ISM ISM-CORE Online Practice Questions and Exam Preparation

ISM ISM-CORE Online Questions & Answers

• Question 241:

  According to the Sarbanes-Oxley Act, to whom must an audit committee for a publicly traded company answer?

  A. The Internal Revenue Service
  B. The Securities and Exchange Commission
  C. The company's shareholders
  D. The firm's CEO
  C. The company's shareholders

  ---

  Explanation

  The audit committee for a publicly traded company must answer to the company's shareholders. The Sarbanes-Oxley Act mandates significant corporate governance reforms regarding audit committees, making them responsible for the appointment, compensation, and oversight of the issuer's auditor12. This aligns with the objective of ensuring that the audit committee acts in the best interest of the shareholders, maintaining transparency and accountability in financial reporting.

• Question 242:

  PQR's supply manager signs a contract with Supplier X for delivery of parts totaling $1,250,000 per year for four years. Accompanying the contract is a copy of the organization's signing policy, which states that supply managers have

  authority to execute contracts up to $1,000,000 per year. Supplier X questions the discrepancy, but is told verbally by the supply manager that the policy has changed, and supply managers now have a $1,500,000 per year signing limit for up

  to five years.

  Senior management at PQR discovers the supply manager's misstatement and tries to disavow the contract. This attempt will likely be ____________

  A. successful, as the supplier should have respected the written signing policy
  B. unsuccessful, because the supply manager's verbal statement represents a binding agreement
  C. unsuccessful, as the supply manager's status and statement constitute apparent authority
  D. successful, provided the disavowal occurs within three business days of contract signing
  C. unsuccessful, as the supply manager's status and statement constitute apparent authority

  ---

  Explanation

  In this scenario, the supply manager signed a contract exceeding their documented authority limit, but verbally assured the supplier of an increased signing limit. The key issue is the concept of apparent authority. Successful, as the supplier

  should have respected the written signing policy: This disregards the principle of apparent authority. Unsuccessful, because the supply manager's verbal statement represents a binding agreement: Verbal statements alone may not constitute

  a binding agreement without supporting apparent authority. Unsuccessful, as the supply manager's status and statement constitute apparent authority: Apparent authority exists when a third party reasonably believes that an individual has the

  authority to act on behalf of the organization. The supply manager's role and assurances create a reasonable perception of authority.

  Successful, provided the disavowal occurs within three business days of contract signing: No standard provision supports this within the given context. Therefore, the attempt to disavow the contract will likely be unsuccessful, as the supply

  manager's status and statement constitute apparent authority.

  References:

  Contract law principles on actual and apparent authority.

  Case studies on organizational liability for employees' actions.

• Question 243:

  An automobile manufacturer learns that its supplier for brake parts cannot maintain a steady workforce of machinists. In this instance, it is likely that the manufacturer failed to examine which of the following during supplier performance evaluations?

  A. Labor stability
  B. Quality metrics
  C. Financial stability
  D. Business continuity
  A. Labor stability

  ---

  Explanation

  The issue of a supplier not maintaining a steady workforce indicates a failure to assess labor stability during

  supplier performance evaluations: Labor stability: Evaluating the supplier's ability to maintain a steady workforce would have highlighted potential issues affecting continuity and reliability.

  Quality metrics: Important, but this issue pertains to workforce stability.

  Financial stability: While crucial, it does not directly address the problem of workforce fluctuations.

  Business continuity: Broadly relevant, but labor stability is a more specific indicator of the workforce issue.

  Therefore, the manufacturer likely failed to examine labor stability.

  References:

  Supplier performance evaluation best practices.

  Risk management in supply chain literature.

• Question 244:

  An operations manager wants to replace the existing fleet of aging vehicles owned by the company. The operations manager presents the supply manager with a list denoting the quantity, makes and models currently in operation:

  Quantity Brand A 4X4 SUVs15 Brand B Midsize Cars5 Brand C Compact Cars45

  Which of the following is the BEST course of action for the supply manager to take?

  A. Request quotations for the listed quantities of vehicles, using generic specifications and performance requirements
  B. Request quotations for the listed makes and models of vehicles, with forecasted quantities to meet current and future needs
  C. Request quotations using generic specifications and performance requirements, with forecasted quantities to meet current and future needs
  D. Request quotations for the makes, models and quantities of vehicles specified on the list
  C. Request quotations using generic specifications and performance requirements, with forecasted quantities to meet current and future needs

  ---

  Explanation

  Requesting quotations using generic specifications and performance requirements with forecasted quantities to meet current and future needs is the best course of action for the supply manager. This approach ensures flexibility in selecting

  the most cost-effective and suitable vehicles while considering future demands. By focusing on specifications and performance, the supply manager can compare different brands and models objectively, ensuring that the chosen vehicles

  meet the company's operational needs and budget constraints. Additionally, considering future needs allows for strategic planning and potential cost savings through bulk purchasing or long-term contracts.

  References:

  Lysons, K., and Farrington,

  B. (2016). Procurement and Supply Chain Management. Pearson.

  CIPS (Chartered Institute of Procurement and Supply) guidelines on vehicle procurement and fleet management.

• Question 245:

  Which document provides a detailed description of performance expectations for services?

  A. Contract Addendum
  B. Statement of Work
  C. Non-Disclosure Agreement
  D. Purchase Requisition
  B. Statement of Work

  ---

  Explanation

  The Statement of Work (SOW) defines service deliverables, timelines, and quality metrics within service contracts.

• Question 246:

  After a bid process concludes and an award is made, there should be a debriefing process that involves

  A. advising the unsuccessful bidders to resubmit proposals
  B. informing unsuccessful bidders they were not awarded the contract and notifying end users of the successful supplier
  C. advising the successful bidder to review the contract terms
  D. informing end users of the specific pricing provided by all of the bidders and notifying third party organizations of the unsuccessful bidders
  B. informing unsuccessful bidders they were not awarded the contract and notifying end users of the successful supplier

  ---

  Explanation

  After a bid process concludes and an award is made, it is important to inform unsuccessful bidders that they were not awarded the contract and notify the end users of the successful supplier. This debriefing process maintains transparency

  and professionalism. Unsuccessful bidders should be given feedback on why their bids were not selected to help them improve future proposals, while end users need to know which supplier will be fulfilling the contract to ensure smooth

  coordination and implementation.

  References:

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

  National Institute of Governmental Purchasing (NIGP). (2018). Public Procurement Guide.

• Question 247:

  A supplier is awarded a contract to network all of a buying company's production and forecasting applications. The supplier completes the work on time. However, follow-up tests by the buying organization's IT department determine that performance does not meet contract specifications. Given this situation, which of the following is the BEST course of action for the buying firm to take?

  A. Review the contract warranty terms and remedies
  B. Accept the network and sign a maintenance contract to fix the problems
  C. Have another supplier review the network to estimate the cost of repairs
  D. Have IT attempt to repair the network so it works correctly
  A. Review the contract warranty terms and remedies

  ---

  Explanation

  Issue with Performance: The supplier completed the work on time, but the network does not meet the contract specifications.

  Contractual Remedies: Reviewing the contract warranty terms and remedies is the first step to determine the buyer's rights and the supplier's obligations. Warranties and Penalties: The contract should outline any warranties, penalties for

  non-compliance, and steps to resolve performance issues. Negotiating Solutions: Understanding the contractual terms allows the buying firm to negotiate appropriate remedies with the supplier, such as requiring repairs or seeking

  compensation. Conclusion: Reviewing the contract warranty terms and remedies is the best course of action to address the performance issues within the framework of the agreement.

  References:

  ISM. (n.d.). Managing Contracts and Warranties.

  CIPS. (n.d.). Contract Management and Enforcement in Procurement.

• Question 248:

  Which of the following BEST describes a single source supply strategy?

  A. Awarding purchases to one supplier in preference over other suppliers
  B. Designing requirements so that only one supplier can meet the needs of the organization
  C. Selecting two or more suppliers for the same product, but purchasing from only one of them to increase the volume discount
  D. Purchasing a product from one supplier for a period of time, then switching purchases to a new supplier for the same product
  A. Awarding purchases to one supplier in preference over other suppliers

  ---

  Explanation

  The option that BEST describes a single source supply strategy is A. Awarding purchases to one supplier in preference over other suppliers. Single sourcing occurs when a company chooses one supplier to provide all of its products, materials, parts, and components, even when there are other suppliers that can provide the same goods12. This strategy is often used to reduce costs and streamline the procurement process.

• Question 249:

  A supply manager Is assigned to a new product similar to products the firm has developed in the past. Because the stakeholders have not defined all of the product's requirements, not all engineering diagrams have been completed, and the program is behind schedule. The program manager requests all procurement lead times for the project. Which of the following is the BEST way for supply manager to respond in this situation?

  A. Consult with suppliers for lead time estimates on similar parts used in related products
  B. Contract with the suppliers to start manufacturing the parts, as the engineering drawings are not necessary at this point
  C. Postpone any action until the engineering drawings are released
  D. Conduct regular meetings with the engineering team to expedite the release of the drawings
  A. Consult with suppliers for lead time estimates on similar parts used in related products

  ---

  Explanation

  Understanding Lead Times: Lead time is the period between the initiation and completion of a production process.

  Consulting Suppliers: Given that the product is similar to previous products, suppliers would have historical data on lead times for similar parts. Accuracy of Estimates: Suppliers can provide more accurate and realistic estimates based on

  past experience and current production capabilities. Action Without Complete Drawings: Consulting suppliers does not require final engineering drawings, allowing procurement processes to begin promptly without delays. Minimizing Delays:

  This approach allows the supply manager to provide the program manager with timely information, helping to keep the project on track despite incomplete engineering diagrams.

  References:

  Project Management Body of Knowledge (PMBOK), Procurement Management.

• Question 250:

  When developing a category management plan, which of the following is the BEST reason for soliciting cross-functional input?

  A. It facilitates Input from stakeholders and other functional areas to ensure a long-term solution.
  B. It provides an opportunity to demonstrate non-linear leadership.
  C. It allows the category manager to gain important insights from the supply management team.
  D. It enables the category manager to resolve conflicting views and priorities for goods or services.
  A. It facilitates Input from stakeholders and other functional areas to ensure a long-term solution.

  ---

  Explanation

  Soliciting cross-functional input when developing a category management plan is crucial because it ensures that the plan considers the perspectives and requirements of various stakeholders and functional areas. This collaboration helps in

  creating a comprehensive and effective plan that addresses the needs of the entire organization, leading to more sustainable and long-term solutions.

  References:

  CIPS (Chartered Institute of Procurement and Supply). Cross-functional Team Collaboration in Category Management.

  ISM (Institute for Supply Management). Benefits of Cross-functional Teams in Supply Management.