Free Practice Questions for ISM CORE Exam

The best way to resolve the situation is to structure the RFP to include pass/fail and non-mandatory scored requirements, and have stakeholders assign needs and wants accordingly. This approach allows for the inclusion of the VP of sales' requirements without limiting competition excessively. Pass/fail requirements are mandatory, ensuring critical needs are met, while non-mandatory scored requirements allow for flexibility and encourage competition. Stakeholders can prioritize their needs and wants, facilitating a balanced and comprehensive evaluation of proposals.

References:

"The Request for Proposal Handbook: A Sourcebook of Guidelines, Best Practices, Examples, Laws, Regulations, and Checklists from Jurisdictions throughout the United States and Canada" by Michael Asner.

ISM guidelines on RFP development.

Articles on RFP best practices from Supply Chain Management Review.

] Understand the Need: DEF, Inc. needs to find local sources for materials and equipment in a new geographic region.

Initial Information Gathering:

An RFI is used to collect information about potential suppliers' capabilities, offerings, and market conditions.

This step helps in understanding the supplier landscape and identifying potential suppliers.

Evaluate Responses: Analyze the information gathered from the RFI to shortlist suppliers for further engagement.

Subsequent Steps: Based on RFI responses, the company can issue RFQs or RFPs to procure the required materials and equipment. References:

Procurement and Sourcing Best Practices

Supplier Selection and Evaluation Processes

Strategic Sourcing Frameworks

In situations where a consultant performing audit services also engages in other non-audit work for the company, a conflict of interest may arise, compromising the integrity and objectivity of the audit. It is crucial to address this issue transparently with the CEO, explaining the potential conflict and recommending alternative solutions, such as engaging a different consultant or firm for the audit. This approach ensures compliance with ethical standards and maintains the credibility of the audit process.References:

IFAC (International Federation of Accountants) Code of Ethics for Professional Accountants.

ISM (Institute for Supply Management) guidelines on professional services procurement.

When creating a service level agreement (SLA) for laundry services, especially for a rapidly growing food service company, it is crucial to focus on the most impactful area.

Distance from the company: Relevant for logistics but not the primary concern.

Cost: Important but secondary to ensuring service quality.

Quality: This should be the primary focus to ensure that the laundry services meet the necessary standards, which is critical for maintaining hygiene and customer satisfaction in the food service industry.

Supplier capacity: Important to ensure they can handle the volume but can be addressed within the quality parameters.

Therefore, the primary focus area of the new SLA should be quality.

References:

Service level agreement best practices.

Quality management in service procurement.

The supply manager should pay $13,000 now and $5,000 14 days after the receipt of the replacement goods. This approach balances the need to adhere to preferential payment terms, which are important for the supplier's cash flow, while ensuring that payment is made for the correct goods received. It respects the negotiated terms and maintains good supplier relations by providing timely partial payment, with the balance due upon the fulfillment of the complete order.

References:

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

Institute for Supply Management (ISM). (2020). ISM Glossary of Key Supply Management Terms.

Lead Division Buying: This strategy involves one division taking the lead in purchasing for multiple divisions within an organization.

Supporting Factor: Consistent quantities of the same item used by several divisions support lead division buying.

Economies of Scale: Consistent demand allows for bulk purchasing, leveraging economies of scale, and achieving cost savings.

Standardization: Consistent usage across divisions promotes standardization, simplifying the procurement process and supplier management.

References

CIPS. (n.d.). Lead Division Buying and Centralized Procurement.

ISM. (n.d.). Strategies for Efficient Procurement Management.

Context: Evaluating bids for a delivery van with consideration of cost and potential buyback offers.

Cost Calculation:

Supplier J: $50,000

Supplier K: $52,500 with a $3,000 buyback.

Opportunity Cost: The present value (PV) factor for 5 years at 10% is 0.62.

Supplier K’s Net Cost: $52,500 - ($3,000 * 0.62) = $52,500 - $1,860 = $50,640

Comparison: Supplier J’s cost is $50,000, Supplier K’s effective cost is $50,640.

Lifecycle Savings: Supplier K offers a buyback, which provides future value and offsets initial higher cost.

Conclusion: Over the van's life cycle, Supplier K's offer results in cost savings considering the buyback.

References

Capital Budgeting Techniques by Brigham and Ehrhardt.

Present Value calculations and decision-making in procurement.

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., & Patterson, J.L. (2015). Purchasing and Supply Chain Management.

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

When a supplier requests that the contract be based on its local currency, the first course of action for the supply manager is to assess the potential financial implications of this request. Exchange rate fluctuations can significantly impact the cost of goods and services over time. By performing exchange rate due diligence with the help of a financial advisor, the supply manager can understand the risks and potential cost variations. This involves analyzing historical exchange rate trends, forecasting future movements, and considering hedging strategies to mitigate risk. The supply manager can then make an informed decision on how to proceed with the supplier's request. References:

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

Supply Chain Management Review articles on currency risk management

Identify the Issues: The supply manager should first clearly outline the specific issues with Supplier X, such as the price increases and declining technical support.

Develop Win-Win Scenarios: Before entering negotiations, it is essential to develop scenarios that can create mutual benefits for both MNO, Inc. and Supplier X. This approach fosters a collaborative relationship rather than an adversarial one.

Long-term Value: By focusing on long-term value, the supply manager can address the current issues and also set a precedent for future interactions. This may involve proposing solutions like better support mechanisms or more favorable pricing structures in exchange for commitments from MNO.

Collaborative Relationship: Building a collaborative relationship helps in negotiating terms that are beneficial and sustainable for both parties. This includes working together to find efficiencies or improvements that can lead to cost savings or enhanced service levels.

References:

CIPS: "Guide to Supplier Relationship Management"

ISM: "Negotiation Strategies for Long-Term Supplier Relationships"