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CPSM® Update

3 Questions, 3 Answers

January/February 2013, eSide Supply Management Vol. 6, No. 1

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 appropriate tactics for a purchaser to use during negotiations EXCEPT the revealing of

(A)  minimum position
(B)  minimum objectives
(C)  maximum position
(D)  no position

Question #2: A manufacturer of women's dresses has been a supplier for many years to a regional retail chain. Based on internal seasonal demand forecasts, the manufacturer orders fabric, and arranges for production overseas. However, instances of stockouts and excess inventory are common. Given this situation, which of the following would be MOST beneficial?

(B)  ESI
(D)  SMI

Question #3: Which of the following are needed in order to establish a benchmark against which performance will be measured?

I.  Before-the-fact controls
II.  During-the-fact controls
III.  After-the-fact controls

(A)  I only
(B)  II only
(C)  I and III only
(D)  I, II and III

3 Answers

Question #1: Option C is correct because in negotiations a purchaser would be unwise to tell the supplier the maximum price the company is willing to pay. If the supplier knows that the purchase is willing to pay up to X dollars, there is little incentive for them to negotiate below that. Minimum position (Option A) is incorrect because in negotiations, purchasers may tell a supplier what is the least they would like to pay. Purchasers often tell suppliers the minimum objectives (Option B) that they must have for a workable agreement (i.e. drop-dead position for non-monetary issues). One approach to negotiations is not to take a position at all (Option D) but to challenge and slowly chip away at the seller's position.

References: CPSM® and CSM™ Study Guide, 1st Edition (Book 1 — Foundation of Supply Management), pages 29-30; ISM Professional Series (Book 1 — Foundation of Supply Management), pages 178-181.

Question #2: Option A is correct because primary applications of collaborative planning, forecasting, and replenishment (CPFR) often involve retailers' sharing of consumer demand forecasts with manufacturers of branded goods to enable the suppliers to produce and deliver their goods to retailers at lower costs. Supplier managed inventory (SMI) (Option D) transfers responsibility for monitoring stock at the customer's location to a supplier, who replenishes it as needed to maintain specified levels. ESI or early supplier involvement (Option B) can encompass many dimensions of the supply management process, including specifications, manufacturing, quality, and technology. Manufacturing resource planning (MRP II) (Option C) seeks to optimize use of all resources in a manufacturing organization.

References: CPSM® and CSM™ Study Guide, 1st Edition (Book 2 — Effective Supply Management), pages 33-38; ISM Glossary.

Question #3: Option A is correct because before-the-fact controls establish benchmarks against which to measure actual performance. During-the-fact controls (included in Options B and D) are related to timing, quality, and key performance indicators and are used to monitor or measure tasks while they occur. After-the-fact controls (Options C and D) are reviews comparing what actually happened against benchmarks.

References: CPSM® and CSM™ Study Guide, 1st Edition (Book 3 — Leadership in Supply Management), pages 37-39; ISM Professional Series (Book 3 — Leadership in Supply Management), pages 284-285.

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

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