ISM ISM-CORE Online Practice Questions and Exam Preparation

ISM ISM-CORE Online Questions & Answers

• Question 111:

  A supply manager submits a request to fill several new positions, along with a proposal for an increased training budget. The new positions are approved, but training funds are cut rather than expanded for the coming year. The supply manager believes that training will be essential for supply management's ability to support organizational strategy. Given this situation, which of the following actions by the supply manager is MOST likely to be effective?

  A. Fill fewer positions than approved, and use the remaining budget for training
  B. Attempt to fill the new positions with skilled candidates who will not require extensive training
  C. Have the staff complete the training early in the year
  D. Develop examples of how training will help employees focus on organizational objectives
  D. Develop examples of how training will help employees focus on organizational objectives

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  Explanation

  The MOST likely effective action by the supply manager, when training funds are cut, is

  D. Develop examples of how training will help employees focus on organizational objectives. This approach can demonstrate the value of training to the organization's leadership and may help in securing future funding. It's important to show how training aligns with and supports the strategic goals of the organization.

• Question 112:

  Which of the following best represents an ethical supply management decision?

  A. Avoiding gifts or favors from suppliers
  B. Negotiating informal discounts
  C. Ignoring small conflicts of interest
  D. Sharing cost data without approval
  A. Avoiding gifts or favors from suppliers

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  Explanation

  Refusing gifts or favors avoids conflicts of interest and supports ethical and transparent supplier relationships.

• Question 113:

  A local utility's supply manager is preparing a solicitation to select a contractor to construct a controlling station for the utility's main plant. Construction must begin within four months and be completed in a year or less, as delays in bringing the new station online could cause serious losses for the utility. Which of the following will be MOST effective in monitoring performance and ensuring timely completion?

  A. Specifying high consequential damages for failure to complete the project in a timely manner
  B. Ensuring that the scope of work is clear, to minimize misunderstandings
  C. Requiring milestones, progress reports, and liquidated damages for noncompliance
  D. Including a strong for-cause termination clause
  C. Requiring milestones, progress reports, and liquidated damages for noncompliance

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  Explanation

  Project Timeline: The construction must begin within four months and be completed within a year. Performance Monitoring: To ensure timely completion, setting clear milestones and requiring progress reports keeps the project on track and

  allows for early identification of potential delays.

  Liquidated Damages: Including liquidated damages clauses for noncompliance provides a financial incentive for the contractor to meet deadlines and minimizes the risk of delays. Accountability: This comprehensive approach ensures

  accountability and provides mechanisms to enforce timely project completion.

  References:

  ISM. (n.d.). Effective Contract Management and Performance Monitoring.

  CIPS. (n.d.). Best Practices in Project Management for Procurement.

• Question 114:

  Which of the following are the BEST factors to consider when assigning suppliers to a supplier segmentation matrix?

  A. Data provided by co-workers and business stakeholders
  B. Data provided by the supplier account manager
  C. Past performance, quality and financial information
  D. Public information on the web and in court records
  C. Past performance, quality and financial information

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  Explanation

  When assigning suppliers to a supplier segmentation matrix, considering past performance, quality, and financial information is best. These factors provide a comprehensive view of a supplier's reliability, capability, and stability. Data from coworkers, business stakeholders, and public sources can be useful, but the primary focus should be on empirical data that reflects the supplier's historical and current performance and financial health.

  References: Supplier management and evaluation resources, supplier segmentation models.

• Question 115:

  A buyer for ABC, Inc. meets with a sales representative from XYZ Company to discuss the purchase of a product. The sales representative provides documentation to the buyer that the product will meet or exceed the specifications required

  by ABC. Based on thi information, the buyer places an order with XYZ.

  However, upon inspection of the received product, the buyer learns that it does not meet ABC's specifications and cannot be used for the intended purpose. Which of the following is TRUE in this situation?

  A. ABC should sell the product to a third party and use the funds to procure items that meet the required specifications.
  B. ABC should return the goods for a full refund because the promise made by the seller created an express warranty.
  C. ABC can do nothing, as the salesperson's claim was an opinion and did not create a warranty.
  D. ABC's design team should change the specifications to allow the product to be used and avoid further delay.
  B. ABC should return the goods for a full refund because the promise made by the seller created an express warranty.

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  Explanation

  Sales Representative's Promise: The sales representative from XYZ Company provided documentation that the product would meet or exceed ABC's specifications.

  Express Warranty: An express warranty is created when a seller makes a promise or provides assurance that a product will meet certain standards or specifications. Non-Conforming Goods: Upon inspection, the product did not meet the

  required specifications and could not be used for its intended purpose. Buyer's Rights: Under the Uniform Commercial Code (UCC) and similar laws, the buyer has the right to return non-conforming goods and seek a full refund when an

  express warranty has been breached.

  Conclusion: ABC is entitled to return the product and receive a full refund due to the breach of the express warranty.

  References:

  UCC (Uniform Commercial Code). (n.d.). Article 2 - Sales.

  ISM. (n.d.). Managing Warranties and Product Non-Conformance.

• Question 116:

  A supply manager submits requests for additional personnel and equipment, which are approved. However, the organization's training budget is cut, giving less opportunity to train new employees. The supply manager is concerned that this will adversely affect the department's ability to build expertise. Given this situation, which of the following is the MOST effective action for the supply manager to take?

  A. Present justification showing how training supports cost reduction goals
  B. Utilize available training funds early in the year to gain maximum impact
  C. Fill fewer positions than approved and re-direct savings to training
  D. Seek highly-qualified applicants who will require less training
  A. Present justification showing how training supports cost reduction goals

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  Explanation

  The supply manager is facing a situation where the training budget has been cut, limiting the ability to train new employees despite having approval for additional personnel and equipment. The most effective action is to:

  Identify the Impact: Understand and outline how the lack of training will impact the department's performance, efficiency, and ability to meet organizational goals. Present Justification: Develop a detailed justification that shows the correlation

  between training and cost reduction goals. Explain how effective training leads to better employee performance, reduces errors, and increases productivity, ultimately saving costs.

  Data and Examples: Use data and examples to support the argument. This could include metrics on employee performance before and after training, case studies, or industry benchmarks that highlight the importance of training. Align with

  Organizational Goals: Ensure that the justification aligns with the overall strategic goals of the organization, demonstrating that investing in training will contribute to achieving these goals. By presenting a well-supported justification, the supply

  manager can make a compelling case for restoring the training budget to support the department's expertise and efficiency.

  References:

  Institute for Supply Management (ISM) guidelines on training and development.

  Articles and case studies on the impact of employee training on cost reduction and performance improvement.

• Question 117:

  A manufacturing firm has a product that has been experiencing shrinking profits. The product requires several high-tech parts with strict specification tolerances. The contract for these parts was recently renegotiated with favorable terms, including lower costs. The firm's supply manager has been asked to reduce the product's costs and improve margins. Given this situation, which of the following is the BES1 course of action that the supply manager can recommend?

  A. Conduct a quality function deployment (QFD) analysis
  B. Issue a request for information (RFI) to other suppliers
  C. Review the part requirements and design with engineering
  D. Renegotiate pricing with the current supplier
  C. Review the part requirements and design with engineering

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  Explanation

  The firm is facing shrinking profits on a product that requires high-tech parts with strict specifications. While the contract for these parts has been renegotiated for lower costs, further actions are needed to reduce product costs and improve

  margins.

  Conduct a quality function deployment (QFD) analysis: This helps in translating customer needs into specific engineering requirements but may not directly address cost reduction. Issue a request for information (RFI) to other suppliers: This

  might identify potential new suppliers but does not guarantee cost savings or immediate improvement. Review the part requirements and design with engineering: This is the best course of action as it can uncover opportunities to simplify the

  design, use alternative materials, or modify specifications to reduce costs without compromising quality. Renegotiate pricing with the current supplier: Since the contract was recently renegotiated, further price reductions may not be feasible

  immediately. Therefore, the most effective course of action is to review the part requirements and design with engineering to identify potential cost-saving opportunities.

  References:

  Institute for Supply Management (ISM) guidelines on cost management. Engineering and design collaboration for cost reduction strategies.

• Question 118:

  A manufacturing company purchases a certain component in quantities of 10,000 units per truckload. The company uses 2,000,000 units annually. The firm's supply manager identifies two possible suppliers of the component, both of which

  meet service and quality requirements.

  Supplier A offers the component at $.69 per unit and charges $2000 to ship one truckload. Supplier B offers the component at $.71 per unit and charges $1500 to ship one truckload. Given this situation, which of the following will be MOST

  useful to the supply manager in deciding between the two suppliers?

  A. Landed price
  B. Value analysis
  C. Economic order quantity
  D. Cost/price analysis
  A. Landed price

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  Explanation

  Calculate Total Cost per Supplier: This includes the unit price and shipping costs.

  Supplier A: Unit cost is $0.69. Shipping cost is $2000 per 10,000 units.

  Total cost per unit: $0.69 + ($2000/10,000) = $0.69 + $0.20 = $0.71 per unit.

  Supplier B: Unit cost is $0.71. Shipping cost is $1500 per 10,000 units.

  Total cost per unit: $0.71 + ($1500/10,000) = $0.71 + $0.15 = $0.715 per unit.

  Compare Landed Prices: The total cost per unit for Supplier A is $0.71, and for Supplier B, it is $0.715. Decision: Supplier A offers the lower landed price at $0.71 per unit compared to Supplier B's $0.715 per unit.

  References:

  Monczka, R. M., Handfield, R. B., Giunipero, L. C., and Patterson, J. L. (2016). Purchasing and Supply Chain Management. Cengage Learning.

  Christopher, M. (2016). Logistics and Supply Chain Management. Pearson.

• Question 119:

  A supply manager for PQR, Inc. is negotiating a contract to purchase software. The software will streamline PQR's online purchasing process with a one-click buy function. The supply manager wants to ensure PQR's performance expectations are met and that the consequences of failure to perform are properly captured. In this situation, which of the following is MOST important for the supply manager to include in the contract?

  A. Service-level agreements
  B. Protective covenants
  C. Warranties
  D. Maintenance and support
  A. Service-level agreements

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  Explanation

  Understanding the Contract Needs: The supply manager's primary concern is ensuring that the software meets PQR's performance expectations and that there are clear consequences if these expectations are not met. Service-Level

  Agreements (SLAs): SLAs are contractual commitments between a service provider and a client. They specify the performance standards the provider must meet and the remedies or penalties for failing to meet them. Performance

  Expectations: By including SLAs in the contract, the supply manager ensures that there are measurable performance metrics for the software, such as uptime, response time, and resolution time for issues. Consequences of Failure: SLAs

  also outline the consequences if the vendor fails to meet the agreed-upon standards. This can include penalties, service credits, or termination of the contract. Protective Covenants, Warranties, and Maintenance and Support: While these are

  important, they do not directly address the performance expectations and consequences of failure as effectively as SLAs.

  References:

  CIPS (Chartered Institute of Procurement and Supply). (n.d.). Service Level Agreement (SLA) - A detailed guide.

  SCMDOJO. (n.d.). The importance of SLAs in Procurement Contracts.

• Question 120:

  A firm's supply manager is asked by the engineering department to replace a chemical used in a majority of products made by the firm. The current chemical is Imported and has components that are highly regulated. Engineering wants to replace it with a chemical that uses non-hazardous domestic materials. This chemical would still have to be reported and customers would have to be notified of the change. Initial tests indicate that the new chemical is as effective as the old one. In this situation, which of the following should be the FIRST step taken by the supply manager?

  A. Check if the proposed supplier is ISO 14000 certified
  B. Update the project folder and timeline for implementation
  C. Perform a total cost analysis of the recommended new formula
  D. Notify all customers of the proposed change
  C. Perform a total cost analysis of the recommended new formula

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  Explanation

  Identify the Change Requirement: The engineering department wants to replace a highly regulated imported chemical with a domestic, non-hazardous alternative.

  Evaluate the Impact:

  Assess the cost implications of switching chemicals, including sourcing, handling, and

  compliance costs.

  Consider the impact on production processes, product quality, and customer acceptance.

  Total Cost Analysis: Performing a comprehensive total cost analysis will provide a clear picture of all associated costs, ensuring that the decision is financially sound and aligns with the company's strategic objectives. Subsequent Steps: If the

  cost analysis is favorable, update project timelines, check supplier certifications, and notify customers.

  References: Total Cost of Ownership (TCO) Analysis Frameworks Chemical Supply Chain Management

  Best Practices in Supplier Evaluation and Selection