ISM ISM-CORE Online Practice Questions and Exam Preparation

ISM ISM-CORE Online Questions & Answers

• Question 91:

  A chief procurement officer (CPO) is asked by the company corporate travel department to present strategies and tactics related to the acquisition of travel services. Which of the following approaches will BEST demonstrate an understanding of the travel department's needs?

  A. Presenting benchmarks on the average costs of domestic and international airline tickets, to employ during negotiations over airline contracts
  B. Highlighting the negotiating of airline contracts, given that air travel represents the largest element of the budget and other travel spend categories are less important and harder to control
  C. Focusing on supply (e.g. airlines, hotels) and demand (e.g. company travel policy, classes of travel), and how supply management can optimize both
  D. Emphasizing the company-wide implementation of a corporate card as a tool to monitor every aspect of the travel spend
  C. Focusing on supply (e.g. airlines, hotels) and demand (e.g. company travel policy, classes of travel), and how supply management can optimize both

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  Explanation

  To demonstrate an understanding of the travel department's needs, the CPO should take a holistic approach, focusing on both supply and demand aspects of travel services. This involves understanding the various suppliers (airlines, hotels)

  and the internal demand factors (company travel policies, different classes of travel). By optimizing both supply contracts and internal demand management, the CPO can develop strategies that control costs while meeting the company's

  travel needs effectively. This approach shows a comprehensive understanding of the complexities involved in managing travel services.

  References:

  Procurement and Supply Chain Management by Kenneth Lysons and Brian Farrington.

  Travel and Expense Management Best Practices by Aberdeen Group.

• Question 92:

  A company has a large upcoming project. While the company has a current list of qualified suppliers capable of participating in this project, the chief procurement officer (CPO) wants supply management to conduct site visits with the suppliers under consideration. A senior supply manager is given the assignment of planning and scheduling the visits. Which of the following is the BEST way to begin this project?

  A. Select up to three suppliers to visit
  B. Establish the key evaluation criteria for the visits
  C. Submit a budget for the selection activity and site visits
  D. Select a cross-functional team to participate in the visits
  B. Establish the key evaluation criteria for the visits

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  Explanation

  Project Context: The CPO wants to conduct site visits with potential suppliers for a large project. Importance of Evaluation Criteria: Establishing key evaluation criteria is essential to ensure the visits are structured and focused. Initial Step:

  Before selecting suppliers or scheduling visits, it's crucial to know what aspects of the suppliers' operations will be evaluated. Evaluation Aspects: These criteria might include production capacity, quality control processes, financial stability,

  compliance with standards, and overall capability to meet project requirements. Purpose of Criteria: These criteria will guide the assessment, provide a basis for comparison, and ensure that the most suitable suppliers are chosen.

  Conclusion: Starting with clear evaluation criteria ensures a systematic and objective approach to selecting the best suppliers for the project.

  References:

  Supplier Evaluation and Performance Excellence: A Guide to Meaningful Metrics and Successful Results by Sherry R. Gordon.

  CIPS Guide to Supplier Appraisal and Performance Management.

• Question 93:

  Of the following, the BEST way for supply management to effectively support stakeholders is to ensure that ____

  A. communications with stakeholders are held face-to-face
  B. stakeholders are regarded as equally important
  C. goals are given precedence over a team environment
  D. communications are tailored to each stakeholder
  D. communications are tailored to each stakeholder

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  Explanation

  The best way for supply management to effectively support stakeholders is to ensure that communications are tailored to each stakeholder. Tailoring communications means providing relevant information in a manner that each stakeholder

  understands and values. This approach ensures clarity, fosters engagement, and meets the unique needs of each stakeholder, thereby enhancing collaboration and support.

  References:

  "Effective Communication Skills for Scientific and Technical Professionals," Harry

  E. Chambers.

  "Managing Stakeholders as Clients: Sponsorship, Partnership, Leadership, and Citizenship," Mario Henrique Trentim.

• Question 94:

  A supply manager is conducting financial analysis of bidders. The supply manager wants to select the supplier that is most efficient In the use of its assets. Based on the following information, which supplier should the supply manager choose?

  A. Supplier D: Netincome= 50, Assets = 20
  B. Supplier A: Netincome= 100,Assets= 10
  C. Supplier C: Netincome= 200,Assets= 400
  D. Supplier B: Netincome= 200,Assets= 100
  B. Supplier A: Netincome= 100,Assets= 10

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  Explanation

  To determine which supplier is most efficient in the use of its assets, we calculate the return on assets (ROA) for each supplier. ROA is calculated as:

  ROA=Net IncomeAssets\text{ROA} = \frac{\text{Net Income}}{\text{Assets}}ROA=AssetsNet Income

  Supplier D: ROA = 50 / 20 = 2.5

  Supplier A: ROA = 100 / 10 = 10

  Supplier C: ROA = 200 / 400 = 0.5

  Supplier B: ROA = 200 / 100 = 2

  Supplier A has the highest ROA at 10, indicating the highest efficiency in using its assets to generate income.

  References:

  Financial analysis methods in supply chain management.

  Return on assets (ROA) calculation and interpretation.

• Question 95:

  In which step of the sourcing process should supplier capability assessments occur?

  A. Market analysis
  B. Contracting
  C. Performance monitoring
  D. Category strategy
  A. Market analysis

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  Explanation

  Supplier capability assessments are conducted during market analysis to ensure qualified vendors are invited to bid.

• Question 96:

  At what point in a business relationship with a supplier should discussions be held about which party has responsibility for specific costs, in the event the relationship needs to end?

  A. At any point in the relationship
  B. At no point in the relationship
  C. When the relationship needs to end
  D. In the beginning of the relationship
  D. In the beginning of the relationship

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  Explanation

  Importance of Clarity: Discussions about responsibilities and costs should be held at the outset of a business relationship to ensure clarity and avoid disputes later. Contractual Agreements: Clear agreements on cost responsibilities,

  especially in the event of the relationship ending, should be documented in the initial contract.

  Prevention of Disputes: Addressing these issues early helps in preventing misunderstandings and legal disputes.

  Best Practices: It is a best practice in supply management to establish all terms and conditions, including those related to ending the relationship, during the contract negotiation phase.

  References:

  ISM Professional Series: Contracting and Negotiations

  CIPS Contract Management Guide

• Question 97:

  A procurement manager solicits bids for renovation of a building and writes a service level agreement. The agreement includes language regarding the proper disposal of waste. This is an example of a(n)

  A. regulatory requirement
  B. zead time requirement
  C. cost goal
  D. engineering specification
  A. regulatory requirement

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  Explanation

  Including language regarding the proper disposal of waste in a service level agreement typically addresses compliance with regulatory requirements. These regulations ensure environmentally safe disposal practices. While lead time

  requirements (B), cost goals (C), and engineering specifications (D) are important in contracts, waste disposal primarily falls under regulatory compliance.

  References: Service level agreements and regulatory compliance guidelines, environmental regulations in procurement.

• Question 98:

  When conducting a supplier risk assessment, which factor is MOST important?

  A. Supplier ownership structure
  B. Supplier production capacity
  C. Supplier's risk mitigation plan
  D. Supplier's industry reputation
  C. Supplier's risk mitigation plan

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  Explanation

  Evaluating a supplier's risk mitigation plan provides insight into its ability to manage disruptions and maintain supply continuity.

• Question 99:

  A firm has over 1000 active suppliers within its database. The company wants to begin the practice of regular business reviews with suppliers. Of the following, the BEST method for conducting reviews is to

  A. start with the most tenured suppliers and conclude with the newest
  B. choose one supplier from each category of products purchased
  C. choose suppliers based on the necessity of their product to operations
  D. start with the closest suppliers and conclude with those farthest away
  C. choose suppliers based on the necessity of their product to operations

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  Explanation

  The best method for conducting regular business reviews with suppliers is to choose suppliers based on the necessity of their product to operations. Prioritizing suppliers who provide critical products ensures that the most important aspects

  of the supply chain are managed effectively. This approach helps in maintaining the continuity and efficiency of operations and allows the firm to address potential issues with key suppliers promptly.

  References:

  ISM (Institute for Supply Management). Supplier Relationship Management Best Practices. CIPS (Chartered Institute of Procurement and Supply). Conducting Effective Supplier Reviews.

• Question 100:

  Which type of cost is MOST relevant when determining make-or-buy decisions?

  A. Fixed and variable costs
  B. Opportunity cost
  C. Historical cost
  D. Absorbed cost
  A. Fixed and variable costs

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  Explanation

  Fixed and variable costs define production scalability and economic feasibility when deciding to produce or outsource.