CORE ISM Supply Management Core Exam Free Practice Exam Questions (2025 Updated)

External Category Market Conditions: These are factors outside the organization that can affect the supply market.

Porter’s Five Forces: This framework analyzes the competitive forces within an industry, which include:

The threat of new entrants

The bargaining power of buyers

The bargaining power of suppliers

The threat of substitute products or services

The intensity of competitive rivalry

Application: Using Porter’s Five Forces helps in understanding the dynamics of the industry and how they affect the company’s position and strategy.

Strategic Decision Making: This analysis informs supply managers about potential risks and opportunities, enabling them to make better strategic sourcing decisions. References

Michael E. Porter’s "Competitive Strategy: Techniques for Analyzing Industries and Competitors".

Strategic Deliverables: Category management plans are strategic deliverables that outline proactive steps and tactical actions for managing specific categories of spend.

Tactical-Level Actions: These plans help in executing tactical-level actions such as sourcing strategies, supplier selection, and cost management within the sourcing process.

Proactive Steps: The category management plan identifies proactive steps to manage the category effectively, ensuring alignment with overall business strategy and goals.

References

CIPS. (n.d.). What is Category Management?

SCMDOJO. (n.d.). Developing a Category Management Plan.

The procurement team needs to find a supplier for small construction tools that will be heavily used and require quick service for repair or replacement. The tools do not provide a strategic advantage and do not warrant specialized services.

Vertical partnerships are deep, strategic relationships often involving high integration and shared processes.

Operational partnerships focus on efficiency and effectiveness in daily operations.

Strategic partnerships involve long-term, mutually beneficial relationships with a high level of collaboration.

Basic partnerships are transactional, focusing on cost and basic service requirements without deep integration.

Given that the firm does not view the tools as strategically important and seeks to avoid specialized services, a basic partnership is the best fit. This type of partnership focuses on ensuring the supplier can meet the service and cost requirements without the need for deep collaboration or strategic alignment.

References:

CIPS (Chartered Institute of Procurement & Supply) guidelines on supplier relationship management.

Institute for Supply Management (ISM) standards on procurement strategies.

In the context of highly volatile raw material prices, the buying organization should D. allow the supplier to change pricing on a fixed schedule based on a price index with a maximum allowable change. This approach allows for a structured and predictable method of adjusting prices in response to market conditions, while also setting a cap on the maximum change to protect the buying organization from extreme price fluctuations123.

RFx Documentation and Processes: RFx (Request for Proposal, Request for Quotation, etc.) documentation and processes are critical in procurement.

Organizational Alignment: Ensuring that the RFx documentation and processes align with the organization’s policies and principles is paramount.

Consistency and Compliance: Alignment with organizational policies ensures consistency, compliance, and supports strategic objectives.

Relevance to Specific Industry: While working from a template tailored to the industry can be helpful, alignment with organizational policies is more universally important for maintaining integrity and achieving strategic goals.

Conclusion: Ensuring alignment with the organization's policies and principles is the most important factor in developing RFx documentation and processes.

References

ISM. (n.d.). Developing Effective RFx Documentation.

CIPS. (n.d.). Ensuring Compliance and Alignment in Procurement Processes.

Context of Negotiation: The phrase “This is our best and final offer” is a strong statement in negotiations.

Risk Assessment: This tactic can abruptly end negotiations if the other party is not willing to accept the terms.

Alternative Readiness: Using this tactic effectively requires the buyer to have a viable alternative in case the offer is rejected.

Strategic Use: It should be employed when the buyer is confident that the offer is competitive and fair, and when there is leverage from alternative suppliers or options.

Potential Drawbacks: It might strain relationships if perceived as inflexible or final.

Conclusion: While it can shorten negotiations, it carries significant risk and should be used judiciously with alternative plans in place.

References

Getting to Yes: Negotiating Agreement Without Giving In by Roger Fisher and William Ury.

Negotiation Genius: How to Overcome Obstacles and Achieve Brilliant Results at the Bargaining Table and Beyond by Deepak Malhotra and Max H. Bazerman.

To reduce the supply base from three to two suppliers, the firm should evaluate the past performance of the current suppliers and select the two that have consistently met or exceeded performance expectations. This ensures that the firm retains reliable and high-performing suppliers. Once the selection is made, the firm can negotiate more favorable pricing with the chosen suppliers, leveraging the increased business volume that comes with consolidating orders.

References

Purchasing and Supply Chain Management by Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, and James L. Patterson

"Supplier Performance and Evaluation" - Chartered Institute of Procurement & Supply (CIPS)

The best course of action for the procurement specialist to take is to use the information in considering whether to qualify the supplier. This approach involves evaluating the financial risks associated with the supplier while considering other factors such as their capability, quality, and delivery performance. This due diligence ensures that the procurement decision is informed and balanced, reducing the risk of future financial instability affecting supply chain operations.

References

"Procurement and Supply Chain Management," Kenneth Lysons and Brian Farrington.

"Financial Intelligence, Revised Edition: A Manager's Guide to Knowing What the Numbers Really Mean," Karen Berman and Joe Knight.

Company’s Situation: The oil & gas exploration company needs to update its fleet of offshore vessels but is unsure about the best combination of vessel types and quantities.

RFP Purpose: An RFP is used when the buyer knows the results it requires but needs detailed proposals from suppliers to determine the best solution.

Comprehensive Proposals: RFPs allow suppliers to propose various solutions, including different combinations of vessel types and quantities, and explain how their proposals will meet the company's needs.

Evaluating Solutions: The RFP process provides the company with the information needed to evaluate the most efficient and effective options for updating its fleet.

Conclusion: Issuing an RFP is most appropriate to obtain detailed and varied proposals that will help the company make an informed decision.

References

CIPS. (n.d.). The Use of Requests for Proposals (RFPs) in Procurement.

ISM. (n.d.). Best Practices for RFP Development and Evaluation.

In a highly competitive market with many pre-qualified suppliers for a well-specified item, a reverse auction is likely to yield the best value for HIJ, Inc. Reverse auctions drive suppliers to offer their best prices in a competitive bidding environment, potentially lowering costs for standard, commoditized items. This approach is especially effective when the item specifications are clear and there is sufficient competition. References: Procurement sourcing strategies, competitive bidding techniques, reverse auction best practices.

Need for High-Quality Materials: DEF, Inc. requires high-quality raw materials for an emerging product.

Collaborative Approach: Selecting an approved supplier and working collaboratively ensures that the supplier fully understands and meets the quality specifications.

Long-Term Relationship: This approach helps build a long-term relationship with the supplier, fostering continuous improvement and reliability.

Quality Assurance: By working closely, DEF can monitor and ensure adherence to quality standards throughout the supply process.

References

CIPS. (n.d.). Building Supplier Relationships for Quality Assurance.

ISM. (n.d.). Collaborative Supplier Management.