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CPSM® Update

3 Questions, 3 Answers

May/June 2011, eSide Supply Management Vol. 4, No. 3

In every edition, 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.

3 Questions

Question #1: An in-depth analysis of a supplier's proposal is useful because it is important to understand the

(A)  SOW throughout the evaluation process
(B)  SOW throughout the proposal development process
(C)  supplier's proposal throughout the negotiation process
(D)  supplier's firm-fixed price

Question #2: All of the following are indicators of Gross National Product EXCEPT

(A)  the total dollar value of all goods and services produced for consumption within a country
(B)  the income earned within a country by foreigners
(C)  the measure of labor and production output within a country
(D)  the aggregated monetary value of all the goods and services produced by an entire economy

Question #3: In the hierarchy of the planning process, which of the following should be completed FIRST?

(A)  Business strategy
(B)  Financial plan
(C)  Market strategy
(D)  Operations plan
3 Answers

Question #1: Option C is correct because thorough analysis of the supplier's proposal can give supply management an advantage in negotiations. The proposal usually represents the supplier's optimistic position, which can be a beginning point in negotiations. The statement of work (SOW) or specifications issued by the buying organization does not establish criteria against which the supplier's proposal will be evaluated (Option A), but should have been agreed upon before proposals were sought (Option B). Though understanding of the components of a supplier's pricing (Option D) is important to negotiations, analyzing the proposal usually goes beyond pricing.

References: CPSM® Study Guide, 1st Edition (Book 1 — Foundation of Supply Management), page 15; ISM Professional Series (Book 1 — Foundation of Supply Management), pages 35-36.

Question #2: Option B is correct because. The Gross National Product measures the total production of a country. The nationality status of an individual or group of individuals is not a consideration. Option A is not correct because the dollar value of goods and services produced for consumption is part of the total dollar value produced and helps define Gross National Product. Option C is not correct because the total labor and production output is part of the total dollar value of the goods and services produced. Option D is not correct because this is another way of defining Gross National Product.

References: CPSM® Study Guide, 1st Edition (Book 2 — Effective Supply Management), page 18, 5; ISM Professional Series (Book 2 — Effective Supply Management Performance), page 107; ISM Glossary of Key Supply Management Terms (4th Edition).

Question #3: Option A is correct because overall business strategies are defined before focus is given to key areas including financial plan (Option B), market strategy (Option C) and operations plan/capabilities (Option D). The hierarchy of planning begins with vision, then continues down through mission, strategy, goals (which evolve from strategy) and plans (roadmaps to achieve strategy and goals).

References: CPSM® Study Guide, 1st Edition (Book 3 — Leadership in Supply Management), pages 1113-17; ISM Professional Series (Book 3 — Leadership in Supply Management), pages 138-140; Guide to Business Planning (The Economist Series), pages 19-23.

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

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