March/April 2011, eSide Supply Management Vol. 4, No. 2
In every edition, eSide offers three sample questions — and answers — from the CPSM® Diagnostic Practice Exam 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.
Question #1: A supply manager is negotiating with a critical supplier. The parties have relatively equal bargaining power. Which of the following would MOST likely occur in "win-win" negotiation between these parties?
Question #2: Which of the following would most likely be effective monitoring techniques for a buyer to take in order to forecast and project future general market conditions and business activity?
Question #3: A company has the following mission statement: "XYZ Inc. will become the premier provider of the best products in the world." Which of the following would be the MOST effective goals and objectives for supply management to support such a mission?
Question #1: Option C is correct. The foundation for win-win negotiations is trust. In this situation, both parties would probably put information on the table that might be considered confidential. In order to establish a win-win relationship, open and honest discussions are a must. Splitting the difference (Option A) is a tactic for quick resolution of minor issues and may or may not occur. There is no requirement that concessions be equal (Option B), only that the outcome be livable for both parties over the long term. Option D is not correct because each party brings in to the negotiation an idea of their settlement range. The greater the overlap of the buyer's and supplier's settlement ranges, the easier it will be to find a mutually satisfactory settlement position, but these ranges are often not shared with the other party.
References: CPSM® Study Guide, 1st Edition (Book 1 — Foundation of Supply Management), page 27; ISM Professional Series (Book 1 — Foundation of Supply Management), pages 164-165; The Supply Management Handbook (7th Edition), pages 494-495.
Question #2: Option C is correct because. Identifying leading indicators (II) and using those indicators to project future market conditions (III) are key to monitoring future business activity. Options A and B are incorrect because using one indicator (I) would not be a reliable way to project future market activity. Multiple indicators are always more reliable than a single indicator. Option D is incorrect because one would not disregard indicators just for the lack of seasonality. Many indicators are not affected by seasonality.
References: CPSM® Study Guide, 1st Edition (Book 2 — Effective Supply Management), pages 15-16, 5; ISM Professional Series (Book 2 — Effective Supply Management Performance), pages 108-114; The Supply Management Handbook (7th Edition), pages 619-622.
Question #3: Option A is correct because it encompasses the primary objectives of supply management. Options B and C are likely components of Option A, but each addresses only one aspect of supply management's mission. Setting minimum cost savings (Option D) is a tactical goal and does not address contribution to XYZ's mission.
References: CPSM® Study Guide, 1st Edition (Book 3 — Leadership in Supply Management), pages 11-12; ISM Professional Series (Book 3 — Leadership in Supply Management), pages 149-150.
For more information on ISM's professional credentials, visit the Institute's website.
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