CPSM^® Update

3 Questions, 3 Answers

May/June 2010, eSide Supply Management Vol. 3, No. 3

New in 2010, eSide offers three sample questions — and answers — from the CPSM^® Diagnostic Kit to help you prepare to pursue your CPSM^® certification. First, answer all three questions; then, scroll down to the "3 Answers" section to find out how you fared.

3 Questions

Question #1: When developing specifications, a buyer may consider information from which of the following?

1. Suppliers
2. Industry Standards
3. Professional Organizations
4. Competitors

1. I and IV only
2. II and III only
3. I, II and III only
4. I, II, III and IV

Question #2: A home medical testing device includes a very sensitive sensor with a customized, easily readable display. This sensor is low-cost but high-risk because shortages could stop production at the buying organization's plant. In this situation, which term BEST describes the sensor?

1. Bottleneck item
2. Non-critical component
3. Leverage buy
4. Routine component

Question #3: Which of the following is an example of a mission statement for a supply management organization?

1. "The supply management organization will ensure the right price for the right products or services at the right time, with required quality and supporting documentation."
2. "The supply management organization will effectively manage supply management activities and supplier relationships to satisfy internal stakeholders of the company."
3. "The supply management organization will ensure that all personnel perform their responsibilities in an efficient and effective manner."
4. "The supply management organization will provide a minimum of $200,000 of cost savings or cost avoidance during the upcoming fiscal year."

3 Answers

Question #1: Option D is correct because all four sources of information can be important to the supply management professional. Suppliers (I) provide not only specifications for current products (which can be compared to be sure specs aren't unduly restrictive) but also advance looks at new products or technologies. Industry standards (II) are especially useful for common parts or materials or for those routinely tested by third-party services or labs. Professional organizations (III) offer resources such as training, examples of standard specifications, and networking among peers. Being aware of competitors' (IV) innovations, problems, and solutions can yield valuable perspective.

References: CPSM^® Study Guide, 1st Edition (Book 1 — Foundation of Supply Management), pages 1-2; ISM Professional Series (Book 1 — Foundation of Supply Management), pages 114-115.

Question #2: Option A is correct because bottleneck items are low-value, high-risk products with customized specifications and/or technologies. To minimize supply interruptions, inventory levels are closely monitored and supply management may search for alternate suppliers. Non-critical or routine components (Options B & D) have little effect on the organization's profitability and competitiveness. They can be standardized, and substitution is feasible. Leverage buying (Option C) is used when items are low-risk and a large number of suppliers are available. The organization's volume can be leveraged to obtain lower prices.

Reference: CPSM^® Study Guide, 1st Edition (Book 2 — Effective Supply Management), pages 8-9.

Question #3: Option B is correct because it addresses overarching purposes of the supply management function as they relate to the larger organization. Options A and C are strategies in support of the mission. Option D is incorrect because goal setting (such as specific savings targets) evolves from strategies.

References: CPSM^® Study Guide, 1st Edition (Book 3 — Leadership in Supply Management), pages 1-4; ISM Professional Series (Book 3 — Leadership in Supply Management), pages 48-51; Strategy: A View From The Top (2nd Edition), pages 7-8; Guide to Business Planning (The Economist Series), pages 27-29

For more information on ISM's professional credentials, visit the Institute's Web site.

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