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CPSM® Update

3 Questions, 3 Answers

May/June 2012, eSide Supply Management Vol. 5, No. 3

In every edition, eSide offers three sample questions — and answers — from the CPSM® and CSM™ Diagnostic Practice Exam to help you prepare to pursue your CPSM® or CSM™ certification. First, answer all three questions; then, scroll down to the "3 Answers" section to find out how you fared.

3 Questions

Question #1: All of the following are considered to be errors made by a buyer at the negotiation table EXCEPT

(A)  failing to be thoroughly prepared
(B)  disclosing an offer from a competitor
(C)  breaking off the negotiations
(D)  committing to an agreement very early

Question #2: From the list of supply management strategic plan elements below, select those referred to by the following statement: "This element includes the dynamics of the market."

(A)  Commodity segmentation
(B)  Supplier strategies
(C)  Advanced acquisition plan
(D)  Objective of the supply function

Question #3: To facilitate partnering and shorten lead times, a manufacturing organization shares production plans and schedules with key suppliers. Which of the following is LEAST likely to be part of this interchange?

(A)  A nondisclosure agreement protecting critical information
(B)  A written agreement on what portion of the schedule, if any, constitutes a firm commitment
(C)  An agreement on who shall own any process improvements resulting from the partnership
(D)  Inspection standards for incoming materials

3 Answers

Question #1: Option C is correct because breaking off negotiations may be the best (or only) alternative when discussions are deadlocked and no further progress is expected. Failure to prepare (Option A) may put the organization at a disadvantage due to incomplete information or misunderstanding of its goals. If permitted by law or policy, disclosing a competitor's offer (Option B) can be useful for comparison and as a challenge to the supplier to better its offer. Though there is no optimum length for negotiations, too early commitment (Option D) may result in an agreement that does not meet your organization's needs or is not the best that might have been achieved.

References: ISM Professional Series (Book 1 — Foundation of Supply Management), pages 168-172; The Supply Management Handbook (7th Edition), pages 505-506.

Question #2: Option C is correct because an advanced acquisition plan includes early definition of needs, investigation of the market, and decisions about solicitations, master contracts and performance work statements.

References: CPSM® and CSM™ Study Guide, 1st Edition (Book 3 — Leadership in Supply Management), pages 25-27; ISM Professional Series (Book 3 — Leadership in Supply Management), pages 148-149; The Supply Management Handbook (7th Edition), pages 81-98; Strategy: A View From the Top (2nd Edition), page 53.

Question #3: Option D is correct because provision of production plans and schedules to a supplier would not affect the quality inspection standards. Option A is not correct since production plans and schedules are highly confidential information and would likely require protection such as a nondisclosure agreement. Option B is not correct because before sharing a production schedule with a supplier, the buying organization should have an agreement regarding liability if the supplier overbuilds that schedule. Option C is not correct because ownership of process developments that may occur should be discussed and agreed to prior to sharing production plans.

References: CPSM® and CSM™ Study Guide, 1st Edition (Book 2 — Effective Supply Management), page 37; ISM Professional Series (Book 2 — Effective Supply Management Performance), pages 171-174.

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

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