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The price of raw materials for a critical product is highly volatile. The supplier will not commit to long-term pricing due to the dramatic swings of raw material price. In this situation, the buying

organization should

A.

find another supplier for the product who can propose a method to manage volatility

B.

source the material itself to get better pricing directly from the raw material manufacturer

C.

demand that the supplier maintain pricing for a longer period of time to mitigate the raw material price swings

D.

allow the supplier to change pricing on a fixed schedule based on a price index with a maximum allowable change

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

FGH, Inc. has purchased components from Supplier A for many years. The supplier's performance has been very good, with reliable deliveries and consistently high quality. As contract renewal approaches, Supplier A informs FGH's supply manager that a significant price increase is anticipated, based primarily on the costs of building a new production facility. The supply manager has been directed to negotiate a new contract with Supplier A only if it agrees to maintain current pricing. Which of the following is the BEST way for the supply manager to prepare for negotiations with Supplier A?

A.

Determine if the parts made by Supplier A can be produced elsewhere

B.

Discuss alternate product designs with engineering

C.

Enlist FGH's executive management to participate in negotiations

D.

Research into whether Supplier A's recent expansion costs are reasonable

A director of supply management is tasked with determining where savings can be found in indirect cost categories. If needed, the company will consider hiring additional staff to negotiate and administer contracts. Which of the following is the FIRST step the supply manager should take?

A.

Assess skills already available in supply management

B.

Identify a cross-functional team to brainstorm solutions

C.

Develop a new supplier relationship model

D.

Establish a baseline using current spend data

Which of the following refers to the legal principle that prevents a person from asserting a position Inconsistent with his or her prior conduct, if injustice would result to a person who has changed position in reliance upon that conduct?

A.

Conflict of interest

B.

Estoppel

C.

Severability

D.

Mutual consideration

A firm has contracted for the past 3 years with Supplier DEF to supply parts used in manufacturing. As the contract comes to an end, the parties enter into negotiations in the hopes of renewing the agreement. DEF proposes a new 3-year term with a 3% increase in price each year. The supply management team believes this price increase is higher than market value, so they execute a request for proposal (RFP) event for parts, In which DEF is Included. After reviewing the proposals, DEF is the successful bidder. DEF's proposal is for 3 years with only a 1% increase in price each year.

The price difference obtained through the RFP can BEST be described as which of the following?

A.

Cost containment

B.

Cost mitigation

C.

Cost reduction

D.

Cost avoidance

PQR, Inc. is a small manufacturing firm that is rebuilding its customer base after emerging from bankruptcy. PQR now projects growing demand for its products. PQR's supply manager is planning negotiations with a key supplier that has worked well with the firm in the past. Which of the following is the STRONGEST factor the supply manager can use to improve PQR's negotiating position?

A.

There is considerable competition among suppliers.

B.

Delivery schedules can be more flexible than in the past.

C.

PQR has a reputation for innovation in its industry.

D.

PQR wants to enhance long-term supplier relationships.

A large manufacturing organization has a policy of awarding contracts to a single source based on bids for requirements over a specified time period. Some of the parts sourced are readily available from many suppliers, and the organization's supply management team recommends choosing a few of these parts for a trial project to determine the effectiveness of multiple sourcing. The MOST likely advantage of the multiple sourcing arrangement will be

A.

improved production scheduling accuracy

B.

the ability to test new suppliers with little risk

C.

enhanced standardization programs

D.

the improvement of product quality

Which of the following is the PRIMARY reason why companies should consistently update internal purchasing policies?

A.

Suppliers might believe they can take advantage of an organization that fails to consistently update policies.

B.

Updating policies is a key metric senior management uses to measure the impact of the purchasing organization on the business.

C.

Auditors expect updates on a regular basis to ensure that the company is consistently reviewing procedures.

D.

The company and market place are constantly undergoing changes.

Which of the following is the BEST reason to develop relationships with a small number of suppliers?

A.

To identify innovation opportunities

B.

To obtain pricing improvements

C.

To decrease internal cultural barriers

D.

To Improve sourcing opportunities