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CORE Supply Management Core Exam Questions and Answers

Questions 4

A multinational company is in the market to purchase widgets. The firm's standard payment terms are net 80. While negotiating terms and conditions, a supplier offers to provide a 2% discount on the purchase price of the widgets if they are paid within 35 days. This is an example of which of the following?

Options:

A.

Profit repatriation

B.

Dynamic discounting

C.

Fixed discounting

D.

Supplier financing

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Questions 5

A buying firm learns that its sole supplier of a critical part is being sued by an employee for negligence. The firm is currently in negotiations with this supplier. To minimize or avoid risk, which of the following is the BEST tactic for the buying firm to utilize in this situation?

Options:

A.

Postpone the negotiations until after the suit is settled

B.

Request more favorable payment terms

C.

Complete the negotiations while monitoring the situation

D.

Purchase an all-risk insurance policy

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Questions 6

A supply manager seeks bids on a new piece of capital equipment. The equipment is budgeted at $115,000. Three suppliers send in bids of $110,000, $114,000 and 5135,000. After receiving the bids, additional negotiations with the low bidder result in a final cost of $105,000. In this situation, what should the baseline value be for calculating cost avoidance?

Options:

A.

$114,000

B.

$135,000

C.

$110,000

D.

$115,000

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Questions 7

A large manufacturing firm has offices across the country. The company wants to obtain the best price and reduce administrative costs associated with procuring office supplies. Which of the following would be BEST suited to the firm's needs?

Options:

A.

Blanket agreement

B.

Indefinite delivery contract

C.

Master purchasing agreement

D.

Manufacturing resource planning

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Questions 8

PQR, Inc. is a large international life insurance company. PQR's vice president of sales asks the firm's supply manager to require that any future procurement contracts contain a provision which obligates the supplier to make PQR's insurance products available to the supplier's employees for optional purchase. In this situation, the supply manager should

Options:

A.

ask legal counsel to review national and local laws in determining the legality of the request

B.

accommodate the request, as the provision contains no absolute requirement that a supplier's employees purchase any insurance

C.

decline the request on the grounds that it is Illegal

D.

decline the request, as it is contrary to the principle of buying and selling based on the fundamental criteria of quality, cost, and service

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Questions 9

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?

Options:

A.

Negotiator

B.

Mediator

C.

Agent

D.

Advocate

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Questions 10

The use of procurement cards to simplify purchases of low cost/low complexity items is BEST suited for which of the following categories of spend?

Options:

A.

Leverage

B.

Tactical

C.

Critical

D.

Strategic

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Questions 11

For several years, an environmental services company has contracted on a single-source basis with a supplier that offers highly specialized testing procedures. The supplier’s performance is excellent, but it has Instituted frequent rate increases. The company’s supply manager is under pressure to reduce costs wherever possible, but developing other sources will be time-consuming. Given this situation, which of the following actions should the supply manager take FIRST?

Options:

A.

Negotiate a maximum yearly limit on price increases with the current supplier

B.

Issue an RFI to identify other potential sources

C.

Perform a 'should cost' analysis of the current supplier's pricing

D.

Inform the current supplier that the contract will be terminated If it does not reduce prices

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Questions 12

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?

Options:

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

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Questions 13

MNO, Inc. purchases benchmarking data services from Supplier X, which is the sole source for data relevant to MNO's industry. In recent months, Supplier X's pricing has increased and its technical support has worsened. MNO's supply manager is preparing to negotiate for contract renewal with Supplier X and needs to resolve these concerns. Which of the following is the BEST course action for the supply manager to take before conducting negotiations?

Options:

A.

Determine whether data can be collected from other sources, to bring the services in-house

B.

Compare Supplier X's rates against similar services to establish reasonable costs

C.

Develop win-win scenarios to add long-term value in a collaborative relationship

D.

Revise the Service Level Agreement (SLA) with Supplier X, with penalties for non-performance

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Questions 14

After working for several years at ABC, Inc.—a large manufacturing company—Smith moves to a senior position at XYZ, a smaller firm which is part of ABC's family of companies. In an effort to lower costs, Smith begins negotiations with a supplier that sells to both ABC and XYZ. While at ABC, Smith was able to negotiate very favorable contracts for parts and services. However, Smith is unable to obtain as favorable terms for XYZ with the same supplier.

To improve XYZ's position, which of the following is the BEST course of action for Smith to take?

Options:

A.

Inform the supplier that the contracts will be cancelled unless concessions are made

B.

Apply knowledge of ABC's operations to demand better pricing

C.

Issue an RFI to identify other potential suppliers

D.

Combine requirements of XYZ with ABC to leverage volume

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Questions 15

A buying organization requires suppliers to maintain an on-time delivery rate greater than 90%. Based on the data below, which of the following can be concluded regarding the delivery performance of these three suppliers?

Supplier A ScoreSupplier B ScoreSupplier C Score

Total Shipments10002000500

Late Shipments6012551

Options:

A.

All threesuppliers have an on-time delivery rate greater than 90%.

B.

SupplierBhas failed to meettheorganization'srequirements.

C.

SupplierChas failed to meettheorganization'srequirements.

D.

SupplierAhas failed to meettheorganization'srequirements.

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Questions 16

A manufacturing firm which prides itself on excellent customer service, quality, and prompt delivery decides to outsource several of its high volume, cost-driven products. The firm's supply manager is tasked with ensuring that service level expectations are maintained during the transition. Which of the following is the BEST step for the supply manager to take to ensure a smooth transition?

Options:

A.

Promote supply management staff as examples of change leaders

B.

Emphasize the focus on relationship management to support customers

C.

Direct staff to concentrate on execution and teamwork

D.

Redesign the department for better end-to-end supply management

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Questions 17

IJK, Inc. is currently under contract with Supplier X to provide parts utilized in retail products manufactured by IJK. Demand for UK's products is expected to increase dramatically, and thus the firm's supply manager wants to explore possible cost savings. Supplier X has been a reliable supplier for many years and provides excellent quality, on-time service, and a willingness to work with UK on improvements. However, the supply manager believes Supplier X’s price is too high, as a competitor is offering a lower price. Given this situation, which of the following is the BEST course of action for UK's supply manager to take?

Options:

A.

Demand concessions from Supplier X

B.

Meet with Supplier X with the intent of working to reduce costs

C.

Do nothing for the moment, but wait to see how much volume increases

D.

Transition to the competitor offering the lower price

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Questions 18

An organization selects a supplier for a complex system implementation that will be conducted in several stages. Prompt initiation of the project is necessary in order to maintain the schedule, but the stakeholders have not yet defined the later milestones and deliverables. Which of the following would be the MOST appropriate course of action for the buying organization to take regarding the statement of work (SOW) for this project?

Options:

A.

Create an initial SOW to allow the supplier to begin the first phase, with provisions for negotiating subsequent SOWs for full project implementation

B.

Provide a SOW with all requirements available thus far, and include procedures for internal customers to make changes via contract amendments

C.

Issue a general letter of intent so that the supplier can start mobilizing and avoid delays

D.

Postpone any type of agreement with the supplier until all requirements are fully defined

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Questions 19

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?

Options:

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.

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Questions 20

A company purchases a high-value product In an industry known for slow turnover on receivables. This creates issues with cash flow and presents a special challenge to supply management. Given this situation, which of the following should this firm negotiate to BEST avoid difficulties in the buyer/supplier relationship?

Options:

A.

Extended NET terms

B.

Deposit payments on order and balance at shipment

C.

Cash discounts for early payment

D.

Cash in advance purchase

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Questions 21

Which of the following BEST describes a cash flow budget?

Options:

A.

A budget that links expenditures to revenue within each budgetary period

B.

A process in which managers must begin each budgetary period with no predetermined allocations

C.

A financial plan specifying the amount of money to be spent on plant and equipment

D.

A budget that shows individual expenses without tying the expenses to broader goals

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Questions 22

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

Options:

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

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Questions 23

Which of the following is a key element in the development of an auditable supply chain management process?

Options:

A.

Dedicated internal audit employees

B.

Strong management oversight

C.

Effective internal controls

D.

Supplier surveys

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Questions 24

A buyer for DEF, Inc. has been exceeding spending authority on agreements with several new suppliers. Which of the following Is an accurate statement regarding DEF's liability in this situation?

Options:

A.

DEF is only liable for an amount equal to the buyer's actual authority level.

B.

DEF is fully liable for the agreements, as the buyer is an employee of the company.

C.

DEF is responsible for the agreements if the buyer exceeded actual authority, but the suppliers perceived the spend to be within apparent authority.

D.

DEF is responsible for the agreement if the buyer exceeded actual and apparent authority levels, but only for a value equal to the apparent authority amount.

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Questions 25

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?

Options:

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

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Questions 26

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?

Options:

A.

Labor stability

B.

Quality metrics

C.

Financial stability

D.

Business continuity

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Questions 27

Smith is a supply manager for BCD, Inc. While planning for a solicitation involving high-volume parts, Smith learns that one of the potential suppliers has recently hired, as account executive, a close relative of Smith's. The relative owns a large block of shares in the supplier's company. In this situation, which of the following is the BEST course of action for Smith to take?

Options:

A.

Discuss the potential conflict of interest with the department supervisor and jointly determine how to proceed

B.

Advise the supplier that it cannot submit a bid, as it would create a conflict of interest

C.

Continue with the sourcing process and discuss the situation with the department supervisor if the supplier submits a competitive bid

D.

Prepare a memorandum outlining the situation and place it in the transaction file

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Questions 28

MNO, Inc. is a manufacturing operation that has recently expanded from domestic to global locations. MNO's supply management department is considering a plan to obtain raw materials from suppliers nearby each location. The organization currently handles its sourcing from headquarters, which provides coordination and support for all contracts. Which of the following strategies will likely be MOST useful to MNO's expansion efforts?

Options:

A.

Identifying suppliers in the region and managing purchases locally

B.

Using current sources to increase volume leveraging

C.

Contacting current suppliers to determine if they have offshore distribution

D.

Establishing a regional sourcing office that is centrally supported

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Questions 29

A company buys 200 metric tons of ethylene per month. The firm has a one-year agreement with Supplier X to buy the ethylene at $1000 per metric ton. After 3 months, the market price drops to $900 per metric ton, and the firm renegotiates the price to $890 per metric ton for the remaining contract term.

What savings should be reported?

Options:

A.

$264,000 cost reduction and $240,000 cost avoidance

B.

$18,000 cost reduction and $180,000 cost avoidance

C.

$24,000 cost reduction and $240,000 cost avoidance

D.

$198,000 cost reduction and $198,000 cost avoidance

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Questions 30

A company employs a special testing device within its laboratories. The firm needs two additional units of this device with the same capabilities, but wants to encourage competition rather than be brand-specific. The company's supply manager issues a solicitation with the brand and model number of the devices in use, appended with the phrase "or functional equivalent". Suppliers of other brands submit inquiries as to what the firm's exact needs are. Which of the following is the BEST response the supply manager can make to these inquiries?

Options:

A.

Detail how and where the devices will be used, Including any constraints

B.

Send detailed specifications from the referenced model's manufacturer

C.

Describe minimum capabilities and designate required versus optional features

D.

Provide a list of the brands and models that can meet requirements

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Questions 31

A rapidly-growing food service company Is creating a service level agreement (SLA) for laundry services. The current supply base has invested in new machines. Which of the following should be the PRIMARY focus area of the new SLA?

Options:

A.

Distance from the company

B.

Cost

C.

Quality

D.

Supplier capacity

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Questions 32

Which of the following is MOST important to address in an exit plan when an organization Is transitioning to a new supplier?

Options:

A.

Ensuring continuity of supply

B.

Identifying how costs will be shared

C.

Defining ownership and destruction of data

D.

Determining how assets will be transferred or sold

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Questions 33

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

Options:

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

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Questions 34

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

Options:

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

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Questions 35

EFG uses specialized components from Supplier A in the manufacture of state-of-the-art testing equipment. Supplier A has been very successful in meeting EFG's stringent quality specifications, which has been critical for EFG.

EFG learns that Supplier A plans to acquire a smaller firm which makes components similar to those under contract with EFG. EFG is concerned that the supplier may transfer its contract to the new subsidiary, leading to compromises in quality. Given this situation, which of the following is the BEST course of action for EFG to take?

Options:

A.

Negotiate with Supplier A to remove the changes clause from the contract

B.

Negotiate with Supplier A to strengthen the indemnification clause in the contract

C.

Negotiate with Supplier A to add a consent of assignment clause to the contract

D.

Take no action, as Supplier A must supply the chips at the same quality level no matter who manufactures them

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Questions 36

According to the Law of Agency, a supply manager acting as an agent makes decisions and acts in whose interest(s)?

Options:

A.

The interests of the profession

B.

His/her personal interest

C.

The interest of the organization that employs him/her

D.

The interests of the supplier which overlap with those of the buyer

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Questions 37

A manufacturing firm needs to maintain production and prevent delays due to raw material outages and quality Issues. Which of the following is the BEST course of action for this firm to take?

Options:

A.

Add 25% to raw material purchases to ensure there is enough inventory in case of supplier delays or quality problems

B.

Contract with multiple suppliers rather than depend upon one supplier to provide raw materials

C.

Develop a strategic relationship with its main supplier

D.

Maintain safety stock and implement an automatic reordering process when inventory drops below a certain level

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Questions 38

A business unit conducts discussions with key management members that Include category overviews, contracting executive summaries, local content spending plans, sourcing timelines, and cost management/value creation. These presentations can BEST be described as which of the following?

Options:

A.

Commodity segmentation

B.

Contracting plan

C.

Spend analysis

D.

Category action plan

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Questions 39

A firm issues an RFQ for specialty electronics to be used within a new product line. Internal needs are assessed and specifications are prepared by engineering. The bid is sent to five current suppliers, all of whom are familiar with the firm's supply chain. However, only two of these suppliers respond, and their quotes are much higher than expected. Which of the following is the MOST likely explanation for what occurred?

Options:

A.

The internal needs were not adequately addressed.

B.

The specifications were too narrow.

C.

The suppliers were not qualified.

D.

The specifications were too broad.

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Questions 40

During negotiations with a supply manager from FGH Inc., a supplier states that if FGH buys the 200 gigabyte version of its software package at a price of $700, the supplier will include a never-before-sold malware license valued at $147. FGH needs both the malware and the software package. If the supply manager agrees to the offer, FGH may claim a

Options:

A.

cost savings

B.

cost variance

C.

cost avoidance

D.

cost reduction

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Questions 41

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

Options:

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

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Questions 42

A supply manager is leading a negotiation team. This team will negotiate with several finalists supplying complex services. Prior to the negotiations, the supply manager briefs the team on strategies, roles and responsibilities. The team members seem to understand the importance of these factors, but shortly after the negotiations commence, several members begin to make mistakes such as arguing witF each other and failing to pay attention. Which of the following is the BEST course of action for the supply manager to take at this point?

Options:

A.

Call a caucus and reiterate the negotiation rules and their Importance In interactions with suppliers

B.

Remove the offending stakeholders from the negotiations, as they are not following the instructions

C.

End the negotiations and begin another round with different team members

D.

Contact the team members’ supervisors and express concern over the way they acted during the negotiations

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Questions 43

At what point in a business relationship with a supplier should discussions be held about which party has responsibility for specific costs, in the event the relationship needs to end?

Options:

A.

At any point in the relationship

B.

At no point in the relationship

C.

When the relationship needs to end

D.

In the beginning of the relationship

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Questions 44

A supply manager Is leading a team in developing a strategic sourcing strategy for the company's corporate-wide desktop and laptop computer procurement. Several business unit managers get into a heated debate over the relative Importance and exposure of desktop computers for their specific business units. Some units consider the desktop computer to be a low risk/low value commodity, while others consider them to be high risk/high value critical items. How should the supply manager proceed?

Options:

A.

Conduct a regression analysis to more accurately assess the risk and value of the desktop computers

B.

Develop a desktop computer sourcing strategy based on medium risk and medium value

C.

Tell the business unit managers to come to an agreement on the risk and value assessment of the computers

D.

Divide the desktop computers into two groups: one high risk/high value, and the other low risk/low value

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Questions 45

To weigh the benefits and risks of outsourcing a function, a supply manager conducts due diligence from cost, cultural, and service perspectives. The skills the supply manager is employing can BEST be described as

Options:

A.

project management

B.

technical knowledge

C.

analytical problem solving

D.

functional interaction

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Questions 46

An international company is conducting its annual review of its supply management processes to confirm compliance to corporate legal requirements. An external audit team plans to visit each location. Which of the following is the MOST important activity each supply management professional should perform in order to prepare for the audit?

Options:

A.

Review the order, receipt, and payment process with the accounting department

B.

Review the ISM Principles and Standards of Ethical Supply Management Conduct

C.

Review company supply management policies with strategic suppliers

D.

Review supply management activities to verify adherence to policies and procedures

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Questions 47

A company has a large upcoming project. While the company has a current list of qualified suppliers capable of participating in this project, the chief procurement officer (CPO) wants supply management to conduct site visits with the suppliers under consideration. A senior supply manager is given the assignment of planning and scheduling the visits. Which of the following is the BEST way to begin this project?

Options:

A.

Select up to three suppliers to visit

B.

Establish the key evaluation criteria for the visits

C.

Submit a budget for the selection activity and site visits

D.

Select a cross-functional team to participate in the visits

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Questions 48

DEF, Inc. is a small manufacturing firm. DEF enters into a three-year contract for raw materials, with payment terms of net 30. On one of the initial deliveries, a mistake by DEF results in failure to pay for three months. In return, the supplier puts DEF on credit hold. As the materials are critical to manufacturing operations, DEF pre-pays for future orders.

After several months of pre-payments, the firm issues an order with payment net 30, but the supplier refuses to ship goods under these terms. DEF's supply manager believes the firm has made a good-faith effort to address the supplier's concerns, and now wants to enforce the original contract terms. Which of the following is the BEST way for the supply manager to resolve this situation?

Options:

A.

Escalate the issue to the executive level with the supplier indicating that all future orders must comply with the original contract

B.

Terminate the contract, as the supplier is breaching the terms and conditions

C.

Make one last pre-payment on credit hold, then notify the supplier of the return to net 30

D.

Negotiate a reasonable compromise with the supplier, including plans for returning to net 30

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Questions 49

For the past two years, XYZ Company has issued Requests for Proposals (RFPs) for event registration mobile apps to be used for the firm's annual conference. In both instances, XYZ ended up using an app developed in-house. While the internally-developed app has met XYZ's requirements, the company believes it may be outdated in comparison with those provided by the suppliers that have submitted responses in the past. XYZ issues a new RFP to assess the suppliers' current capabilities. Responses are requested within four weeks from the date of the RFP.

Which of the following is the GREATEST risk that XYZ may encounter with this strategy?

Options:

A.

Suppliers may decline to respond because XYZ has issued RFPs twice in the past without selecting anyone.

B.

Procuring the app from a third party when it was not purchased from a supplier during the previous years could result in the firm exceeding its budget.

C.

XYZ may be forced to accept a proposal that does not meet its business requirements.

D.

XYZ's timetable might place an unreasonable burden on the ability of suppliers to prepare and submit responses.

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Questions 50

A US-based manufacturing firm receives a quoted price for an item from an offshore supplier of $.40 each (in US dollars), delivered duty paid to its US plant per Incoterms® 2020 rules, in minimum quantities of 20,000 units. The buying organization uses 80,000 units per year, and the carrying cost is 25%. The item price is fixed for one year. What are the total costs of purchasing annual requirements from this supplier?

Options:

A.

$36,000

B.

$33,000

C.

$32,000

D.

$40,000

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Questions 51

An organization is preparing its budget for the next fiscal year. Management challenges the procurement team to reduce MRO purchasing costs. The procurement team has reduced the janitorial services budget by 2.5%, but corporate management wants a 5% reduction. Which of the following is the BEST approach for the team to take in order to meet management's expectation?

Options:

A.

Demand that the current supplier reduce costs to meet the required budget

B.

Contact the current supplier and develop a solution to reduce costs

C.

Send out a request for quotation (RFQ) to all possible qualified suppliers

D.

Conduct a root-cause analysis, and then negotiate with the current supplier

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Questions 52

Questions pertaining to standardizing products, reducing the number of suppliers, and combining volumes to attain better pricing are BEST addressed by which of the following?

Options:

A.

Category strategy

B.

Spend analysis

C.

ERP system

D.

Category action plan

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Questions 53

A supply manager for an electronics distributor is asked to buy new routers for the company's wireless network. The supply manager is provided with a detailed scope of work and a list of potential bidders. However, the firm is also interested in investigating alternative solutions available on the market. The original equipment was purchased over 5 years ago and the budget is unknown, but it is roughly estimated at $250,000.

Given these circumstances, the MOST appropriate approach for the supply manager would be to issue which of the following?

Options:

A.

Request for quote

B.

Invitation to bid

C.

Request for proposal

D.

Request for information

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Questions 54

A supply manager holds a competitive, sealed bid for a piece of capital equipment. The equipment is of critical importance to the company's operations. The potential bidders include local, national, and international suppliers, as the company wants to receive as many bids as possible.

After the bid closing date, but before bid opening, a bidder contacts the supply manager and states that it made an error in its delivery time. The supplier asks if it can submit a corrected bid prior to opening. Which of the following is the BEST action for the supply manager to take?

Options:

A.

The supply manager should allow the supplier to submit a corrected bid subject to the approval of management during the bid opening.

B.

The supply manager should allowthe supplier towithdraw its bid.

C.

The supply manager should allowthe supplier tosubmit a corrected bid.

D.

The supply manager should allow the supplier to withdraw its bid, but suspend it from bidding for another six months.

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Questions 55

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?

Options:

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

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Questions 56

A supply manager wants to develop a strategy to facilitate supplier Innovation. Which of the following is MOST likely to achieve this goal?

Options:

A.

Locating new suppliers that lead their industry

B.

Recognizing current suppliers for innovative performance

C.

Leveraging innovations from one supplier to improve all other suppliers

D.

Awarding contracts only to the most innovative companies

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Questions 57

A supply management office for a county government has been authorized to select a contractor to design, build and operate a new bridge. In the past, the county has experienced four major problems when hiring contractors:

1)Contractors dropping out of the bidding process due to lack of resources or ability to perform the scope of the work

2)A limited number of competitive bids that are able to achieve the value supply management desires

3)Underperformance of contractors after the award

4)The perception that the contractors are not operating effectively

In order to prevent these problems, which of the following should supply management do FIRST?

Options:

A.

Issue a Request for Information

B.

Issue an Invitation for Bid

C.

Issue a Request for Qualifications

D.

Conduct a pre-bid conference

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Questions 58

A supplier of software critical to PQR Inc.'s scheduling system plans to discontinue supporting the version PQR uses in order to concentrate its resources on a newer version. The current software works well for PQR, and upgrading It would be costly for them in both money and time. The supply manager for PQR assembles a negotiating team with representatives from user departments to discuss the situation with the supplier and try to reach a mutually satisfactory agreement.

Soon after the start of negotiations, the supplier states that 90 days is the longest they can guarantee support for the current software. PQR’s production manager responds by saying, "Fine, we will take any extension at this point." But PQR's IT director shouts, "We can't do that! It will take at least six months to replace the software, even if we could afford to do so."

Given this situation, which of the following is the BEST course of action for the supply manager to take?

Options:

A.

Ask the production manager and IT manager to calm down, and move on to another issue

B.

Ignore the outburst and continue with the negotiations as if it had not occurred

C.

Call a recess and meet with the team to recommit to agreed-upon roles and a unified strategy

D.

Use the outburst as an opportunity for all parties to address their concerns

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Questions 59

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?

Options:

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

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Questions 60

TUV Inc., a small manufacturing firm, hopes to rebuild its customer base and return to profitability after a period of losing market share. Negotiations with a key supplier will be an important factor in this turnaround if target costs and pricing can be worked out.

Given this situation, which of the following would create the MOST challenging constraints In negotiations?

Options:

A.

Demand for the supplier's products from competitors

B.

Need for flexible delivery schedules

C.

Troubled financial history of TUV

D.

Unpredictable future volume

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Questions 61

Which of the following is the MOST important benefit of implementing a contract management system?

Options:

A.

Greater visibility for reverse auctions

B.

Lower legal staff costs

C.

Access to a cooperative purchasing group

D.

Higher value-added activities

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Questions 62

The supply manager for TUV Inc. is planning for negotiations with a supplier of software critical to TUV's order processing system. The supplier informs the supply manager that support for this software will soon be dropped. Upgrading to a newer version will be cost prohibitive for TUV. Given this situation, which of the following is the BEST course of action for TUV's supply manager to take prior to negotiations?

Options:

A.

Contact each team member, ask for ideas on how to negotiate, and confirm what the priorities should be

B.

Engage a trainer to teach the team members the latest negotiating strategies and techniques

C.

Discuss roles, requirements, and strategies with team members, including what information should or should not be shared

D.

Hold a practice session where team members can debate key points one-on-one

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Questions 63

A sourcing manager is evaluating the following bids:

Quality ScoreCost

Supplier 190$100,000

Supplier 290$104,000

Supplier 3100$105,000

Supplier 4100$110,000

To score the cost attribute, the company with the lowest cost is awarded 100 points. The remaining companies lose 1 point for every 1% in higher costs. The overall weighting for the score is 50% quality and 50% cost.

Which supplier should be awarded the contract?

Options:

A.

Supplier 1

B.

Supplier 2

C.

Supplier 4

D.

Supplier 3

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Questions 64

A supply manager of a U.S. publicly listed company is conducting an internal audit of the procurement department to ensure compliance with applicable laws and regulations. Top management has communicated the importance of financial reporting and effective controls within the organization's procurement processes. In order to carry out the audit in alignment with top management's direction, the supply manager should be particularly familiar with which of the following?

Options:

A.

Uniform Commercial Code

B.

Sarbanes-Oxley Act

C.

Sherman Antitrust Act

D.

Federal Trade Commission Act

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Questions 65

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?

Options:

A.

Conflict of interest

B.

Estoppel

C.

Severability

D.

Mutual consideration

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Questions 66

DEF Corporation is a supplier whose products no longer require incoming inspection. Which of the following BEST describes DEF's supplier categorization?

Options:

A.

Certifiable

B.

Partnered

C.

Certified

D.

Approved

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Questions 67

A machine that costs $200,000 is expected to realize an annual savings of $35,000. What is the simple ROI for this piece of equipment?

Options:

A.

57.5%

B.

31.5%

C.

20.0%

D.

17.5%

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Questions 68

A supplier manufactures toys of proprietary design for its customers. Since the company's customers are industry rivals, the supplier has mutual non-disclosure agreements with each of them. One of these customers has developed a new toy and put it out to bid. Before awarding the contract, the customer's procurement team conducts a site visit to the supplier's factory. During the tour, the supplier asks the procurement team to turn off and put away any cell phones that have cameras. Which of the following BEST describes why the supplier made this request?

Options:

A.

To protect the finished goods of other customers

B.

To protect the confidentiality of the manufacturing process

C.

To protect the production schedules of the other customers

D.

To protect the supplier's employee work practices

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Questions 69

A U.S.-based supply manager wants to reduce the number of defective parts arriving from an outsourced supplier located in Malaysia. Which of the following is MOST likely to help achieve this goal?

Options:

A.

COPC 2000

B.

Six Sigma

C.

Sarbanes-Oxley

D.

Lean manufacturing

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Questions 70

A company has recently moved to outsourcing and low-cost country sourcing for two key product lines, and the supply manager has seen some of the cost savings erode as the supply chain and related distances increase. However, the supply manager is certain that by working with the new supply base, many of the savings previously earned could be regained, especially since raw material lead times have actually decreased in the marketplace, and cycle time in most offshore assembly plants has been reduced by 35%. Which of the following should be employed?

Options:

A.

Value chain analysis

B.

Supplier alliance development

C.

Supplier mentorship

D.

Multi-tier purchase agreements

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Questions 71

To better reflect commodity purchasing costs for its consumer automotive division, a firm separates inventory purchasing into "repairable parts" versus "consumable parts." This is an example of

Options:

A.

spend analysis

B.

market segmentation

C.

workload distribution

D.

category management

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Questions 72

As interest rates rise, what will MOST likely be the effect on supply?

Options:

A.

Suppliers will lock in raw material prices in anticipation of price increases.

B.

Suppliers will delay shipments by selling to other customers.

C.

Bond prices will rise, forcing suppliers to pay more for capital investments.

D.

The risk of supplier stock outs will increase due to higher costs of holding inventory.

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Questions 73

Parts characterized by high cost/value and low technical complexity are categorized as

Options:

A.

specialized

B.

custom

C.

off-the-shelf

D.

standardized

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Questions 74

Which of the following is a factor to be considered in a Total Cost of Ownership analysis for fleet automobiles?

Options:

A.

Disposal

B.

Regulations

C.

Income

D.

Indemnification

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Questions 75

A supply manager is working with multiple management layers to create a procurement policy. Which of the following should the supply manager do FIRST in order to ensure that this policy is successfully adopted by the organization?

Options:

A.

Host a meeting with key external suppliers to understand engagement for policy adoption

B.

Host a meeting with key internal stakeholders to review the proposed policy

C.

Engage business unit sponsors to ensure adoption throughout the organization

D.

Verify that senior management approves and distributes the policy to the organization

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Questions 76

Which component of the COSO framework, as required by the Sarbanes-Oxley Act of 2002, specifies that the buying organization must have top management commitment and a supporting organizational culture in which policies and procedures are standardized?

Options:

A.

Monitoring activities

B.

Control environment

C.

Risk assessment

D.

Control activities

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Questions 77

During a business downturn, a supply manager for RST, Inc. learns that its key supplier is becoming concerned about the firm's unpaid invoices. In this situation, the BEST course of action for the supply manager to take would be to

Options:

A.

negotiate a payment plan that accommodates RST's situation but still incentivizes the supplier to do business with RST

B.

find another supplier with more favorable payment terms

C.

notify the supplier that future orders will likely be at risk without extended payment terms

D.

renegotiate the supplier's contract to include a clause that allows RST the option of returning unused goods for a full refund

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Questions 78

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

Options:

A.

The Internal Revenue Service

B.

The Securities and Exchange Commission

C.

The company's shareholders

D.

The firm's CEO

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Questions 79

The ability to explain how and why decisions are made in support of business plans is important because it allows a supply manager to

Options:

A.

influence internal stakeholders

B.

reduce the amount of needed input from key stakeholders

C.

align goals to supply management's mission

D.

prevent supply chain disruptions

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Questions 80

A supply manager Is seeking potential suppliers to recreate a now obsolete custom component. The supply manager identifies five suppliers who have the technology to manufacture the part. The supply manager wants to understand the capability of these suppliers prior to bidding. Which of the following should the supply manager use in this instance?

Options:

A.

Collaborative optimization

B.

E-Design

C.

E-RFx

D.

E-Sourcing

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Questions 81

After lengthy and intense negotiations, a verbal agreement is reached between a buying organization and a finished goods supplier. The president of the buying organization sends a letter contract to the supplier. The supplier immediately ships goods to the buying organization and invoices for the material, before any contract is signed. At this point, is the buying firm obligated to pay the invoice?

Options:

A.

Yes, the buying firm must pay for anything that the supplier ships whether agreed to or not.

B.

Yes, as a letter contract Is a valid pre-contractual agreement.

C.

No, as the buying organization did not issue a formal purchase order.

D.

No, as there was only a verbal agreement.

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Questions 82

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?

Options:

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

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Questions 83

During its first annual business review, a supplier requests an increase in pricing. The supplier’s survey results show a rating of 2.9 out of 5 possible points (with 3.0 being acceptable). Market indices indicate that the supplier's industry has experienced no price increase. In this situation, which of the following is the BEST course of action for the buyer to take?

Options:

A.

Ask the supplier to respond to the survey results item by item, to determine the efficacy of the request

B.

Review the survey results with the supplier asking how it plans to address the concerns, and discuss the economic factors supporting the price increase

C.

Reestablish service level agreement expectations and deny any increase at this time

D.

Inform the supplier that the market indices do not support an increase, and issue a 30-day cure letter warning of contract breach based on the survey results

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Questions 84

A manufacturing company experiences an increase in returns due to product quality issues. A root cause analysis determines that the raw materials are the cause, not the production process. In order to resolve this issue and avoid similar problems in the future, the firm should FIRST do which of the following?

Options:

A.

Require current suppliers to submit samples to determine if any materials do not meet standards

B.

Stop production and halt any shipments until the problem is rectified

C.

Find new suppliers for the raw materials

D.

Offer replacement products from current inventory so that customers can get new products right away

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Questions 85

While preparing for negotiations with a supplier, a supply manager learns that the supplier has fallen short of its sales goals for the year. The supply manager uses this information to focus on attaining below-market pricing, with the expectation that the supplier will be eager to improve its sales figures. However, continued discussions with the supplier yield no progress. Which of the following has the supply manager MOST likely failed to consider?

Options:

A.

Obtaining a fair and reasonable price

B.

Achieving a mutually beneficial agreement

C.

Understanding current market forces

D.

Meeting the buying organization's needs

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Questions 86

Which of the following is the PRIMARY reason for holding a business review with a supplier?

Options:

A.

To determine whether the supplier should be moved to the strategic engagement tier

B.

To strengthen the business relationship and to promote collaboration

C.

To ensure that senior executives from both companies meet on a recurring basis

D.

To review the supplier's cost performance relative to goals set for the year

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Questions 87

According to the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework, which of the following Is an element of effective internal controls?

Options:

A.

Documenting

B.

Monitoring

C.

Management

D.

Auditing

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Questions 88

A firm needs training services within a short time frame. The firm's supply manager issues a request for quotation (RFQ) to training companies, evaluates the offers received, selects the lowest bidder meeting all of the requirements, and prepares a contract. The selected bidder states to the supply manager that because of the scarcity of qualified trainers, the bidder needs to offer incentives, and therefore must raise its quoted rates. In this situation, what should the supply manager do FIRST?

Options:

A.

Negotiate with all offerors for reduced rates

B.

Renegotiate with the lowest bidder

C.

Remind the supplier its quoted rates are binding

D.

Revise the specifications and issue a new RFQ

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Questions 89

A supply manager works with engineering on an aerospace project. A request for quotation (RFQ) Is distributed to five potential suppliers, three of whom respond that they are not interested In the project. The two remaining suppliers say they are interested, but a high level of risk involving tight tolerances will force them to raise prices significantly, and neither will accept a firm fixed price contract. The supply manager arranges a conference with engineering and both suppliers. During this conference, it is determined that only three of the tolerances are truly critical. Based on this conference, a revised RFQ is issued.

This scenario is an example of which of the following aspects of supply management?

Options:

A.

Acting as a liaison between stakeholders

B.

Negotiating a contract award

C.

Facilitating value engineering

D.

Resolving conflicts between stakeholders

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Questions 90

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?

Options:

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

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Questions 91

A software design firm has traditionally done most of its work in-house, including support services and distribution management. The firm is planning a large expansion, and is evaluating how the various departments can support It. The chief executive officer (CEO) recommends concentrating on core competencies to increase the firm's agility and emphasize what differentiates them from competitors. Which of the following is the BEST way supply management can support this recommendation?

Options:

A.

Conduct a spend analysis on strategic items

B.

Develop and implement an organization-wide strategic sourcing plan

C.

Develop better e-procurement processes

D.

Identify opportunities to outsource non-core business functions

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Questions 92

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

Options:

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

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Questions 93

EFG, Inc., a research firm, buys an ultra-high efficiency filter from Supplier A, which is the only capable source for this component. Supplier A informs EFG that the filter will soon be discontinued. EFG's supply manager finds filters with similar—though not identical—characteristics from another source and brings a small sample in for testing. The initial results are acceptable. Given this situation, which of the following is the MOST appropriate next step for the supply manager to take?

Options:

A.

Seek additional suppliers for the product

B.

Quantify potential savings and report them to top management

C.

Build a collaborative relationship with the new source

D.

Review specifications and performance needs with stakeholders

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Exam Code: CORE
Exam Name: Supply Management Core Exam
Last Update: Jul 23, 2024
Questions: 312
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