Supply Management Core Exam - CORe Exam Practice Test

Question 1

Which of the following financial indices may be used to infer the typical mark-up percentages used by a firm?

A. Current ratio

B. Gross profit margin

C. Quick ratio

D. Times interest earned

Correct Answer: B

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Question 2

A small company identifies a market need for a new device. However, the firm is relatively young and does not have much design expertise. In this situation, which of the following would be the BEST option for bringing the new product concept to market?

A. Develop detailed performance specifications for potential suppliers to use

B. Engage in a multiple sourcing arrangement to gather several design solutions

C. Develop detailed design specifications for potential suppliers to use

D. Issue a detailed Statement of Work (SOW) for the new device

Correct Answer: A

Question 3

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?

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

B. Contact the team members' supervisors and express concern over the way they acted during the negotiations

C. End the negotiations and begin another round with different team members

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

Correct Answer: D

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Question 4

When evaluating bids, the MOST critical aspect Is ensuring the quote meets the solicitation's

A. technical capabilities

B. quality requirements

C. terms and conditions

D. specifications

Correct Answer: D

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Question 5

A multi-divisional corporation seeks to leverage its overall spend by creating a consolidated supply base of preferred suppliers offering the most competitive costs and services. Though stakeholders Involved in the planning process seem to support leveraging efforts, the actual results have been disappointing, as the divisions continue to buy from past suppliers rather than from the preferred suppliers. In which of the following ways can supply management BEST improve the rate of buying through the preferred suppliers?

A. Recommend changes in the composition of the steering committee

B. Obtain endorsement from top management for adding compliance to all divisions' goals and performance criteria

C. Improve access to information about preferred suppliers via the corporate intranet

D. Establish a mentoring program, matching staff members from top performing locations with their counterparts at less successful locations

Correct Answer: B

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Question 6

A supply manager receives negative feedback from internal stakeholders about several suppliers. However, the scorecards for these suppliers have been positive over the past few quarters, and any diminished performance is not reflected. Which of the following MOST likely explains this situation?

A. The scorecard metrics were calculated incorrectly.

B. The stakeholders failed to attend quarterly review meetings.

C. The stakeholder requirements changed over time.

D. The stakeholders' input to scorecards was improperly captured.

Correct Answer: C

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Question 7

A supply manager for DEF Inc. meets with the firm's operations team to discuss the requirements for a new piece of equipment. The team establishes the specifications, and the supply manager begins contacting suppliers. The supply manager finds that almost everything specified is outside the normal features of the equipment and will require custom modifications. These modifications will raise the cost to 2.5 times the amount budgeted. In this situation, which of the following should the supply manager do?

A. Negotiate with the suppliers to get a price closer to the budgeted cost

B. Purchase the equipment as specified by the operations team and quoted by the suppliers

C. Source new suppliers for the equipment with better prices

D. Review the specifications to ensure alignment between what is available and what is requested

Correct Answer: D

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Question 8

A firm wants to leverage supply contracts by making maintenance, repair, and operations (MRO) supplies available to all of its subsidiaries. Which of the following is the MOST efficient and cost-effective way to provide product details to potential users?

A. Email a list of suppliers' websites to contacts at each subsidiary

B. Conduct train-the-trainer sessions for supply management staff at the subsidiaries

C. Require suppliers to provide secure ordering portals tailored to specific contracts

D. Create internal online catalogs with ordering instructions and links to suppliers' sites

Correct Answer: D

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Question 9

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. PQR has a reputation for innovation in its industry.

B. Delivery schedules can be more flexible than in the past.

C. PQR wants to enhance long-term supplier relationships.

D. There is considerable competition among suppliers.

Correct Answer: D

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Question 10

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

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

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

C. find another supplier with more favorable payment terms

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

Correct Answer: B

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Question 11

Of the following, the BEST way for supply management to effectively support stakeholders is to ensure that

A. stakeholders are regarded as equally important

B. goals are given precedence over a team environment

C. communications with stakeholders are held face-to-face

D. communications are tailored to each stakeholder

Correct Answer: D

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Question 12

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?

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

B. No, as there was only a verbal agreement.

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

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

Correct Answer: D

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Question 13

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 avoidance

B. Cost reduction

C. Cost mitigation

D. Cost containment

Correct Answer: D

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ISM Supply Management Core - CORe Exam Practice Test

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