to select a contractor to construct a controlling station for the utility's main plant. Construction must begin within four months and be completed in a year or less, as delays in bringing the new station online could cause serious losses for the utility. Which of the following will be MOST effective in monitoring performance and ensuring timely completion?

Options:

A.

Specifying high consequential damages for failure to complete the project in a timely manner

B.

Ensuring that the scope of work is clear, to minimize misunderstandings

C.

Requiring milestones, progress reports, and liquidated damages for noncompliance

D.

Including a strong for-cause termination clause

Question 57

An oil & gas exploration company has employed its current offshore vessels for over ten years. The firm is seeking to bring its fleet up-to-date. The firm knows what results it requires, but with the changes that have occurred over the last decade, it is not sure what combination of vessel types and quantities will deliver the most efficient operations for its needs. Given this situation, which of the following will be MOST appropriate for this firm to issue?

Options:

A.

Request for proposal (RFP)

B.

Request for information (RFI)

C.

Request for quotation (RFQ)

D.

Invitation for bid (IFB)

Question 58

A manufacturing company purchases a certain component in quantities of 10,000 units per truckload. The company uses 2,000,000 units annually. The firm's supply manager identifies two possible suppliers of the component, both of which meet service and quality requirements.

Supplier A offers the component at $.69 per unit and charges $2000 to ship one truckload. Supplier B offers the component at $.71 per unit and charges $1500 to ship one truckload. Given this situation, which of the following will be MOST useful to the supply manager in deciding between the two suppliers?

Options:

A.

Landed price

B.

Value analysis

C.

Economic order quantity

D.

Cost/price analysis

Question 59

A supply manager submits requests for additional personnel and equipment, which are approved. However, the organization's training budget is cut, giving less opportunity to train new employees. The supply manager is concerned that this will adversely affect the department's ability to build expertise. Given this situation, which of the following is the MOST effective action for the supply manager to take?

Options:

A.

Present justification showing how training supports cost reduction goals

B.

Utilize available training funds early in the year to gain maximum impact

C.

Fill fewer positions than approved and re-direct savings to training

D.

Seek highly-qualified applicants who will require less training

Question 60

A director of supply management is tasked with determining where savings can be found in indirect cost categories. If needed, the company will consider hiring additional staff to negotiate and administer contracts. Which of the following is the FIRST step the supply manager should take?

Options:

A.

Assess skills already available in supply management

B.

Identify a cross-functional team to brainstorm solutions

C.

Develop a new supplier relationship model

D.

Establish a baseline using current spend data

Question 61

XYZ Inc. is a chemical manufacturing company. XYZ requires high levels of consistency and precision from certain suppliers in their machining work. In order to drive continuous improvement with these suppliers, XYZ should develop KPIs to track performance in which of the following areas?

Options:

A.

Cost

B.

Quality

C.

Cycle Time

D.

Service

Question 62

A supply manager wants to develop a strategy to facilitate supplier Innovation. Which of the following is MOST likely to achieve this goal?

Options:

A.

Locating new suppliers that lead their industry

B.

Recognizing current suppliers for innovative performance

C.

Leveraging innovations from one supplier to improve all other suppliers

D.

Awarding contracts only to the most innovative companies

Question 63

A buyer for DEF, Inc. has been exceeding spending authority on agreements with several new suppliers. Which of the following Is an accurate statement regarding DEF's liability in this situation?

Options:

A.

DEF is only liable for an amount equal to the buyer's actual authority level.

B.

DEF is fully liable for the agreements, as the buyer is an employee of the company.

C.

DEF is responsible for the agreements if the buyer exceeded actual authority, but the suppliers perceived the spend to be within apparent authority.

D.

DEF is responsible for the agreement if the buyer exceeded actual and apparent authority levels, but only for a value equal to the apparent authority amount.

Question 64

The chief procurement officer (CPO) for a large hospital system is planning to implement a new e-sourcing system. Satellite clinics and specialty centers will be authorized to process small orders through this system, rather than sending requests to the central supply management department, as has been done in the past. Which of the following actions by the CPO will MOST likely support a successful implementation of this system?

Options:

A.

Providing regular progress reports to top management

B.

Visiting similar organizations to see how their systems operate

C.

Building a team of potential users to help define needs

D.

Scheduling on-site demonstrations of leading software systems

Question 65

When evaluating bids, the MOST critical aspect Is ensuring the quote meets the solicitation's

Options:

A.

quality requirements

B.

specifications

C.

technical capabilities

D.

terms and conditions

Question 66

A supply manager is working with multiple management layers to create a procurement policy. Which of the following should the supply manager do FIRST in order to ensure that this policy is successfully adopted by the organization?

Options:

A.

Host a meeting with key external suppliers to understand engagement for policy adoption

B.

Host a meeting with key internal stakeholders to review the proposed policy

C.

Engage business unit sponsors to ensure adoption throughout the organization

D.

Verify that senior management approves and distributes the policy to the organization

Question 67

A company is about to conduct an opportunity assessment review of the items it purchases. Which of the following categories should be analyzed FIRST?

Options:

A.

Low value/high risk and high value/low risk items

B.

High value/high risk and low value/high risk items

C.

High value/low risk and high value/high risk items

D.

Low value/low risk and low value/high risk items

Question 68

Planning and negotiating a contract while considering its impact on a supplier is an example of which of the following?

Options:

A.

Supplier relationship management

B.

Contingency planning

C.

Supply chain mapping

D.

Supplier mentorship

Question 69

With which group of suppliers is It MOST important to conduct regular performance reviews?

Options:

A.

Standard

B.

Key

C.

Strategic

D.

Commodity

Question 70

A supply manager for an electronics manufacturer is asked to source packaging for the company's new printed circuit board. The specifications recommend 0.50 mm tolerances, with a projected breakage ratio of 0.50%, at a cost of $1.00 each. The supply manager finds an alternative source that is specified at 0.60 mm tolerances, with a projected breakage ratio of 0.75%, at a cost of $0.80 each. If the cost of the new circuit board is $120 per unit, which packaging should the supply manager recommend and why?

Options:

A.

The 0.50 mm packaging, as It is the most cost effective.

B.

The 0.50 mm packaging, as the supply manager's primary responsibility is honoring internal stakeholder requests.

C.

The 0.60 mm packaging, as it is the most cost effective.

D.

The 0.60 mm packaging, as it is only $0.80 each, while the 0.50 mm packaging is $1.00 each.

Question 71

A firm enters into a contract with a minority business. The invoice does not match the purchase order, and some incorrect items are shipped. The erroneous items, valued at $5,000, are returned. The replacement items are scheduled to be delivered within 2 days. The total invoice is for $18,000, which is a substantial amount for the business. Preferential payment terms have previously been negotiated from 30 to 14 days from receipt of goods, as cash flow is a significant issue. The situation is summarized as follows:

Purchase Order RaisedGoods Received Invoiced

Timing18 days ago 13 days ago 12 days ago

Amount$18,000 $18,000 $18,000

As it will take one business day to process payment, a decision needs to be made on whether the supplier should receive payment on time. Which of the following courses of action should the supply manager take?

Options:

A.

Pay the full $18,000 immediately

B.

Pay $18,000 14 days after receipt of all the goods in the original purchase order

C.

Pay $13,000 now and $5,000 upon receipt of the replacement goods

D.

Pay $13,000 now and $5,000 14 days after receipt of the replacement goods

Question 72

A firm has repeatedly experienced communication problems with three crucial suppliers. The firm's supply manager concludes that many of these problems are the result of not having regular business reviews with these suppliers. However, all three suppliers have indicated that they do not see the value in regular business reviews. Given this situation, which of the following is the BEST course of action for the supplier manager to take?

Options:

A.

Contact the CEO of each supplier and request that they encourage the firm to participate in the business reviews

B.

Advise the suppliers that failure to meet for the reviews will result in payments being suspended

C.

Advise the suppliers that their performance is not acceptable, and that they must improve or face further penalties

D.

Develop a specific agenda for the suppliers that identifies items to address and accomplish during the business review

Question 73

Which of the following is the BEST method for comparing a supplier's performance to that of another organization, with the goal of understanding where improvements might be made?

Options:

A.

Customer satisfaction surveys

B.

Measurement system analysis

C.

Focus groups

D.

Benchmarking

Question 74

A supply manager Is planning for negotiations with a sole-source supplier of an essential part. The buying firm is already one of the supplier's top customers, and will need even larger quantities of the part to expand its product line in the near future. The supply manager learns that the supplier may experience some financial risks over the coming year, and that the supplier is anxious to solidify its relationships with major customers to mitigate that risk. Which of the following Is the BEST way for the supply manager to gain a deeper understanding of the supplier's position?

Options:

A.

Perform a SWOT analysis

B.

Perform a Porter's Five Forces analysis

C.

Determine the supplier's bottom line position

D.

Determine the buying firm's bottom line position

Question 75

The chief executive officer (CEO) of a candy company directs the firm to source, produce and market a line of organic clothing. The firm's internal stakeholders are not in agreement with the CEO. In this situation, which of the following courses of action should supply management take?

Options:

A.

Create a steering committee

B.

Poll external stakeholders for input

C.

Select the best source of supply

D.

Perform cost regression analysis (CRA)

Question 76

A large manufacturing organization has a policy of awarding contracts to a single source based on bids for requirements over a specified time period. Some of the parts sourced are readily available from many suppliers, and the organization's supply management team recommends choosing a few of these parts for a trial project to determine the effectiveness of multiple sourcing. The MOST likely advantage of the multiple sourcing arrangement will be

Options:

A.

improved production scheduling accuracy

B.

the ability to test new suppliers with little risk

C.

enhanced standardization programs

D.

the improvement of product quality

Question 77

Which of the following is considered the HIGHEST level in a supply chain's strategic plan?

Options:

A.

Objective of the organization

B.

Commodity segmentation

C.

Supplier differentiation

D.

Acquisition planning

Question 78

A supply manager is planning to conduct negotiations with three potential suppliers, one of which will be selected to provide components for a new product line. A number of internal stakeholders have asked to participate in the negotiations. However, most of the stakeholders have not been involved with the sourcing process up to this point. In this situation, which of the following would be the BEST approach for the supply manager to take?

Options:

A.

Limit the negotiations to a few persons who can add feedback at designated points in the negotiation

B.

Ask the stakeholders' managers to decide who should participate in the negotiations and who should not

C.

Refuse to allow any of the stakeholders to participate in the negotiations

D.

Permit all interested stakeholders to participate in the negotiations

Question 79

A director of supply management obtains approval to implement a spend analysis matrix. While the matrix will be primarily used to support the development of sourcing strategies, it will also be leveraged by functional lines of the business for budget planning. Which of the following is the MOST important step for the director to take in order to ensure the information from the spend analysis is accurate and reliable?

Options:

A.

Lead a sub-initiative to cleanse supplier and spend data before it is loaded

B.

Engage information technology (IT) to develop detailed specifications for all inbound integrations

C.

Select a best-in-class supplier as partner for developing the matrix and on-going hosting

D.

Meet with key stakeholders to gather reporting requirements and understand expectations

Question 80

Which of the following BEST describes a cash flow budget?

Options:

A.

A budget that links expenditures to revenue within each budgetary period

B.

A process in which managers must begin each budgetary period with no predetermined allocations

C.

A financial plan specifying the amount of money to be spent on plant and equipment

D.

A budget that shows individual expenses without tying the expenses to broader goals

Question 81

CDE Inc. is a metal casting manufacturer that uses a supplier performance scorecard to measure key performance indicators (KPIs) across the business. CDE's supply manager wants Supplier Y to improve on a number of the measured KPIs. Which of the following is the BEST approach for the supply manager to take in order to achieve this objective?

Options:

A.

Require the supplier to submit a written plan for how it plans to improve the KPI scores, and require management approval for the plan

B.

Conduct a plant visit at the supplier's location and look for ways to improve processes so that the supplier can meet CDE's standards

C.

Give the supplier a one-year timeline to improve scores on the KPIs and inform it that any new business will be put on hold if no progress is made

D.

Require the supplier to submit a written plan on how it will improve in each underperforming KPI, and monitor the supplier's progress

Question 82

Which of the following is the MOST important benefit of implementing a contract management system?

Options:

A.

Greater visibility for reverse auctions

B.

Lower legal staff costs

C.

Access to a cooperative purchasing group

D.

Higher value-added activities

Question 83

ABC, Inc. has a supply management department responsible for placing orders. In spite of this, a designer from ABC's engineering department places an order with Supplier X for several products.

When the shipment arrives, it is rejected by the receiving department, as they cannot verify the order with supply management. To avoid this situation, the designer should have

Options:

A.

notified the supervisor of the engineering department of the immediate need for the item

B.

requested supply management issue an "after the fact" purchase order

C.

coordinated product needs with supply management prior to order commitment

D.

delayed placing the order until after looking at comparable items from other suppliers

Question 84

A supply management department is asked to obtain lower prices from suppliers. Through its efforts, the department manages to achieve a 5% reduction in indirect spend categories. However, some stakeholders request more items, keeping total expenditures about the same despite lower per-item costs.

Which of the following will be the BEST long-term approach for supply management to improve upon this situation?

Options:

A.

Refrain from processing orders for additional items unless there is a compelling justification

B.

Report the problem to top management, citing the departments with the poorest records

C.

Work with leadership to implement a more effective demand management program

D.

Accept additional orders only if the requesting department has at least a 5% overall reduction in spend

Question 85

Rebates are considered part of which of the following types of cost management?

Options:

A.

Cost avoidance

B.

Cost reduction

C.

Cost mitigation

D.

Cost containment

Question 86

A manufacturing company experiences an increase in returns due to product quality issues. A root cause analysis determines that the raw materials are the cause, not the production process. In order to resolve this issue and avoid similar problems in the future, the firm should FIRST do which of the following?

Options:

A.

Require current suppliers to submit samples to determine if any materials do not meet standards

B.

Stop production and halt any shipments until the problem is rectified

C.

Find new suppliers for the raw materials

D.

Offer replacement products from current inventory so that customers can get new products right away

Question 87

A buyer for ABC, Inc. meets with a sales representative from XYZ Company to discuss the purchase of a product. The sales representative provides documentation to the buyer that the product will meet or exceed the specifications required by ABC. Based on thi information, the buyer places an order with XYZ.

However, upon inspection of the received product, the buyer learns that it does not meet ABC's specifications and cannot be used for the intended purpose. Which of the following is TRUE in this situation?

Options:

A.

ABC should sell the product to a third party and use the funds to procure items that meet the required specifications.

B.

ABC should return the goods for a full refund because the promise made by the seller created an express warranty.

C.

ABC can do nothing, as the salesperson's claim was an opinion and did not create a warranty.

D.

ABC's design team should change the specifications to allow the product to be used and avoid further delay.

Question 88

DEF Corporation is a supplier whose products no longer require incoming inspection. Which of the following BEST describes DEF's supplier categorization?

Options:

A.

Certifiable

B.

Partnered

C.

Certified

D.

Approved

Question 89

Which of the following Is a strategic deliverable whereby proactive steps are identified in order to execute tactical-level actions within the sourcing process?

Options:

A.

Supplier forum

B.

Category management plan

C.

Benchmarking

D.

Business review

Question 90

A plumbing supplies company asks its supply manager to develop a category management plan for the coming year.

The supply manager conducts a spend analysis in order to identify and rank the most important categories. Which of the following should the supply manager use?

Options:

A.

Frequency chart

B.

Pareto analysis chart

C.

Profit margin chart

D.

Fish bone diagram

Question 91

A supply manager Is conducting the following activities:

•Mapping between category codes and category maps

•Normalizing supplier information

•Performing supplier mapping

•Refining mapping with financial systems data

Which of the following is the supply manager engaged in?

Options:

A.

Risk analysis

B.

Spend analysis

C.

Market analysis

D.

Cost/price analysis

Question 92

MNO, Inc. has been one of XYZ Company's most valuable customers for a number of years. During a formal competitive bid event for a new product introduction, MNO becomes a supplier to XYZ. In this situation, which of the following should be of GREATEST concern to these organizations?

Options:

A.

Progress reports

B.

Conflict resolution

C.

Reciprocal relationship

D.

Customer feedback

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Total 312 questions