Term
A supply manager completes a category profile and identifies services provided by multiple service providers. A market and
industry analysis shows that the service providers are growing their
businesses by acquiring competitors, thus enabling them to provide
a greater range of services. Which of the following techniques will
BEST enable the supply manager to leverage market competition?
A Lotting strategy
B Market-basket model
C Market segmentation
D Sole sourcing |
|
Definition
Option A is correct because lotting strategies are especially useful
when a large number of the same or similar items/services are to be
bid. Combining the organization's needs may increase interest
among suppliers and yield savings based on higher volume. Reverse
auctions and online bidding can support lotting strategies. Market..
basket models (Option B) are used to gauge changes in costs for a
selected range of products or services, usually over a period of time.
Market segmentation (Option C) divides a total market into
segments sharing a targeted characteristic such as lifestyle or
geography. Sole sourcing (Option D) is used when investigation
confirms a supplier is the only one available to fulfill specific needs. |
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Term
A supply manager for a publicly traded company is negotiating a
contract for capital equipment with an established supplier. The
supply manager's company is known to discount their invoices. The
lead time on the equipment is 9 months, and payment for the
equipment is due net in 45 days following installation. As part of the
negotiation, the supply manager is seeking a discount on
consumable components used with the equipment. Which of the
following would the supplier most likely seek as an offset to the
supply manager's request?
A. 2%/10 cash discount
B. Milestone payments
C. Minimum orders on consumable components
D Maximum flexibility in the statement of work |
|
Definition
Option B is correct. The supply manager's company readily discounts
their bills, indicating a strong cash position. The best alternative
from the supplier's point of view is to negotiate a series of payments
(milestone) so as not to have to wait over 10 months for payment
on this equipment. Option A may be desirable to the supply manager
but would not be to the supplier; knowing the company's reputation
for discounting bills, a supplier will seek cash before the other
options |
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Term
U.S. Federal E-SIGN law applies to which of the following?
I. Intrastate contracts
II. Interstate contracts
III. International contracts
A I only
B II only
C I and II only
D II and III only |
|
Definition
Option D is correct because E-SIGN (Electronic Signatures In Global
and National Commerce Act) specifies that state law may modify,
limit or supersede the provisions of E-SIGN. For example, if a state
has adopted UETA (Uniform Electronic Transactions Act) into its
commercial code, state law will govern contracts within that state.
Non-uniform provisions or exclusions inconsistent with E-SIGN but
approved by that state's legislature must be evaluated carefully. E-
SIGN applies to interstate (II) and international (III) contracts. |
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Term
What Is the contract term for the obligation of one party to cover the loss or damage suffered by another party?
A Assignment
B Confidentiality
C Indemnification
D Severabiilty |
|
Definition
Option C is correct because indemnification involves one party's
obligation to cover losses or damages suffered by the other, in
specific ways and or situations as detailed in an agreement between
them. |
|
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Term
A supply manager is evaluating a departmental budget and notices
that there is no comparison between established goals and actual results. This indicates an omission in which of the following?
A Controlling
B Executing
C Organizing
D Planning |
|
Definition
Option A is correct because comparison of actual results to
established goals represents the control feature of budgeting
activity. This is usually done through budget performance reports.
Executing the budget (Option B) means carrying out plans in the
agreed-upon way. Organizing (Option C) usually means defining
categories of expenditures and possibly identifying resources.
Planning (Option D) usually means advance preparation and analysis
necessary to prepare a budget |
|
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Term
ABC Corporation has a centralized supply management organization.
The CEO directs that the organization must lower costs and
expenses, and that performance appraisals will be based on results
achieved. Given this scenario, which of the following should be given
the LEAST attention?
A E-procurement
B Spend analysis
C Supplier integration
D Strategic sourcing |
|
Definition
Option C is correct because supplier integration involves combining
internal resources of the buying organization and suppliers through
meshing of inter-company business processes. This is typically done
during new product development to gain a competitive advantage.
Strategic sourcing (Option D) focuses on selection and management
of suppliers with focus on the buying organization's long-term goals,
which in this case include lower costs and expenses. Spend analysis
(Option B) looks at historical spending patterns (usually by
commodity or category) as a basis for future planning. E-
procurement (Option A) may support more efficient solicitation
processes, increase the pool of potential suppliers, and/or facilitate
techniques like lotting or reverse auctions for procurement of high
volume / low complexity products or services |
|
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Term
In anticipation of an upcoming price increase by its current supplier,
a supply manager in charge of purchasing corrugated boxes
conducts a competitive bid to determine if there are any suppliers
who can offer more competitive prices. The supply manager accepts
a bid from a supplier who will meet the current supplier's price, and
will also hold pricing firm for a second year. The actions of the
supply manager can BEST be described as
A cost avoidance
B cost containment
C cost reduction
D cost savings |
|
Definition
Option A is correct because cost avoidance is an effort to prevent or
reduce supplier price increases, as the supply manager has done in
the situation described. Cost containment (Option B) usually means
a plan to hold costs and purchased prices within target limits over a
period of time. Cost reduction (Option C) is an effort to lower costs
associated with acquisition of a product or service. Cost savings
(Option D) can be direct (lower prices paid) or indirect (improved
efficiency or productivity). |
|
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Term
Using a sole sourced supplier with significant transparency of costs
between buyer and seller in order to leverage each firm's
comparative advantage is an example of a strategy for what
category of spend?
A Critical
B Leverage
C Strategic
D Tactical- |
|
Definition
Option C is correct because strategic purchases involve high value
and high risk of acquisition. Continuous availability is essential;
switching suppliers or substitution may be difficult; custom design,
unique specifications, or supplier technology may be critical. Critical
items (Option A) must have continuity of supply maintained, but do
not necessarily involve rigorous specifications or technology.
Leverage spend (Option B) is for high-volume items for which
substitutions and/or competition among suppliers is readily
available, Tactical purchases (Option D) support the strategic and
operational initiatives of an organization. |
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Term
Which of the following provides the MOST comprehensive view
when determining the total cost of procured materials?
A Product, transportation, and delivery
B Product, process, network, source, and security
C Product, logistics, storage, and handling
D Product, indirect costs, and profit |
|
Definition
Option B is correct because in order to determine the true total cost
of materials, one must look at all costs incurred in the process of
their purchase and use. This includes costs incurred in the process of
their consumption, such as in production of the purchaser's product.
Option A stops at delivery to the purchaser and does not address
internal costs at all. Option C considers internal storage and handling
costs, but not costs incurred in use. Option D doesn't consider direct
costs such as fall-out, scrap and lost productivity that would be the
result of a quality problem incurred in the process of the material's
use. |
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Term
Which of the following cost analysis methods would be LEAST useful in selecting and negotiating with a domestic supplier of
capital equipment to be used in a production facility?
A Landed cost
B Life-cycle cost
C Purchase-related cost
D Total cost of ownership |
|
Definition
Option A is correct because landed cost is the total cost for an
imported item, including purchase price plus freight, handling,
duties, customs clearance, and storage. Life-cycle cost (Option B)
combines the purchase price of the equipment with all operating and
related costs over its life (examples: maintenance, downtime,
energy consumption, and salvage value). Purchase-related cost
(Option C) includes the actual purchase price plus the cost of
processing that purchase, while total cost of ownership (Option D) is
the combination of purchase or acquisition price and additional costs
incurred before or after product or service delivery. Life-cycle cost,
purchase-related cost, and total cost of ownership might all be
important in determining which specific equipment or supplier offers
the best overall value. |
|
|
Term
Which of the following information is needed to perform a simplified break-even ROI analysis calculation?
I. Purchase Price
II. Time value of Money
III. Life expectancy of the equipment
IV. Annual saving
A. I and III only
B. I and IV Only
C. II and III Only
D. I, II, III and IV |
|
Definition
Option B is correct because simplified ROI compares costs
(investment) and benefits (return) on a small number of key issues
(in this case, purchase price and annual savings). Simplified ROI can
be used as an initial step to determine if further investigation is
warranted. Time value of money (II) and/or life expectancy of
equipment (III) might then be introduced as part of a more complex
ROI calculation. |
|
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Term
A supply manager is evaluating several potential overseas suppliers, and the degree of risk each would bring to the supply chain. Which of the following employment characteristics would be
MOST favorable in a manufacturing relationship?
A Employment-for-life practices
B Flexibility in hiring and firing employees
C High unemployment rates
D High union membership of skilled labor |
|
Definition
Option B is correct because flexibility enhances the supplier's ability
to engage qualified employees as needed. Employment-for-life
contracts (Option A) may have the benefit of building loyalty and
retaining experience, but might have the disadvantage of increasing
labor costs or limiting the supplier's opportunities to hire people with
new skills. Unemployment rates (Option C) are generally considered
to have an inverse relationship to how hospitable a country is to
manufacturing. (A high rate of unemployment may signal a very
inhospitable environment.) A similar relationship is usually described
for rate of union membership (Option D), with higher membership
signaling a less hospitable climate. |
|
|
Term
In which of the following areas is the movement into offshore
markets and global sourcing MOST likely to create risks?
A Business continuity
B Scaling of procurement
C Strategic execution
D Market expansion |
|
Definition
Option A is correct because sourcing from other countries requires
analysis of differing political environments, laws and regulations,
environmental or safety concerns, economic stability, and related
factors, all of which can affect business continuity and thus supply.
Scaling of procurement (Option B) generally means matching the
complexity of the procurement process to the importance of the
items or services to be procured. Strategic execution of plans to
meet marketplace opportunities (Option C) and market expansion
(Option D) are key considerations for supply management whether
sourcing is domestic or international. |
|
|
Term
A Latin American consumer products company produces and sells computer keyboards to a British electronics retailer. The Latin American company purchases European marketing assistance from the British retailer. Both trading partners agree to pay for the majority of their purchases in cash, and fulfill their individual sales obligations to each other over a three-year period. This arrangement is BEST described as
A bilateral contract
B barter
C counterpurchase
D offset |
|
Definition
Option C is correct because counterpurchase, a form of
countertrade, occurs when an organization agrees to purchase a
specified monetary volume of materials from another country in
return for a sale made in that country. Bilateral contract (Option A)
is a more general term in which both contracting parties make
promises to each other. Barter (Option B) is the exchange of goods
or services, rather than trading through currency. (Note that barter
can be used in countertrade arrangements, though in this case
currency was involved.) Offset (Option D) is also a form of
countertrade, but differs because the supplier can fulfill its obligation
by purchasing from any business organization in the country it
supplies, not just from its customer. |
|
|
Term
A sourcing specialist at a global organization has been experiencing
extended lead times for security components sourced from Asia.
Although the products are shipped on a timely basis, due to their
nature, they are being held in customs for extended time periods.
Given this situation, which of the following would be the BEST
approach for minimizing total lead time?
A Working with a customs broker to minimize clearance time
B Initiating the use of smart seals on future shipments
C Exploring point-of-destination shipment alternatives
D Paying expedited customs fees to reduce total cost of ownership |
|
Definition
Option B is correct because smart seals (also known as smart box
technology) guarantee that shipments have not been tampered with
after inspection at the origin port. This can reduce the number of
inbound containers that must be inspected by customs. A customs
broker (Option A) can help by ensuring documentation and
classifications are in order, but may not have as great an effect on
the problem described as would smart seals. Changing shipment
alternatives (Option C) will not resolve customs questions (and note
that shipments are already described as timely). Payment of
expedited customs fees (Option D) might be warranted in special
situations where critical components are needed immediately, but is
not a cost-effective long-term solution. |
|
|
Term
26. Integrity is BEST described as
A always telling the truth
B consistently making ethical choices
C a good reputation
D consistency between one's words and actions |
|
Definition
Option D is correct because integrity is the alignment of one's words
and one's actions. It is the opposite of hypocrisy. Honesty (Option A)
is telling the truth; integrity is walking the talk. Consistently making
ethical choices (Option B) is laudable behavior, but one can also
have integrity and make unethical choices as long as they are clear
about their position and act accordingly. Reputation (Option C) is
what others believe to be true about a person, while integrity is
internal |
|
|
Term
As typically defined, social responsibility includes all the following
areas EXCEPT
A ensuring child labor is not employed in production of materials or
components
B avoiding the use of sweatshops, either directly or by suppliers
C understanding stakeholders, business norms, and legal systems
D expanding the supplier base to involve more diverse enterprises |
|
Definition
Option C is correct because understanding stakeholders, business
norms, and legal systems is considered part of ethical standards
rather than social responsibility. Categories in ISM's Principles of
Social Responsibility include Human Rights and Quality of Life
(avoiding use of child labor or sweatshops / Options A & B) and
Diversity (expanding supplier base to increase diversity / Option D). |
|
|
Term
In complying with laws and regulations such as OSHA and the
Consumer Product Safety Act throughout the supply chain, supply
managers should consider
A safety precautions required of the manufacturer
B safety precautions required of the buying organization
C the environmental impact of items the supply manager buys
D appropriate legal counsel for guidance on these laws |
|
Definition
Option D is correct because guidance from legal counsel is important
to reduce not only the organization's potential liability, but also
possible personal liability of employees while they are acting on the
organization's behalf. Though consideration of the areas covered in
other options (safety precautions required of the manufacturer or
buying organization plus environmental impact of items purchased is
wise,) involvement of legal counsel brings another level of expertise
on laws and regulations |
|
|
Term
A supply manager for a small organization wants to take advantage
of availability of a new online searchable database. Up to this time,
there was no common database to research suppliers, examine
market conditions, or provide spend information to the supply
organization. Despite staff orientation, there is resistance to using spend data to rationalize the supply base due to the risk of stock
outs. Which of the following can the supply manager emphasize as
a benefit of the new database that will minimize this concern?
A Better market knowledge
B Improved cost/price analysis
C Increased inventories
D Shorter lead times |
|
Definition
Option A is correct. The new database would allow for improved
understanding and visibility of relevant market conditions. The other
options do not provide information on supplier cost, nor would it
impact inventory. Increased knowledge of the supply base doesn't |
|
|
Term
Company A receives prototype hinges from Supplier B. As part of
the quality testing process, the prototypes are subjected to abuse
and destroyed. Which of the following is TRUE in this situation?
A Supplier B should have been required to sign a non-disclosure
agreement.
B Company A should have been required to sign a non-disclosure
agreement.
C Company A should have paid for the samples.
D Company A should return the samples |
|
Definition
Option C is correct because Company A's testing process diminishes
or destroys the value of the prototype hinges. Return of the hinges
(Option D) is thus not possible. Non-disclosure provisions (Options A
& B) might have been appropriate as part of the original agreements
under which Supplier B provided the hinges. (Company A could have
shared proprietary information with Supplier B or vice versa. The
prototypes themselves might reveal confidential information about
Supplier B's process or technology.) |
|
|
Term
A supply manager in charge of warehouse operations learns that
packing lists are missing from a second-tier supplier's freight
deliveries. The supplier is located in another state about 2,000
miles away. Which of the following is the FIRST course of action
the supply manager should take?
A Initiate a continuous replenishment program
B Conduct a supplier visit
C Implement a supplier rating system
D Create a supply chain map |
|
Definition
Option D is correct because a supply chain map will detail the flow of
goods and documentation throughout the process, including
geography, precedence, ownership and relationships. This may
enable the supply manager to identify cause(s) of problems, and
prepare for productive visits to the supplier (Option B). A supplier
rating system (Option C) might reinforce expectations but does not
address this situation directly or promptly. Concern in this situation
is with packing lists, not delivery time, so a continuous
replenishment system (Option A) is not applicable. |
|
|
Term
A supply manager is evaluating proposals for a critical commodity.
Although there is nothing substantively wrong with the low bidder's
proposal, and it is likely to result in significant cost savings, the
supply manager is concerned about the low bidder's financial
stability. Which of the following is the BEST course of action in this
situation?
A Award the contract to the next lowest bidder to assure supply
B Split the award between the low bidder and the next lowest bidder
C Award the contract to the low bidder and ensure that the contract
has appropriate protection from default
D Award the contract to the low bidder and develop a reasonable
contract termination plan |
|
Definition
Option D is correct because, at this time, the low bidder's proposal is
responsive to the buying organization's solicitation and offers cost
saving advantages. Rejecting the low bidder's proposal (Option A) or
splitting the award (Option B) would be questionable unless financial
stability was included as a significant evaluation criterion. Including
default clauses in the awarded contract (Option C) is usually wise in
any contract, but does not ensure continuity of supply for this critical
commodity. Being prepared with a supplier exit strategy in case of
problems minimizes risks of a supply interruption. |
|
|
Term
A supply manager is tasked with acquiring training services for a
group of engineers who will be part of specialized sourcing teams
charged with driving an aggressive cost reduction program. Which
of the following methods would be MOST appropriate for the supply
manager to employ in identifying appropriate training solutions?
A SWOT analysis
B Industry benchmarks
C Request for Information
D Porter's Five Forces |
|
Definition
Option C, a request for information (RFI), is correct. An RFI, as
defined, is a solicitation method of obtaining general information
about services, products, and suppliers. This will allow the supply
manager to review suggestions from potential suppliers and focus on
the best fit for the organization. Option A, a SWOT analysis, is a risk
assessment. Option B, industry benchmarks, are a standard or point
of reference used in judging performance. Option D, Porter's Five
Forces, is used to describe competition. |
|
|
Term
Which of the following exchange rates are set by governments?
A Differential and floating
B Fixed and differential
C Variable and differential
D Variable and floating |
|
Definition
Option B is correct because governments set the fixed and
differential exchanges rates, but floating and variable rates are
determined by market forces. Differential exchange rates differ from
fixed rates because they are specific to the nature of the goods and
services imported, rather than fixed for all transactions involving
Global inports |
|
|
Term
All of the following are components of a nation's balance of
payments EXCEPT
A balance of trade
B capital account fluctuations
C currency exchange rate
D official reserve account changes |
|
Definition
Option C is correct because the balance of payments is a measure of
the difference in the flows of funds across a nation's boundaries.
Currency exchange rate is the price of one nation's currency as it is
exchanged for another, not a measure of the volume of funds
flowing across borders. Balance of trade (Option A) is the difference
between the values of a country's exports and imports. Capital
accounts (Option B) are investment flows across national
boundaries. The official reserve account (Option D) is made up of a
country's foreign currency holdings, gold, and special drawing rights
with the International Monetary Fund |
|
|
Term
A proposed integrated logistics system, whereby both channel
lanes and fixed structures are taken into account, should be
designed around the
A corporate headquarters of the buying organization
B end'-channel consumers
C locations of intermediary channel members
D points of shipping origins |
|
Definition
Option B is correct. The purpose of channels in the logistics system
is to provide consumers with the goods they desire, and consumers
determine channel locations and structures. Option A is not correct
because the location of corporate headquarters is not necessarily
where any shipping or receiving of goods takes place. It is not a
factor in designing channel lanes at all. Option C is not correct
because intermediary channels are designed to support flow to the
customer and minimize total cost. They flow from (and after) the
channels to consumers. Option D is not correct because points of
origin are the beginnings of the channels, are often fixed and do not
drive the design of the channels to customers. |
|
|
Term
46. In terms of logistics cost structure, the principle of shared and/or
shifted risk involves all of the following EXCEPT
A shifting risk with a key supplier
B shifting risk with the customer
C shifting the cost basis from fixed to variable
D shifting the cost basis from variable to fixed |
|
Definition
Option D is correct because one would not want to shift a cost basis
from variable to fixed. Variable costs can be more easily controlled
(and lessened) than fixed costs. Option C is not correct because
shifting costs from fixed to variable allows them to be more easily
controlled and reduced. Options A and B are not correct because
shifting risk with customers and suppliers occurs any time the FOB
point changes. |
|
|
Term
47. Which of the following is MOST likely to minimize picking errors,
increase inventory accuracy, and reduce associated costs?
A Automated fulfillment systems
B Picking modules
C Radio frequency identification
D Voice recognition devices |
|
Definition
Option D is correct. Voice recognition devices are becoming a best
practice for distribution centers and result in substantial reductions
of picking errors
Option A is not correct because automated
fulfillment systems are used in larger warehouse operations, and
while better than manual picking systems, are expensive and may
not reduce costs. Option B is not correct because a pick module is a
type of mechanized system used in many distribution centers. It also
may work very well in the appropriate circumstances but may not
reduce costs. Option C is not correct because radio frequency
identification is best used to record inventory movement in and out
of a location such as at the docks. It is not as often used for picking
individual items. |
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|
Term
48. Which of the following are the PRIMARY factors that influence
transportation costs?
A Energy and interest rates
B Exchange rates and interest rates
C Labor and energy
D Labor and interest rates |
|
Definition
Option C is correct. The PRIMARY factors influencing transportation
costs are fuel (energy) and labor. Options A, B and D are incorrect
because interest rates are not a primary driver of transportation
costs, nor is the exchange rate. |
|
|
Term
49. A supply manager for a small manufacturer has responsibility for
logistics functions. The company ships approximately 10,000
pounds of product per month. The prices vary considerably
depending upon end use. The supply manager negotiates lower
freight rates by leveraging volume and more favorable rate
classifications. After 18 months, the supply manager wants to
conduct an audit to verify that the organization is being invoiced
correctly. In this situation, which of the following methods would
be MOST effective?
A Carrier's charges
B Carrier performance
C Freight-rate maintenance
D Line haul rate |
|
Definition
Option A is correct because an audit of invoices to check for accuracy
would involve examining the carrier's charges as reflected on the
invoices. Option B is not correct because while auditing performance
may be an important part of supplier performance management,
performance information is not on an invoice. Option C is not correct
because freight-rate maintenance (or lack thereof) would be the
outcome of an audit of invoices. The results of the audit will tell
them whether the supplier has correctly maintained freight rates or
not. Option D is not correct because the audit is focused on
determining adherence to the negotiated rates, not the rates
themselves |
|
|
Term
When contracting with a freight forwarder to import or export
goods, which of the following should be in place FIRST?
A Certificate of origin
B Commercial invoice
C Export declaration
D Power of attorney |
|
Definition
Option D is correct because the documentation listed under Options
A, B and C would be completed by a freight forwarder. In order for a
freight forwarder to make declarations in these documents, they
must have the power of attorney to do so. Options A, B and C are
not correct because these are all documents that a freight forwarder
would complete as part of the shipment package under the power of
attorney from the responsible party. |
|
|
Term
A company is an exporter of steel beams. Which of the following is
LEAST likely to be required for each shipment made by this firm?
A Arrival notice
B Bill of lading
C Certificate of origin
D Dock receipt |
|
Definition
Option A is correct. An arrival notice is an import document, not an
export document. It would be completed by the recipient of the steel
or their designee. Options B, C and D are all incorrect because they
are export documents and would be completed by the exporter or
their designee |
|
|
Term
54. A bill of lading indicates that a shipment is being rated under a
"Declared Value." If this shipment is lost or damaged by the
carrier, the carrier's maximum liability will be equal to the
A manufactured cost declared by the carrier
B per pound value as indicated by the classification
C invoice value as declared by the purchaser
D value as declared in negotiation between the shipper and the carrier |
|
Definition
Option C is correct because the declared value of goods has already
been agreed upon and documented. Introduction of other values
might make narrowing of differences more difficult during
negotiations to resolve damage claims, as could attempting to
declare value during negotiations (Option D). Carriers do not
typically declare manufactured cost (Option A). Plus, not all
materials shipped are "manufactured" . The per pound value (Option
B) may not be as accurate as declared value for specific goods |
|
|
Term
55. When nonconforming goods are received, the corrective-action
process requires all of the following EXCEPT
A clarification of nonconformance
B contact with the supplier
C return of the goods
D documentation of corrective actions |
|
Definition
Option C is correct. The corrective action process determines the disposition of the goods, but several options are available. The goods
may be returned, but they may also be reworked at the buyer's
facility or used as is. Options A, B and D are not correct because the
corrective action process requires that the nonconformance be
clearly identified, the seller be notified and that the corrective
actions be documented. |
|
|
Term
A supply manager forms a cross-functional team to study
opportunities for standardization in the manufacture of widgets.
Currently, the widgets are produced in facilities located in Hong
Kong, Costa Rica, and the United States. Which of the following
factors is LEAST likely to affect the standardization efforts?
A Ability to ship parts to all locations
B Lead time for shipping parts
C Local buying requirements
D Use of the metric system |
|
Definition
Option D is correct because use of English or metric systems is
determined in the design and specifications for an item being
manufactured and is likely to already be consistent across all
manufacturing sites, since the specifications should be consistent.
Option A is not correct because the ability of all manufacturing sites
to obtain parts is critical to the success of the corporation. Option S
is not correct because lead time to get parts is a key factor in the
ability of a site to meet its production goals, Standardization on a
component that a site cannot get in a timely manner would
negatively impact their ability to meet schedules. Option C is not
correct because some locations may have requirements for in-
country spending that are imposed on them by local governments.
Violating these requirements by standardizing parts away from local
suppliers may result in serious political complications for the
company. |
|
|
Term
57. What is the inventory carrying cost term associated with space,
handling and control?
A Finance Costs
B Ownership Costs
C Overhead Costs
D Risk Costs |
|
Definition
Option C is correct. Costs associated with space, handling and
control are indirect costs and would be included in overhead costs |
|
|
Term
58. What is the inventory carrying cost term associated with having
material on hand for a specified period of time?
A Finance Costs
B Ownership Costs
C Overhead Costs
D Risk Costs |
|
Definition
Option D is correct. Risk is defined as exposure to a chance or
probability of loss or damage. The longer materials are on hand in
storage, the higher the probability that loss or damage may occur. |
|
|
Term
64. In which of the following ways does RFID contribute to increased
inventory accuracy?
A Product life cycle is increased.
B Transaction postings are more precise.
C Increased information on component history is available.
D Inventory replenishment is automated, |
|
Definition
Option B is correct. RFID provides automatic data entry and
eliminates the process of human-entered data collection. It removes
human error and creates greater data accuracy. Options A and D are
not correct because changing the method of data entry has no
bearing on either product life cycle or the physical movement of
inventory. Option C is not correct because data entry is different
from data storage. RFID automates data entry. The storage of data
and its retrieval are other components in the software system and
not likely to be affected by a change to RFID from human data entry |
|
|
Term
65. All of the following are reasons for assigning the disposal of
materials to the supply management function EXCEPT their
A knowledge of price trends
B technical knowledge of waste disposal
C contact with possible users of the material
D familiarity with the organization's needs |
|
Definition
Option B is correct. Technical knowledge of waste disposal is not
necessary for the commercial disposition process. Option A is not
correct because knowledge of price trends allows supply
management to seek appropriate return for the disposed goods Options C and D are not correct because the greatest return for
unwanted goods is to use them elsewhere in the organization, which
offsets the purchase of new goods and yields 100% return. Supply
management has the best view of the whole organization's needs
and can see if other parts of the organization can use the disposed
goods. |
|
|
Term
An organization's warehouse is piled up with damaged goods. The
material takes up a lot of valuable space and skews information on
usable stock. Which of the following actions is LEAST likely to
improve this situation?
A Processing inventory adjustment to classify the item(s) as non-
nettable
B Determining if goods can be reworked at reasonable cost
C Defining standards for acceptable rework
D Finding potential uses for goods in other branches or processes |
|
Definition
Option D is correct because the goods are damaged and therefore
not useable elsewhere in the organization. Option A is not correct
because processing inventory adjustments to classify the item(s) as
non-nettable will yield an immediate benefit of eliminating the
skewed information on usable stock. Option B is not correct because
determining if goods can be reworked at reasonable cost is one valid
option for proper disposal. If they can be reworked, that eliminates
the problem. Option C is not correct because defining standards for
acceptable rework is part of the potential resolution described in
Option B. |
|
|
Term
Contracted labor utilization rates are typically included in which
category of performance metrics?
A Business control
B Financial
C Operational
D Sourcing |
|
Definition
Option C is correct because contracted labor utilization rates are
operational measures of the direct cost to manufacture. |
|
|
Term
Supply management social responsibility is typically included in
which category of performance metrics?
A Business control
B Financial
C Operational
D Sourcing |
|
Definition
Option C is correct because contracted labor utilization rates are
operational measures of the direct cost to manufacture. |
|
|
Term
Supply management social responsibility is typically included in
which category of performance metrics?
A Business control
B Financial
C Operational
D Sourcing |
|
Definition
Option D is correct because supply management social responsibility
fadars into sourcing decisions regarding compliance of the supply
base to appropriate standards of behavior. |
|
|
Term
The supply management department of a midsized service
organization is charged with doubling the organization's relatively
small diversity spend within 18 months. Which of the following
courses of action would be LEAST effective in helping to meet this
objective?
A Consolidating the supplier base and using e-procurement
B Establishing a tracking and reporting system
C Reviewing current supplier policies and programs
D Establishing fixed and discretionary spend targets |
|
Definition
Option A is correct because supply base consolidation may work
against the inclusion of diverse suppliers. Requiring their
participation in e-procurement might exclude some good diversity
candidates. Options B, C and D are all incorrect because the steps
normally taken to achieve supply management's goal include: a
review of current policies and programs, establishment of
appropriate targets by category, and establishing a way to track and
measure progress. |
|
|
Term
75. Which of the following is the PRIMARY purpose of creating metrics
for a supply management organization?
A To support audits of the supply management function
B To determine the efficiency of supply management
C To ensure that organizational objectives are being met
D To control the supply management organization |
|
Definition
Option C is correct. The PRIMARY purpose of metrics is to ensure
that the organization is meeting its objectives. Good metrics will help
ensure that the organization is audit-ready (Option A), but that is a
side effect, not its primary purpose. Metrics provide information
about the efficiency of operations (Option B), but effectiveness is
more important than efficiency. Metrics influence behavior (Option
D), but they do not control the organization. |
|
|
Term
All of the following should be done to prepare for an internal
Sarbanes-Oxley audit EXCEPT
A ensure all department members review supply management policies
and procedures
B implement procedures to ensure policy compliance
C organize hard copy and electronic files
D assign audit roles and responsibilities to team members |
|
Definition
Option B is correct. Audits, by their very nature, look at historical
records. If the supply manager were to implement procedures after
notification of the audit and prior to the audit beginning, the auditors
would not be testing activities within this time frame. These changes
would not be part of the time period under review by the auditors.
Therefore, the best actions for the supply manager to take to ensure
a favorable audit outcome is to ensure all department members
review policies and procedures, organize hard copy and electronic
files so that the appropriate documents can be located quickly and
assign roles and responsibilities to team members to facilitate the
audit process |
|
|
Term
A Vice-President of Supply Management has been charged with
investigating the operations of a newly acquired division. This
division was privately-held and was purchased from its original
founders. Preliminary reports indicate that the division's employees
are "like family", and are accustomed to getting their work done in
the manner they deem best. Write-offs have been below industry
averages. The most pressing future issue is how to manage rapid
growth. Which of the following audits would be MOST appropriate
for the Vice-President to employ?
A A preliminary ISO audit
B A financial audit to GAAP
C A Sarbanes-Oxley audit
D An internal audit |
|
Definition
Option D is correct. Option A may be hard to complete due to the
lack of documented procedures. Options B and C are not correct
because the low level of financial write-offs indicate that financial
control is not the most pressing issue, and some financial
investigation has probably already happened as part of the
acquisition process. Option D is correct because the division was
newly purchased and a baseline of efficiency needs to be
established. |
|
|
Term
In an MRP system, which of the following is used to disentangle
combinations of optional product features?
A Phantom bill
B Implosion bill
C Modular bill
D Planning bill |
|
Definition
Option C is correct. Using modular bills creates a separate bill of
materials for each option. The modular bills can be plugged into the
parent bill as the options are called for. Option A is not correct
because a phantom bill is a list of items that are used together but
Option C is correct. Using modular bills creates a separate bill of
materials for each option. The modular bills can be plugged into the
parent bill as the options are called for. Option A is not correct
because a phantom bill is a list of items that are used together but
Option C is correct. Using modular bills creates a separate bill of
materials for each option. The modular bills can be plugged into the
parent bill as the options are called for. Option A is not correct
because a phantom bill is a list of items that are used together but
not assembled into each other (similar to a kit of parts). Option B is
not correct because an implosion bill creates a where-used list of the
parents of an item. Option D is not correct because a planning bill is
an artificial grouping of items used to facilitate master scheduling
and material planning. |
|
|
Term
82. MRP calculates which of the following?
A Independent requirements
B Lot size
C Lead time
D Net requirements |
|
Definition
Option D is correct. MRP calculates net requirements. Option A is not
correct because independent demand must always be manually
input. MRP calculates only dependent demand. Options B and C are
not correct because lot size and lead time are planning parameters
and must be manually entered |
|
|
Term
83. A company that installs swimming pools has recently merged with
another regional installer. It is becoming evident that prices over
the next 24 months will increase substantially, and the supply
manager is considering forward buying or some other option to
take advantage of what is expected to be an expensive and tightmarket. In particular, there is a great need for pool chemicals. In terms of forecasting, which of the following would be MOST useful
in this situation?
A ABC analysis and classification
B Future sales based on past sales
C Least squares
D Winter's model |
|
Definition
Option B is correct. Because of the recent merger, it is likely that the
databases for detailed forward scheduling are not yet merged,
making the use of sophisticated models a bit difficult. Combining
data from the two companies on past sales will give a rapid ballpark
picture of future demand and allow the supply manager to act
quickly. Option A is not correct. ABC analysis is used to determine
inventory levels and cycle count frequency. It has little bearing on
forward buying since an appropriately structured contract will allow
the supply manager to bring in the contracted pool chemicals as he
or she needs them. Options C and D are not correct. Without
consolidation of the databases of the two companies, the use of least
squares calculations or Winter's model will be difficult. |
|
|
Term
A supply manager for XYZ Plastics notices a large increase in
orders from hardware stores for large, blue plastic sheets after a
hurricane strikes a major city. Several months later, XYZ's
inventory of unsold product rises dramatically. Which of the
following is the MOST likely cause of this?
A Bull-whip effect
B Level scheduling
C Package optimization
D Theory of Constraints |
|
Definition
Option A is correct. The bull-whip effect creates greater and greater
variation in demand as the signal passes through the system from
the point of consumption to the point of manufacture. In this case,
the sudden increase was magnified as it passed through the system
and resulted in over-manufacturing which led to excess inventory.
Option B is not correct because level scheduling would not have
resulted in excess inventory. Option C is not correct because
optimization of packaging would not cause such a change in
inventory levels. Option D is not correct because the Theory of
Constraints is a method of optimizing process flows and its effect
should be to lower inventories, not raise them. |
|
|
Term
In conducting a regression analysis, extrapolation is performed
when one wishes to
A predict beyond the limits of the sample
B determine cause and effect
C use a lag variable as an explanatory variable
D fill in gaps for missing observations |
|
Definition
Option A Is correct. Extrapolation is the estimation of a future value
based on current data. Option B is not correct because determination
of cause and effect is not part of a regression analysis. A regression
analysis determines the relationship between the two variables but
not whether that relationship is cause and effect. Option C is not
correct because lag variables are used to test possible model
formulations, not make predictions. Option D is incorrect because it
describes interpolation not extrapolation techniques. |
|
|
Term
A buying organization acquires a large share of a supplier's
capacity for a specialized product, and thereby makes that supplier
dependent upon a single customer. Under these circumstances, the
supply manager is LEAST likely to
A run the risk of supply interruption
B establish an alliance with that supplier
C require that the supplier be certified
D run the risk of high pricing |
|
Definition
Option D is correct. Since the supplier is dependent upon the buyingorganization, they are not likely to risk that business by charging
higher prices. Option A is not correct because since the buying
organization owns the supplier's capacity, they can direct that
capacity to production as needed. Options B and C are not correct
because in a situation of mutual dependence, establishing an alliance
with the supplier and requiring that they be certified are wise
choices. |
|
|
Term
XYZ Company is developing several new products, and has
requested that the supply manager participate in the supplier
development process for the materials needed in manufacture.
Which of the following would be the BEST type of supplier for the
new product development effort?
A A supplier with a large infrastructure dedicated to XYZ's production
B A supplier that produces only a small quantity for XYZ Company
C A supplier that specializes in state-of-the-art technology, with e
diverse customer base
D A supplier that has a .large customer base consisting of large
corporations |
|
Definition
Option C is correct because state-of-the-art technology is valuable
for a new product, and a diverse customer base mitigates risk if the
new product is not successful in the marketplace. Options A and B
are not correct because the size of the infrastructure dedicated to
XYZ's production, whether small or large, is not critical to a new
product. What matters is that the supplier have the capacity to
produce these items in the quantities needed regardless of what else
they are producing. Option D is not correct because a large customer
base consisting of large corporations may be an indication of
capacity, but it may also be a risk if these corporations consume all
of the supplier's capacity. |
|
|
Term
Which of the following is the FIRST step in successful project
management?
A Assess risks
B Build consensus
C Conduct benchmarking
D Identify stakeholders |
|
Definition
Option D is correct. The first step in successful project management
is to identify stakeholders so that they can become involved in the
remaining steps to completion. Subsequent steps are benchmarking
(Option C), assessing risk (Option A) and building consensus (Option
B). Stakeholders will be involved in all of these steps |
|
|
Term
Managers from all major departments in an organization are
working together to find ways to minimize non-value-added
activities, and devote more resources to efforts offering the best
chance for continued success. Which of the following types of root
cause analysis is this team using?
A Business case
B Kepner-Tregoe rational process
C Six Sigma process
D SWOT (strength, weakness, opportunity, threats) |
|
Definition
Option C is'correct. The Six Sigma process is used to systematically
improve processes by eliminating defects and non-value-added
activities. Option A is not correct because business case analysis is a
structured proposal for business improvement that includes reasons
for a proposed project, estimated costs, expected benefits, analysis
of alternatives and expected risks. Option B is not correct because
the Kepner-Tregoe process is a structured approach involving a
situational appraisal, problem analysis, decision analysis and
potential problem/opportunity analysis. Option D is not correct
because a SWOT analysis is a strategic planning approach to assess
an organization's strengths, weaknesses, opportunities and threats |
|
|
Term
Al! of the following are common elements of contract closeout
processes EXCEPT:
A ownership and responsibility for storage of specialized tooling
B payment schedules and documentation
C ana!yses to identify emerging project risks
D final acceptance inspections and procedures for remedying problems |
|
Definition
Option C is correct. Analyses to identify emerging project risks are
things that would be done at the start of a project rather than at
contract close-out. Options A, B and D are all incorrect because
ownership and responsibility for special tooling, payment
schedules/documentation, final acceptance inspections and
procedures for remedying problems are all part of the process to
close out a contract or project. |
|
|
Term
Which of the following is MOST closely associated with reducing
process variability?
A Just-in-time
B Lean production
C Six Sigma
D Value stream mapping |
|
Definition
Option C is correct. Reduction of variation is at the heart of Six
Sigma. Option A is not correct because just-in-time (JIT) focuses on
reducing the time, waste and inventory in a process. Option B is not
correct because lean production is another name for just-in-time and
the same rationale applies as in Option A. Option D is not correct
because value stream mapping is a technique to identify the steps in
a process and the cost and value-added of those steps. |
|
|
Term
A task-level process improvement flow chart typically includes all of
the following EXCEPT:
A a brief description of the task
B who does the task
C the reason for the task
D when the task is to be completed |
|
Definition
Option D is correct. Process improvement flowcharts do not specify
deadlines since they are designed to map out the process as it is
routinely performed, not any specific occurrence of the task. Options
A, B and C are incorrect because process improvement flow charts
do include what the task is, who does it and why. |
|
|
Term
A supply manager issues an RFP to provide a patient assistance
hotline for a new drug that is about to be approved for sale. The
selected supplier will work with the patients and potential patients
to provide information about the drug and medical insurance
benefits available for the drug. Using a balanced scorecard to
evaluate the RFP responses, the supplier with the highest score
does not have as much experience providing patient assistance
hotlines as its competitors. This raises concerns about the
supplier's ability to provide quality patient assistance services. The
supply manager determines that the best way to ensure that the
supplier meets quality service and performance expectations is to
include a service level agreement (SLA) in the contract. Which of
the following examples is LEAST appropriate to include in the SIA?
A 95% of the patients calling the hotline are satisfied or very satisfied
with the service
B 90% of general inquiries are closed during the initial call
C 85% of patient insurance benefit verifications are completed within
two business days
D 80% of all denied insurance reimbursements are closed within one
business day |
|
Definition
Option D is correct. Options A, B and C are measurements that are
related directly to the services that will be provided by the supplier.
It is unlikely that the supplier can have any impact on the
reimbursement of insurance claims. Although customer satisfaction is subjective, it is the major focus of a customer service hotline |
|
|
Term
An electronics company spends millions to improve production
and order-fulfillment times. The company's on-time delivery
performance is excellent. However, delivery performance is no
longer the key to profitable growth. The supply manager
recognizes the need to move to a much lower break-even point.
This represents a misalignment with
A business strategy
B core competencies
C customers' needs
D power position |
|
Definition
Option A is correct because business strategies define the business
in which the organization wants to compete (corporate strategy) or
establish specific strategies for a unit within the organization. Core
competencies (Option B) are talents, attributes and/or products that
form an organization's central identity. Though internal and/or
external customers' needs (Option C) are important considerations,
they are part of the larger picture of the organization's business
strategy. Power position (Option D) is a term used in negotiations or
pricing, Power within an organization arises from the ability to
contribute to corporate goals and objectives. If the supply manager
is concerned about the issue of power, then alignment with
corporate goals is an immediate necessity. |
|
|
Term
A supply management team is preparing to justify to top
management a major expenditure on a new automated system to
improve requisition processing. The cost will be significant, and
time commitments may affect related departments. However, the
team has evaluated various options and is convinced that the
benefits of this system will make the costs worthwhile. Which of
the following is LEAST likely to support their case?
A Showing how changes will improve performance by meeting customer expectations
B Aligning results to specific company goals and objectives
C Outlining previous efforts that have failed, and showing why
D Projecting costs/benefits over several years to put short payback
periods in perspective |
|
Definition
Option C is correct because being prepared with knowledge of
previous efforts may help in answering questions, but is less
important to presenting recommendations. The other options are
more likely to support supply management's recommendation in the
following ways: Option A describes potentially positive effects on
meeting needs of customers (internal or external). Option S
demonstrates understanding and support of organizational goals and
objectives. Option D shows costs have been analyzed and
determined to be reasonable compared to payback period. |
|
|
Term
A supply manager's organization has grown dramatically due to a
recent merger. The supply manager hopes to work throughout the
organization to achieve greater synergy, and thereby benefit not
only the local operation, but those of other branches as well.
Which of the following actions is MOST consistent with this goal?
A Explaining the benefits of world-.class supply management for the
expanded organization at the executive council meeting
B Surveying other locations to identify parts used by multiple areas, in order to pool demand
C Ensuring that supply managers are responsive to internal customers'
needs, in order to minimize "backdoor buying"
D Proposing changes to inventory management that will have positive
effects on service levels |
|
Definition
A supply manager's organization has grown dramatically due to a
recent merger. The supply manager hopes to work throughout the
organization to achieve greater synergy, and thereby benefit not
only the local operation, but those of other branches as well.
Which of the following actions is MOST consistent with this goal?
O Explaining the benefits of world-.class supply management for the
expanded organization at the executive council meeting
@ Surveying other locations to identify parts used by multiple areas, in
order to pool demand
@ Ensuring that supply managers are responsive to internal customers'
needs, in order to minimize "backdoor buying"
@ Proposing changes to inventory management that will have positive
effects on service levels
inventory management (Option D) may be helpful, but the benefits
are less direct and less immediate than pooling demand. |
|
|
Term
Which of the following is LEAST likely to be an element of a business plan?
A Human resource evaluation
B Marketing strategy development
C Raw material availability study
D Risk identification |
|
Definition
Option C is correct because raw material availability is not one of the
seven key areas defined in business planning. Those areas are:
business overview, marketing plan, market strategy (Option B),
management and human capital (Option A), operations capabilities,
financial plan, and critical business risks (Option D). |
|
|
Term
This element of a supply management strategic plan includes the
dynamics of the market.
A Commodity segmentation
B Supplier strategies
C Advanced acquisition plan
D Objective of the supply function |
|
Definition
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 |
|
|
Term
This element of a supply management strategic plan addresses
relative risks.
A Commodity segmentation
B Supplier strategies
C Advanced acquisition plan
D Objective of the supply function |
|
Definition
Option B is correct because supplier strategies include analyzing
benefits and risks of various sourcing options. Examples of risks
include stockouts versus excess inventory, speed compared to
reliability, and lowest initial price weighed against total cost of
ownership |
|
|
Term
This element of a supply management strategic plan 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 |
|
Definition
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 |
|
|
Term
A multi-location manufacturing company wants to have supply management prepare plans on how the organization will resume critical functions within a predetermined time after a disaster or major disruption, with the exception of data, which are handled by the IT department. Which of the following plans is the supply
management group being asked to prepare?
A Business continuity plan
B Contingency plan
C Disaster recovery plan
D Succession plan |
|
Definition
Option A is correct because business continuity involves ensuring
continuity or uninterrupted provision of operations and services.
Contingency (or risk) planning (Option B) deals with response to
potential uncertainties and risks. Disaster recovery plans (Option C)
are usually considered part of business continuity plans. Succession
planning (Option D) is concerned with identifying future staffing
needs and developing resources to meet these, particularly for key
executive positions. |
|
|
Term
Supply management contributes to an organization's flexibility
and quality in which two of the following ways?
I. Promoting early supplier involvement
II. Ensuring accurate specifications
III. Focusing on supplier prices
IV. Increasing the Supply base
A I and II
B I and IV
C II and III
D III and IV |
|
Definition
Option A is correct because it combines two ways supply
management can contribute to quality and flexibility. Early supplier
involvement (I) may highlight vague or unduly restrictive
specifications (II) which could affect quality and provide insight into
possible alternatives that would offer more flexibility, Focusing on
supplier prices (III) has less relationship to flexibility or quality.
Though increasing the supply base (IV) may enhance flexibility,
Option B pairs this with early supplier involvement, which usually
involves a few carefully chosen suppliers. Option C and Option D
include a supplier price focus, which does not match the description in this question |
|
|
Term
Alpha Inc. announces that it is acquiring Omega Company.
Alpha's supply manager requests that Omega send copies of all of
its contracts to Alpha for review prior to completion of the
merger, so that Alpha can determine potential savings
opportunities. Omega may share this information under all of the
following scenarios EXCEPT:
A Written consent was obtained from the other contracting party.
B The contract was assigned to the acquiring company.
C The contract performance period expired.
D The merger was completed. |
|
Definition
Option C IS Correct because Omega and this contractor no longer
have a legal relationship and thus Omega cannot share details of this
past contract with another entity unless there are specific provisions
about survivability of promises and/or laws requiring public
disclosure. Written consent from the other party (Option A) allows
sharing with other named party(ies). If the contract is assigned to
Alpha (Option B), Alpha will have the same access Omega did.
Completion of the merger (Option D) would make Alpha successor to
Omega, with access to contractual agreements. Note: Unless
Omega's contracts have clear language about successors and
assignees, clarification of contract continuation may be needed. |
|
|
Term
Which of the following BEST describes a non-disclosure agreement
(NDA)?
A An agreement indicating that parties are going to enter into a new
business relationship and that certain intellectual properties are
owned by one of the parties
B Contractual provisions of an agreement that are a formality, as the
law requires an outside party to maintain confidentiality of
proprietary information
C An agreement that is used to communicate confidential information
in writing, clearly labeling it confidential, and defining the
parameters for use and dissemination
D An agreement that is used to communicate confidential information,
stipulated in writing, and not including verbal, cellular, wireless, or e-commerce information |
|
Definition
Option C is correct because non-disclosure agreements (NDA) define
confidential materials or knowledge, how they will be used or shared
by the parties, and penalties for unauthorized disclosure. Defining
ownership of intellectual property (Option A) is a key element in
NDAs, but only one part. Though laws offer general protection for
proprietary information or trade secrets (Option B), the contracting
parties are responsible for defining such information or secrets. An
NDA may be part of communication of confidential information
(Option D); however, that information could be in many formats, not
just in traditional writing. |
|
|
Term
An organization's supply management department has been
invited by a local business group to present a program about a
recently completed project involving advanced technology. To
help junior staff members develop their presentation skills, the
manager assigns small roles in the program to selected people.
Presenters meet several times to go over their part of the
program and practice speaking. The manager is likely to remind
everyone of all the following EXCEPT:
A Ensure that confidentiality is not compromised.
B Include a brief introduction to put their presentation in context.
C Utilize competitor comparisons to reinforce major points.
D Follow the organization's guidelines on professional decorum. |
|
Definition
Option C is correct because discussing competitors creates a risk of
impropriety, whether actual or perceived. At best, it reflects
unfavorably on the speaker's organization and, at worst, could have
implications of antitrust or non-collusion violations. The
organization's guidelines (Option D) should address this. Protection
of confidential or proprietary information (Option A) is especially
important when supply management personnel are outside their
familiar environments. Putting the project in context (Option B)
helps the audience appreciate its importance and is helpful since
their familiarity with the marketplace or technology cannot be
assumed |
|
|
Term
An event with relatively low probability but high outcome/impact
is categorized as
A Annoyance
B Catastrophic
C High risk
D Low risk |
|
Definition
Option B is correct. Catastrophic risks are those that are infrequent
but can have devastating effects on a company, such as a hurricane
or product liability recall. Option A is not correct because annoyance
risks are those that occur frequently but have only a small impact on
the organization, such as a late delivery of material (which does not
stop product(on). Option C is not correct because high risks have
both a high likelihood and significant impact, and require significant
and immediate attention. Option D is not correct because low risks
have both a small probability of occurring and a small impact if they
do. |
|
|
Term
A supply manager is responsible for ensuring that the
organization owns the copyrights for all work-for-hire developed
for the company. The manager determines that a policy regarding
copyrights is required. Such a policy should include all of the
following EXCEPT:
A An exemption for employees
B A fair price to be paid to independent contractors for all work-for-
hire
C Contracts and Statements of Work saying that the work is for hire
D A requirement that independent contractors agree to transfer and
assigned copyrights |
|
Definition
Option B is correct because corporate policies for protection of
intellectual property are not likely to have content in them specifying
prices to be paid. Option A is not correct because although
employees sign an employee agreement when they are hired that
covers the transfer of ownership of intellectual property, they should
not be exempted from the copyrights policy. Options C and D are not
correct because these are issues that should be stated in policy. |
|
|
Term
A high end consumer products company establishes a program
offering products at deep discounts to employees. However, the
program specifically excludes sales to temporary employees.
Which of the following is being avoided in this scenario?
A Brand/reputation risk
B Legal risk
C Operational risk
D Technical risk |
|
Definition
Option B is correct because allowing temporary employees to have
the same benefits as permanent employees risks blurring the
distinction of those workers as independent contractors (versus
employees), which can have legal consequences. Option A is not
correct because brand/reputation risk develops by interactions in the
general marketplace over extended periods of time. Sales to
employees are not the same as interactions with the general
marketplace. Option C is not correct because operational risk is the
risk of loss resulting from inadequate or failed internal processes or
from external events. Option D is not correct because technical risk
involves the risk that the technology wiil not function as planned or
that new technology will supplant it. |
|
|
Term
A newly hired supply manager is reviewing $25,000 of spend over the last 12 months with a small, local minority supplier. The
manager notices that purchase orders were not issued for all
services performed. The supply manager questions the individual
responsible for the spend and is told that it is customary not to
issue purchase orders for services below $500, since the supplier
presents a summary invoice and is paid with a P-Card. In this
situation which of the following should the supply manager be
MOST concerned about?
A Compliance to corporate policy
B Data for cost analysis
C Documentation for payment
D Tracking supplier diversity |
|
Definition
Option B is correct. With limited data it is difficult for the supply
manager to understand what services were purchased. The supply
manager can better understand the cost associated with the services
if the detail is provided. |
|
|
Term
All of the following are provisions of the U.S. Sarbanes-Oxley Act
EXCEPT:
A corporate fraud whistleblowers have ninety (90) days to file
complaints with OSHA to seek reinstatement, back pay and benefits,
abatement orders, and similar relief
B accelerated reporting of trades by insiders is required
C a fully independent audit committee must oversee the relationship
between the company and its auditor
D selection of the external auditors shall be overseen by the supply
management department |
|
Definition
Option D is correct. SOX requires that a fully independent audit
committee must oversee the relationship between the company and
its auditor (Option C) but it does not specify that supply
management oversees their selection. Options A and B are not
correct because both are covered in the SOX legislation |
|
|
Term
A supply manager for a privately owned manufacturer is
concerned about the impact of the U.S. Sarbanes-Oxley Act on
the company. The manager is aware of several personal loans
made to the company president's children. The company has
many long-term purchase agreements in place for raw materials.
Which of the following should the supply manager do in this
situation?
A Discuss the personal loans with the chief financial officer
B Cancel the long-term purchase agreements
C Bring the issue to the attention of corporate counsel
D Take no action |
|
Definition
Option D is correct because sOx states that a publicly traded
company must not extend personal loans to directors or corporate
officers. It does not address such loans to others nor does it address
privately owned companies. Option B is not correct because the
long-term purchase agreements have no relationship to the personal
loans. Discussing the personal loans with the CFO (Option A) or
corporate counsel (Option C) would serve no purpose for the supply
manager, since such loans are not prohibited by SOX and do not
affect the supply management function or suppliers. |
|
|
Term
A manufacturing company plans to phase out one of its product
lines. Though models in this line will no longer be sold, parts and
sufficient stock of complete products will continue to be needed in
order to meet warranty requirements. Which of the following is
LEAST appropriate in this situation?
A Considering whether single-sourced items will still be available at
reasonable pricing despite lower demand
B Balancing the costs of stocking parts against the potential loss of
customer goodwill if shortages occur
C Discussing the level of risk tolerance with other affected
departments and agreeing on a transition plan
D Conferring with legal counsel about the future disposition of
hazardous materials |
|
Definition
Option D is correct. If there are any hazardous materials involved
with this product line, proper disposition for them should have been
in place since the beginning of product manufacture. A phase-out of
the product line would not present any new situations regarding
hazards of the materials involved. Option A is not correct because
availability of items at the lower demand levels is an issue,
particularly for items with limited sources. Option B is not correct
because determination of how much material to stock for future
needs involves balancing the costs of stocking parts against the
potential loss of customer goodwill. Option C is not correct because
discussing the level of risk tolerance with other affected departments
and agreeing on a transition plan is an important task to be done
early in the formation of the phase out |
|
|
Term
When addressing product end-of-life issues, which of the following
BEST describes considerations in the development of a
comprehensive supply risk mitigation plan?
A Total life-cycle costs and the financial risk associated with current
sourcing strategy
B Total life-cycle costs, product marketing strategy, market
intelligence, and the buying firm's risk tolerance
C Supply market risk, balanced with the potential savings of the
current sourcing strategy
D The competitive advantage of the current sourcing strategy versus
market dynamics with current suppliers |
|
Definition
Option B is correct. Risk mitigation planning involves consideration of
life-cycle costs, product marketing strategy, market intelligence, and
the buying firm's risk tolerance. Option A is not correct because
although life-cycle costs and the financial risk associated with
current sourcing strategy should be considered, Option B is a more
comprehensive description of the issues. Option C is not correct
because at end-of-life, potential savings of the current sourcing
strategy are of limited importance. Risk of future supply and the
future costs involved with purchasing small quantities are more
important. Option D is not correct because at end-of-life, competitive
advantages of the current sourcing strategy are less important as
the sales of the product shrink |
|
|
Term
Based on RoHS and WEEE regulations within the European Union,
when do the hazardous materials responsibilities of an original
manufacturer of computer equipment end?
A Upon sale to a retailer
B When documentation is submitted to he government
C When the retailer sells the items to
consumer
D At no time |
|
Definition
Option D is correct. ROMS and WEEE regulations mandate cradle-to-
grave responsibilities for hazardous materials. Liability remains with
the manufacturer forever. Options A, B and C are all not correct
because they do not reflect cradle-to-grave ownership of liability. |
|
|
Term
Jill is contracting for the purchase of hazardous material and
wants to protect her organization from potential liability to the
maximum extent possible. She is particularly concerned about the
transport of this material from the supplier to her facilities. Jill's
BEST alternative is to
A include indemnification and hold-harmless clauses in the contract
B specify FOB Destination in the contract
C transfer the risk and responsibility to the carrier
D transfer the risk and responsibility to the supplier |
|
Definition
Option B is correct. Jill's liability for the hazardous material does not
begin until her organization takes ownership of it. By specifying FOB
Destination, her organization does not take ownership of the
material until it reaches her facilities. If anything happens in transit,
the supplier owns the material and the liability. Option A should be
included in the contract, but it will only be exercised after an event
has occurred and if the supplier is responsible or negligent whereas
Option B applies outright. Option C is not possible. There is no
legally sound method of transferring risk or responsibility to a thirdparty. Option D is not possible once Jill's organization has taken
ownership of the material. |
|
|
Term
All of the following are part of proper management of suppliers for
the transport and disposal of hazardous material EXCEPT:
A a due diligence liability assessment of disposal suppliers
B an internal audit of compliance to hazardous materials policies
C receipt of certificates of disposal
D receipt of uniform hazardous waste manifests |
|
Definition
Option B is correct. An internal audit is not part of supplier
management, but rather an internal compliance process. Options A,
C and D are all part of proper supplier documentation and processes
for hazardous material handling. |
|
|
Term
Which of the following sourcing strategies involves a decision to
purchase supplies in advance of need and in anticipation of price
increases?
A Operational
B Organizational
C Financial
D Marketing |
|
Definition
Option C is correct. Purchasing in advance of need in anticipation of
price increases is a financial strategy. One would balance the
increased cost of inventory and the time value of spending the
money early against the potential savings from the projected price
increases. Option A is not correct because the decision is not driven
by operational needs. Option B is not correct because the decision is
not driven by the needs of the organization. Option D is not correct
because the decision is not driven by the needs of the customers or
their market. |
|
|
Term
All of the following are appropriate sourcing strategies for goods
and services that create a competitive edge in the marketplace
EXCEPT:
A limited global sourcing
B market exploitation
C strategic alliance
D supplier design |
|
Definition
Option B is correct because market exploitation involves taking
advantage of a changing focus in the marketplace to link the
organization's goods and services to customers' interests: for
example, tailoring ads to highlight eco-products. Options A, C and D
are all valid sourcing strategies to enhance competitiveness |
|
|
Term
All of the following are fundamental objectives of supply management EXCEPT:
A ensuring an uninterrupted flow of materials
B controlling inventory investment and losses
C buying from local suppliers
D developing good supplier relations |
|
Definition
Option C is correct. Although buying locally has benefits, it is not a
fundamental objective of supply management. Options A, B and D
are not correct because ensuring an uninterrupted flow of materials,
controlling inventory investment/losses and developing good supplier
relations are all fundamental objectives of supply management. |
|
|
Term
A cross-functional team is executing a strategic sourcing strategy
to consolidate the number of agencies used to create Web sites
for the company's products. The team has been working on the
project for several months, and has finalized its recommendation.
Days before the team is scheduled to award the business to
selected agencies, two new project stakeholders are identified.
The new stakeholders are not familiar with the project's goals,
objectives or execution. Given this situation, which of the
following is the BEST course of action to take?
A Advise the new stakeholders of the recommendation and notify the
suppliers
B Gain alignment to the recommendations with the new stakeholders
C Include the new stakeholders in supplier selection process
D Restart the sourcing process with input from the new stakeholders |
|
Definition
Option B is correct. Since the recommendations have been finalized,
the BEST option to involve new stakeholders would be to bring them
up to speed with the goals and objectives of the team and the
execution to date and get their buy-in. Option A is not correct
because advising is not the same as getting agreement. The new
stakeholders should be given all information and allowed to fully
participate in the discussions at this point. Option C is not correct
because the supplier selection process has already taken place. The
team is scheduled to award the business to the winner within a few
days. Option D is not correct because restarting the sourcing process
to include input from the new stakeholders would negate all the work
and time invested to date, confuse the suppliers and cause them to
do double the work of quotation. |
|
|
Term
Jack has just been hired to turn around a chaotic situation created
by his predecessor in which supply management is deemed by the
rest of the organization to be more of an annoyance than value-
added. A group of engineers is particularly outspoken about their
dissatisfaction with supply management, and they have chosen to
do all their contracting for outside millwork directly with their
favorite supplier. Jack needs to address this issue while working
to improve the reputation for supply management throughout the
organization. He develops a new strategic sourcing procedure and
hopes to enlist engineering as the first group to use this new
procedure. Which of the following would be LEAST effective in
Jack's efforts to get engineering's support?
A Distribute copies of the new procedure to all stakeholders
B Host a meeting with engineering to introduce the new procedure and
answer questions
C Determine key engineers and enlist their sponsorship in a one-on-
one meeting
D Post relevant documents and marketing information on the
company's intranet |
|
Definition
Option D is correct. While all of these options are useful in
communicating new policies and procedures, in Jack's situation,
personal contact is much more likely to be effective than intranet
communication. Options A, B and C are all good ways for Jack to
enlist engineering's support. |
|
|
Term
A supply manager has considerable experience in conducting
negotiations for temporary labor rates. The supply manager
creates a database capturing the impact of various cost drivers
such as fringe benefits and agency mark-ups on final negotiated
hourly rates. The supply manager wants to use this information to
determine a fair hourly rate for temporary personnel, for use in
upcoming negotiations with temporary labor agencies. Which of
the following is likely to yield the MOST accurate hourly rate
estimate using the supply manager's database?
A Benchmarking
B Kraljic Matrix
C Regression Analysis
D Winter's Model |
|
Definition
Option C is correct because a regression analysis describes the
relationship between two variables, in this case cost drivers such as
fringe benefits and agency mark-ups versus final negotiated hourly
rates. Option A is not correct because benchmarking involves
comparison of one's own data to the best available in the industry.
There is no indication that the supply manager's database has
information comparing their data to the best available. Option B is
not correct because a Kraljic Matrix compares spend versus market
risk. There is no risk analysis as part of this supply manager's data.
Option D is not correct because the Winter's Model is a forecasting
method. The supply manager is analyzing labor rates, not
forecasting demand. |
|
|
Term
158. A supply manager is evaluating prices for pearls, purchased In a
variety of sizes and shapes. The organization produces a wide
variety of jewelry, and there are more than 3,000 different stock
keeping units (SKUs) in the pearl category. Important
characteristics for pearls are shape, luster, color, and surface
cleanliness. The supply manager faces significant price increases,
and wants to review other sources for this product. Because of
the large number of SKUs, the supply manager uses a
mathematical formula applied to a sampling of components. The
formula minimizes the number of component quotations required
and reduces the need to obtain pricing on all components.
The formula is as follows: Price for sample = (.4 x shape)+(.6 x
luster)+(.1 x color)+(.8 x surface finish)
Based on this information, which of the following can be
concluded regarding the product's characteristics?
A Shape has the highest influence on price.
B Luster is a minor contributor to price.
C Color significantly affects price.
D Surface is a significant contributor to price |
|
Definition
Option D is correct because surface finish has the highest weight (.8)
of any of the factors. Option A is not correct because shape is
weighted as .4, both luster and surface finish are higher influences
on price than shape. Option B is not correct because luster is the
second highest determiner of price at .6. Option C is not correct
because color has the lowest impact on price at .1 |
|
|
Term
159. Common problems associated with the introduction of e-
commerce in an organization will be likely to include all of the
following EXCEPT:
A security
B authenticity
C terms and .conditions
D UCC conflicts |
|
Definition
Option D is correct. The UCC does not regulate or have any conflicts
with e-commerce. Options A and B are not correct because security
and authenticity of transmissions and information are major issues
to be addressed. Option C is not correct because the terms and
conditions of contracts regulating e-commerce should include
provisions for all issues that may arise. If any are not addressed,
that may lead to difficulties later. |
|
|
Term
160. When done correctly, using a reverse auction yields all of the
following benefits EXCEPT:
A Price compression
B Price validation
C Reduced bid cycle time
D Restricted supplier participation |
|
Definition
Option D is correct. A reverse auction normally expands suppliers'
participation rather than restricting it since the requirements are
posted on the site for all bidders to see and potentially respond to.
Options A, B and C are not correct since all are benefits of a reverse
auction. |
|
|
Term
161. All of the following are advantages of EDI EXCEPT:
A improved accuracy of data
B reduced clerical effort
C reduced order cycle time
D ease of implementation |
|
Definition
Option D is correct. EDI implementation is a complex project and can
be lengthy. Options A, B and C are not correct because EDI does
improve the accuracy of data transmission, reduce clerical effort and
reduce order cycle time as some of its major advantages. |
|
|
Term
Procedures for managing an online reverse auction event include
all of the following EXCEPT:
A creation of a category profile
B determination of RFP requirements
C invitation to prequalified suppliers to participate
D opening the five event |
|
Definition
Option A is correct. Creation of a category profile is normally done
well in advance of the reverse auction as part of the strategic
sourcing process. Options B, C and D are all parts of conducting &
reverse auction. |
|
|
Term
A sourcing specialist has completed a spend analysis for a
category of indirect materials. Which of the following would NOT
be a benefit provided by the information gathered?
A Ability to prioritize categories
B Identifying categories for sourcing
C Developing a category profile
D Improved tracking by category |
|
Definition
Option D Is correct because tracking is future oriented and can only
provide information based on multiple results. Only then, can
tracking for comparison be done. Options A, B and C are the results
of conducting the spend analysis. |
|
|
Term
In spend analysis, which of the following attributes describes &
critical sourcing category?
A High supply market competitiveness, low business impact
B Low supply market competitiveness, low business impact
C High supply market competitiveness, high business impact
D Low supply market competitiveness, high business impact |
|
Definition
Option D is correct because goods or services with low-market
competitiveness (e.g. available from only a few suppliers), and high
impact (if supply is disrupted) are "critical" and must be carefully
managed. Option A is not correct because items with low-business
impact and a highly competitive market can be managed tactically.
Option B is not correct because although the items are in an
uncompetitive market, the impact of a disruption on the organization
is low. Option C is not correct because although the items have a
high impact on the organization, they are sold in a highly
competitive market, so the threat of disruption is lessened. |
|
|
Term
A supply manager analyzes potential savings by consolidating
expenditures across the organization. In this situation, which of
the following types of analyses would be MOST appropriate?
A Cost
B Market
C Risk
D Spend |
|
Definition
Option D is correct. Analyzing the potential savings from
consolidation of spend across the organization can best be done by
first analyzing how many dollars of spend come from which
segments of the organization, what is being bought and what the
total dollar amounts are - a classic spend analysis. Option A is not
correct. A cost analysis examines the cost profile of an item or group
of items. It does not look at general spending. Option B is not
correct because the intent of the analysis is internally focused, not
external in the marketplace. Option C is not correct because there is
no indication of risk associated with the organization's current |
|
|
Term
A supply manager reviews the following cost structure with anestablished and profitable supplier providing a standard product to the marketplace:
Materials $4.80
Direct Labor $1.20
Overhead #2.50
Selling Expense $1.25
Profit $1.95
Using an incremental cost approach, at which of the following
costs should the supply manager begin price negotiations?
A $6.00
B $7.25
C $7,95
D $8.50 |
|
Definition
Option A is correct. On an incremental cost basis, the cost for the
next unit of production is $6.00 ($4.80 +$1.20). Negotiations should
begin at this cost, followed by a discussion of a fair and reasonable
profit. The profit stated at $1.95/unit is negotiable, and the supply
manager can argue that overhead is an allocated cost covered by
ongoing business, since the supplier is profitable |
|
|
Term
A supply manager for a small manufacturer of metal products
notices that inventory turns less than one time for raw materials.
An analysis reveals that nearly half of the $6 million in inventory
is in scrap form, recycled through an internal metal fabrication
department. This is one of the most lucrative profit centers in the
organization. When considering labor and overhead costs
allocated to the department, the cost of material fabrication is
only 40% of the pricing offered by suppliers. The supply manager
is convinced that fabrication costs alone do not provide a true cost
picture. Since metal fabrication is not the organization's core
business, process inefficiencies and inventory to support the
process may drive up costs compared to suppliers. In this
situation, which of the following factors would NOT support a
decision to outsource?
A Availability of suppliers
B Lower fabrication costs from suppliers
C Decreased investment in scrap inventory
D Reduced profits to the organization |
|
Definition
Option D is correct. If an analysis shows that outsourcing would
result in lower profit for the organization that is reason not to do It.
Option A is not correct because metal fabrication is a common
process and there are many companies that do it. Availability of
suppliers is unlikely to be an issue. Option B is not correct because if
outsourcing results in lower fabrication costs, that would be a reason
to do it. Option C is not correct because a decrease in scrap
inventory removes the associated dollars from the organization's
books and improves the balance sheet, which would be a reason to
outsource. |
|
|
Term
In the healthcare sector, the LEAST likely motivation to outsource
is to
A reduce technological risk
B reduce labor and overhead costs
C implement ERP
D shift patient liability |
|
Definition
Option C jS correct because ERP (Enterprise Requirements Planning)
is a software system geared to manufacturing organizations, not to
healthcare. Option A is not correct because many hospitals and
clinics outsource procedures that require expensive capital
equipment so they can eliminate the expense of keeping up with
changing technologies. Option B is not correct because a major
expense in the delivery of healthcare is labor and overhead, and a
reduction of these improves the cost profile of the healthcare
provider. Option D is not correct because although overall
responsibility for patient liability remains with the healthcare
provider regardless of the degree of outsourcing, the outsourcing
contractor has potential liability for the specialized services it
provides. |
|
|
Term
Which of the following is LEAST likely to affect the need for a re-
evaluation of a make-or-buy decision?
A Demand
B Revision
C Life cycle
D Testing |
|
Definition
Option D is correct. Although test results may indicate that quality is
best achieved by one party versus the other, the quality assessment
should have been done at the beginning, and unless the process
changes are truly catastrophic, a quality problem later can probably
be resolved without moving production. Option A is not correct
because projected volume is a key factor in the make or buy
decision. If the forecasted demand changes, the equation may
change regarding which is the better option. Option B is not correct
because if the product undergoes a technical revision, it may no
longer be suitable for the current production environment and may
have to go to the oth`er option. Option C is not correct because the
projected life cycle of the product drives demand and is a key factor
in the make-or-buy analysis. If the life cycle changes, the decision
may change. |
|
|
Term
Which of the following supply process improvements is LEAST
likely to help an organization meet its sales goals?
A Shorter new product development
cycles
B Lower percentages of defective parts
C Reduced pricing elasticity with suppliers
D Improved utilization of technology by suppliers |
|
Definition
Option C is correct because a reduction in price elasticity from
suppliers may affect profit margins, but it is not likely to affect sales
since it would be transparent to the customer. Option A is not
correct because a reduction in new product development time gets
new products into the market faster, which will increase sales.
Option B is not correct because a reduction in the percentage of
defective parts increases the quality and reliability of the product,
which should increase sales. Option D is not correct because improved utilization of technology by suppliers is likely to improve
the speed and quality of both information and product.
Improvements in lead time or quality from suppliers allow the
organization to respond faster and better, which should help sales. |
|
|
Term
178. In addition to reduction of total cost of ownership, which of the
following is the PRIMARY reason why organizations look to supply
management for top line revenue generation?
A Supply chain efficiencies increase organizational revenues as well as
reduce costs.
B Supply managers are more visible leaders within the organization.
C A closer relationship now exists between supply and finance.
D Supply management has access to the supplier base for information
and innovation |
|
Definition
Option D is correct. Information and innovations from suppliers have
the potential to create or improve new products for the supply
manager's company,`which enhances top line revenue generation.
Option A is not correct because although supply chain efficiencies do
reduce cost, they do not normally increase revenue. Option B is not
correct because visibility of supply managers within the organization
will not affect revenue generation. Option C is not correct because
the relationship between supply management and finance will not |
|
|
Term
179. A supply manager asks, "What is important to the customer that
can't be directly measured or counted, but which can be assessed
indirectly using one or more proxy measures or counts?" This
supply manager is seeking ways to acquire a
A house of quality matrix
B material value chain
C process capability index
D set of performance metrics |
|
Definition
Option D is correct. The supply manager is looking for a way ofassessing the intangibles by finding something that correlates to
them, which can be measured. Option A is not correct because a
house of quality matrix compares the attributes of a product to the
desires of the customer and looks for areas that don't match. Option
B is not correct because the material value chain consists of a series
of activities that create value culminating with delivery to customers
and creating profit margin. It deals with the tangible, not the
intangible. Option C is not correct because process capability
measures the ability of a process to produce goods to established
specifications. |
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