ISM ISM-CORE Online Practice Questions and Exam Preparation

ISM ISM-CORE Online Questions & Answers

• Question 161:

  A company currently has contracts with several temporary labor suppliers with detailed requirements for the same skill set. The hourly rates charged by each of these suppliers vary widely. The firm wants to have all temporary labor services provided by one supplier at the lowest possible cost. Given this situation, which of the following is the BEST course of action for the firm to take?

  A. Conduct a reverse auction with a clear statement of work
  B. Transition the services to direct employees
  C. Issue a request for proposal (RFP) to preselected suppliers
  D. Negotiate for lower pricing with one of the suppliers
  A. Conduct a reverse auction with a clear statement of work

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  Explanation

  Conducting a reverse auction with a clear statement of work is the best course of action for a firm wanting to have all temporary labor services provided by one supplier at the lowest possible cost. A reverse auction allows suppliers to bid against each other in real-time, driving down the price. Providing a clear statement of work ensures that all bidders understand the requirements and can offer competitive pricing for the same set of services, ultimately resulting in cost savings

  for the firm.

  References:

  Jap, S.

  D. (2003). An Exploratory Study of the Introduction of Online Reverse Auctions. Journal of Marketing.

  CIPS (Chartered Institute of Procurement and Supply). (2021). Procurement and Supply Chain Management.

• Question 162:

  A firm wants to reduce the supply base for a particular product from three to two suppliers. Which of the following is the BEST course of action for this firm to take?

  A. Negotiate with new suppliers to put pressure on the current suppliers
  B. Cease conducting business with the most difficult supplier and retain the other two suppliers
  C. Reassess the firm's supplier selection process
  D. Select two suppliers based on past performance and negotiate more favorable pricing
  D. Select two suppliers based on past performance and negotiate more favorable pricing

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  Explanation

  To reduce the supply base from three to two suppliers, the firm should evaluate the past performance of the current suppliers and select the two that have consistently met or exceeded performance expectations. This ensures that the firm

  retains reliable and high-performing suppliers. Once the selection is made, the firm can negotiate more favorable pricing with the chosen suppliers, leveraging the increased business volume that comes with consolidating orders.

  References:

  Purchasing and Supply Chain Management by Robert M. Monczka, Robert

  B. Handfield, Larry

  C.

  Giunipero, and James L. Patterson

  "Supplier Performance and Evaluation" - Chartered Institute of Procurement and Supply (CIPS)

• Question 163:

  Consider the following supplier terms for the same product:

  Supplier A:2%/15, Net 30 Supplier B:4?o/5, Net 30

  Which supplier's terms are more advantageous to the buying organization?

  A. Supplier B
  B. Cannot be determined based on the above information
  C. Supplier A
  D. The terms are equivalent
  A. Supplier B

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  Explanation

  Supplier B's terms of 4%/5, Net 30 are more advantageous. This means a 4% discount is available if the invoice is paid within 5 days, whereas Supplier A offers a 2% discount for payment within 15 days. Paying early (5 days) to get a 4%

  discount is more beneficial in terms of cost savings compared to a 2% discount for paying within 15 days. The greater discount percentage within a shorter period represents better cash flow management and cost savings.

  References:

  Financial Terms in Procurement

  Cash Flow Management Techniques in Supply Chain

• Question 164:

  A supply manager Is planning for negotiations with a sole-source supplier of an essential part. The buying firm is already one of the supplier's top customers, and will need even larger quantities of the part to expand its product line in the near future. The supply manager learns that the supplier may experience some financial risks over the coming year, and that the supplier is anxious to solidify its relationships with major customers to mitigate that risk. Which of the following Is the BEST way for the supply manager to gain a deeper understanding of the supplier's position?

  A. Perform a SWOT analysis
  B. Perform a Porter's Five Forces analysis
  C. Determine the supplier's bottom line position
  D. Determine the buying firm's bottom line position
  A. Perform a SWOT analysis

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  Explanation

  The best way for the supply manager to gain a deeper understanding of the supplier's position is to perform a SWOT analysis. This analysis helps identify the supplier's strengths, weaknesses, opportunities, and threats. Understanding these

  factors provides valuable insights into the supplier's business environment, financial risks, and potential areas for collaboration. It allows the supply manager to develop a more informed negotiation strategy that addresses both parties' needs.

  References:

  "SWOT Analysis: A Comprehensive Guide" by Lawrence

  G. Fine.

  ISM guidelines on supplier analysis and evaluation.

  CIPS resources on strategic sourcing and supplier evaluation.

• Question 165:

  A product is approaching end-of-life, and the firm is considering its various options. While long-term, ongoing conflicts have occurred between the current supplier and the buying organization, there are few other supply options available for this particular component. In this situation, which of the following is the BEST course of action for the firm to take to ensure continued supply?

  A. Instruct accounts payable to pay supplier invoices in advance
  B. Make the component in-house
  C. Attempt to resolve conflicts with the existing supplier to maintain continuity of supply
  D. Have the legal department instruct the existing supplier to comply with the contract terms
  C. Attempt to resolve conflicts with the existing supplier to maintain continuity of supply

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  Explanation

  Given the product is approaching end-of-life and there are few alternative supply options, the best course of action is to attempt to resolve conflicts with the existing supplier. Maintaining a stable supply chain is crucial, and resolving conflicts

  can ensure that the necessary components continue to be supplied without interruption. This approach is often more practical and cost-effective than other options, such as bringing production in-house or taking legal action, especially for a

  product at the end of its lifecycle.

  References:

  Monczka, R.M., Handfield, R.B., Giunipero, L.C., and Patterson, J.L. (2015). Purchasing and Supply Chain Management.

  Chopra, S., and Meindl, P. (2015). Supply Chain Management: Strategy, Planning, and Operation.

• Question 166:

  A company is about to conduct an opportunity assessment review of the items it purchases. Which of the following categories should be analyzed FIRST?

  A. Low value/high risk and high value/low risk items
  B. High value/high risk and low value/high risk items
  C. High value/low risk and high value/high risk items
  D. Low value/low risk and low value/high risk items
  C. High value/low risk and high value/high risk items

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  Explanation

  During an opportunity assessment review, it is crucial to focus first on high-value items as they represent the most significant potential for cost savings and impact on the company's bottom line. Within this category, both low risk and high-risk items should be analyzed to identify opportunities for improvement, risk mitigation, and value optimization. By targeting high-value items first, the company can achieve more substantial benefits from its procurement strategies.

  References: Category Management in Purchasing: A Strategic Approach to Maximize Business Profitability by Jonathan O'Brien Supply Chain Risk Management: Minimizing Disruptions in Global Sourcing by Robert Handfield and Kevin McCormack

• Question 167:

  A supply manager for TUV, Inc. receives a call from an internal stakeholder complaining that for the past several months, one of TUV's longtime suppliers has been late with shipments, disrupting production. The Internal stakeholder has left

  several messages with the supplier, which have all gone unanswered. The supply manager listens to the stakeholder's concerns and states that these recent occurrences are atypical for this supplier. The supply manager offers to set up a call

  with the internal stakeholder and the supplier to discuss the situation and determine how the parties can move forward.

  Which of the following BEST describes the supply manager's role in this situation?

  A. Negotiator
  B. Mediator
  C. Agent
  D. Advocate
  B. Mediator

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  Explanation

  Situation Analysis: The supply manager receives a complaint from an internal stakeholder about a long-time supplier's recent delays in shipments. Atypical Behavior: The supply manager acknowledges that this behavior is not typical for this supplier, indicating an understanding of the supplier's historical performance. Action Taken: The supply manager offers to set up a call between the internal stakeholder and the supplier to discuss the issue. Role Clarification: The supply manager's role in this situation involves facilitating communication between the internal stakeholder and the supplier to resolve the issue. Mediator Role: This role is best described as a mediator, as the supply manager is acting as an intermediary to help both parties come to a mutual understanding and find a way to move forward.

  References: ISM Professional Series: Supplier Relationship Management CIPS Knowledge on Conflict Resolution in Procurement

• Question 168:

  A supply manager Is conducting negotiations with a supplier. The supplier states that it cannot offer a lower price because the product under negotiation is covered by a government contract. In this situation, the supply manager should

  A. offer to reduce the order quantity
  B. negotiate the other terms and conditions, and return to the issue of price at a later time
  C. conclude that this is in fact the best price that the supplier can legally offer
  D. require the supplier to provide specifics on the government contract restrictions
  D. require the supplier to provide specifics on the government contract restrictions

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  Explanation

  When a supplier states that a product is covered by a government contract, implying that they cannot offer a lower price, it is essential for the supply manager to verify this claim. The supply manager should require the supplier to provide

  specifics on the government contract restrictions. This will help determine if the price is indeed fixed by the government or if there are other negotiable aspects. By understanding the exact restrictions, the supply manager can better navigate

  the negotiation process, ensuring compliance while potentially identifying areas for negotiation that are not restricted.

  References:

  Federal Acquisition Regulation (FAR) guidelines on government contracts.

  "The Art of Negotiation" by Michael Wheeler.

  Institute for Supply Management (ISM) guidelines on government contract negotiations.

• Question 169:

  A supply manager negotiates an agreement with a salesperson from the supplier's organization. With regard to signing the agreement, which of the following is MOST correct?

  A. The supply manager and the salesperson should sign the agreement.
  B. No signatures are required, as the deal was already agreed upon between the supply manager and the salesperson.
  C. The presidents of both the buying firm and the supplier should sign the agreement.
  D. An authorized person from the buying firm and an authorized person from the supplier should sign the agreement.
  D. An authorized person from the buying firm and an authorized person from the supplier should sign the agreement.

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  Explanation

  Authorized Signatures: An agreement should be signed by authorized persons from both the buying firm and the supplier to ensure that the contract is legally binding. Authority Verification: The supply manager and the salesperson may

  negotiate the terms, but the signatures should come from individuals with the authority to bind their respective organizations legally. Risk Mitigation: This ensures that the agreement is enforceable and reduces the risk of any party later

  claiming that the agreement is invalid due to unauthorized signatures. Organizational Policy Compliance: This practice ensures compliance with organizational policies regarding contract signing authority.

  References: ISM: "Contract Management and Negotiation Strategies" CIPS: "Legal Aspects of Procurement and Supply"

• Question 170:

  A manufacturing company has numerous sites around the country. Supply management teams at each location do not have the same understanding of the different Internal processes. Which of the following should senior supply management do in order to correct this problem?

  A. Establish, communicate and reinforce a supply chain map
  B. Contact suppliers to explain the processes and ask them not to collaborate with non-complying employees
  C. Contact supply managers at each site to implement disciplinary actions against buyers deviating from the process
  D. Centralize the purchasing activities at the firm's headquarters
  A. Establish, communicate and reinforce a supply chain map

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  Explanation

  To ensure a consistent understanding of internal processes across all sites, senior supply management should establish, communicate, and reinforce a supply chain map. A supply chain map visually represents the flow of materials,

  information, and finances throughout the supply chain. By standardizing this information and ensuring it is communicated effectively, all team members can have a clear and consistent understanding of the processes. This helps to align

  activities, improve coordination, and ensure compliance with standardized procedures.

  References:

  Lambert,

  D. M., and Cooper, M.

  C. (2000). Issues in Supply Chain Management. Industrial Marketing Management.

  Burt,

  D. N., Dobler,

  D. W., and Starling, S. L. (2003). World Class Supply Management.