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CPSM® Update

3 Questions, 3 Answers

September/October 2012, eSide Supply Management Vol. 5, No. 5

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: This provides the highest value at optimum cost to the organization.

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

Question #2: Which of the following involves the stationing of representatives of key suppliers within a buying organization's facility in order to enhance the transfer of forecast data and minimize communication breakdowns?


Question #3: Shortly after contract negotiations have begun, a supplier makes an offer with a price well above the expected range. Which of the following tactics is the supplier using?

(A) Foot in the door
(B) High ball
(C) Strong initial offer
(D) Phantom quote

3 Answers

Question #1: Option D is correct because obtaining maximum value, required quality and continuity of supply are fundamental objectives of most supply management functions. Specifics on how this is done, and which factor(s) will be a priority, depend on the organization.

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.

Question #2: Option C is correct. JIT II is defined as the stationing of a supplier's representative inside the buyer's facility to work as a planner/buyer to place releases, manage schedules and work out quality problems between the buying organization and their own company. Option A is not correct because ERP is an enterprisewide software system. Option B is not correct because JIT is a concentrated effort to reduce lead time, improve quality and remove waste of all kinds. Option D is not correct because SMI (Supplier Managed Inventory) involves a periodic visits by the supplier's personnel to restock materials, not the permanent stationing of personnel within the buyer's facility. Also their work with SMI is limited to restocking; they are not involved with forecasting and planning.

References: ISM Glossary

Question #3: Option B is correct because a high ball price is used to introduce an offer the supplier can later reduce as one way of appearing to make concessions during negotiations. The supply manager's preparatory research should help determine actual reasonable pricing and enable the buying organization's negotiating team to see past a high ball offer. Foot int eh door (Option A) refers to a low initial price to obtain business, with expectation of making more profit on maintenance or upgrades in the future. A strong initial offer (Option C) provides a proposal that is close to that party's best. Phantom quotes (Option D) may be used by the supply manager, not the supplier, to remind the supplier of competition in the marketplace.

References: The Supply Management Handbook (7th Edition), pages 492-506.

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

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