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CPSM^® Update

3 Questions, 3 Answers

January/February 2011, eSide Supply Management Vol. 4, No. 1

eSide offers sample questions (and answers) from the CPSM^® Diagnostic Kit.

In every edition, 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: Which of the following is the LEAST critical element in a best alternative to a negotiated agreement (BATNA)?

Alternate products
In-house capabilities
Source options
Supplier capabilities

Question #2: Qualitative methods such as the Delphi Method are forecasting models based on

cause and effect relationships
the collective judgment of individuals
trend, seasonality, cycles and randomness
demand and usage requirements

Question #3: A supply manager wishes to align the goals of the organization's procurement function with its strategic financial metrics. Of the following, the MOST appropriate approach would be to

send staff members to finance courses
select the metric with the greatest impact
base the department's goals upon corporate objectives
report on diversity supplier spending

3 Answers

Question #1: Option D is correct because the other three options are defined as key elements enabling supply management to negotiate from a position of increased strength. The capabilities of the supplier with whom one is negotiating are certainly important, but do not have as much influence on the buying organization's BATNA. Availability of source options (Option C), in which other suppliers also offer acceptable products or services, is usually the simplest to consider. Though alternate products or services (Option A) still provide negotiating strength, their use may require more extensive evaluation or agreement from internal customers. If in-house capabilities (Option B) already exist, this will be easier for the supply manager to consider than if these must be developed.

References: CPSM^® Study Guide, 1st Edition (Book 1 — Foundation of Supply Management), pages 22-23; ISM Professional Series (Book 1 — Foundation of Supply Management), pages 173-174.

Question #2: Option B is correct. Qualitative methods are non-numeric by definition and use the opinions of people considered knowledgeable to determine the results. The Delphi Method uses several "experts" and asks them for information in a separate survey iterating through several rounds of questioning to move toward a consensus. Option A is incorrect because cause and effect relationships are used for problem-solving and deal with current data. They are not used for forecasting. Option C is incorrect because although trends, seasonality, cycles and randomness are used in forecasting, they are quantitative, not qualitative. Option D is incorrect because future demand and usage requirements are key components of forecasting and are numeric, therefore quantitative, not qualitative.

References: CPSM^® Study Guide, 1st Edition (Book 2 — Effective Supply Management), pages 24-25, 5; ISM Professional Series (Book 2 — Effective Supply Management Performance), pages 142-147; The Supply Management Handbook (7th Edition), pages 610-611.

Question #3: Option C is correct because goal alignment seeks to relate employee, function and department efforts to the vision and mission of the larger organization. Training (Option A) may improve staff members' understanding of financial issues and thus improve their support of related goals. Selection of metrics (Option B) will be part of plans to monitor performance against updated departmental goals. A report on diversity supplier spending (Option D) is not specifically related to strategic financial metrics, though it may include financial information.

References: CPSM^® Study Guide, 1st Edition (Book 3 — Leadership in Supply Management), page 23; ISM Professional Series (Book 3 — Leadership in Supply Management), pages 65-71; The Supply Management Handbook (7th Edition), pages 24-28.

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

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