3 Questions, 3 Answers
July/August 2010, eSide Supply Management Vol. 3, No. 4
New in 2010, eSide offers three sample questions — and answers — from the CPSM® Diagnostic Practice Exam to help you prepare to pursue your CPSM® certification. First, answer all three questions; then, scroll down to the "3 Answers" section to find out how you fared.
Question #1: 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?
- Lotting strategy
- Market-basket strategy
- Market segmentation
- Sole sourcing
Question #2: Supply management typically provides top management all of the following market intelligence information EXCEPT
- Technology updates
- Supply forecasts and market capability data
- Alternative sources of supply
- Recommendations on financial standards
Question #3: A company's mission states that the firm "will be the premier supplier of products to the luxury automotive industry." Which of the following criteria is MOST appropriate for the evaluation of this company's supply management organization?
- Ensuring that supply management strives to obtain the right product at the right price
- Obtaining the lowest cost product that meets quality and delivery requirements
- Obtaining the highest quality products, with due consideration to impact on cost of production
- Obtaining supplier deliveries in a timely manner, with due consideration to quality and cost
Question #1: 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.
References: CPSM® Study Guide, 1st Edition (Book 1 — Foundation of Supply Management), pages 6-7; ISM Professional Series (Book 1 — Foundation of Supply Management), pages 96, 117; The Supply Management Handbook (7th Edition), pages 426-432.
Question #2: Option D is correct. Supply management would not normally be involved in the establishment of the financial standards of the company. The financial standards referred to here are accounting standards, not standard costs for purchased items. Supply management does provide top management with technology updates from the supply base (Option A), supply forecasts and market capability (capacity) data (Option B) and alternative sources of supply (Option C).
Reference: The Supply Management Handbook (7th Edition), pages 140-141.
Question #3: Option C is correct because it places emphasis on quality first, in alignment with the company's mission statement. Options A, B and D put priority on prices, cost and delivery time rather than quality.
References: CPSM® Study Guide, 1st Edition (Book 3 — Leadership in Supply Management), pages 4-5; ISM Professional Series (Book 3 — Leadership in Supply Management), pages 256-262; Strategic Supply Chain Management: The 5 Disciplines for Top Performance, pages 188-191.
For more information on ISM's professional credentials, visit the Institute's Web site.
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