Pass the ISM CPSM CORE Questions and answers with ExamsMirror

Verbal Agreement: A verbal agreement was reached during negotiations.

Letter Contract: The president of the buying organization sent a letter contract to the supplier.

Supplier Actions: The supplier shipped goods and invoiced for the material.

Obligation to Pay: A letter contract is a valid pre-contractual agreement that signifies the buying firm's intent to enter into a formal contract. By accepting the goods, the buying firm is obligated to pay the invoice.

References

ISM. (n.d.). Understanding Letter Contracts and Binding Agreements.

CIPS. (n.d.). Legal Aspects of Procurement Contracts.

Annual Business Review Focus: The goal is to address a supplier's service performance and product quality.

Using a Scorecard: A scorecard based on internal surveys provides a structured and comprehensive way to evaluate and communicate performance metrics.

Feedback Collection: Internal surveys gather feedback from various departments that interact with the supplier, offering a holistic view of their performance.

Performance Metrics: The scorecard includes key performance indicators (KPIs) that are relevant to service performance and product quality, facilitating objective assessment and discussion during the review.

References

ISM (Institute for Supply Management). (n.d.). Supplier Performance Metrics and Scorecards.

APQC. (2018). Using Scorecards for Supplier Performance Management.

Legal protections for inventions, processes, or manufacturing methods are categorized into different types of patents:

Design patents cover new, original, and ornamental designs for an article of manufacture.

Copyrights protect original works of authorship, such as literature, music, and art.

Utility patents cover new inventions or discoveries of processes, machines, or methods of manufacturing.

Plant patents cover new and distinct varieties of plants that are asexually reproduced.

A utility patent is the appropriate legal protection for an invention, the discovery of a process, or a machine or method of manufacturing.

References:

U.S. Patent and Trademark Office (USPTO) guidelines on patents.

World Intellectual Property Organization (WIPO) resources on intellectual property rights.

The BEST course of action for EFG, Inc. to take in assessing the financial stability of potential suppliers for operational software is A. Obtain Dun & Bradstreet reports for the potential suppliers and review them for financial vulnerabilities. Dun & Bradstreet reports provide comprehensive insights into a company’s financial health, including credit scores, financial stability, and potential risks1. This information is crucial for making informed decisions during the supplier selection process.

The supply manager is looking for the supplier that is most efficient in its use of assets, which is measured by the return on assets (ROA). ROA is calculated as net income divided by total assets.

For each supplier:

Supplier A: ROA = 100 / 100 = 1.0

Supplier B: ROA = 200 / 100 = 2.0

Supplier C: ROA = 200 / 400 = 0.5

Supplier D: ROA = 50 / 20 = 2.5

Supplier D has the highest ROA, indicating it is the most efficient in its use of assets.

References

Financial Management for Supply Chain Management by Michael D. Waters

Principles of Corporate Finance by Richard A. Brealey, Stewart C. Myers, and Franklin Allen

To determine cost-effectiveness, calculate the total cost considering breakage:

0.50 mm packaging: Cost per unit = $1.00 Breakage ratio = 0.50% Breakage cost = $50 * 0.50% = $0.25 Total cost per unit = $1.00 + $0.25 = $1.25

0.60 mm packaging: Cost per unit = $0.80 Breakage ratio = 0.75% Breakage cost = $50 * 0.75% = $0.375 Total cost per unit = $0.80 + $0.375 = $1.175

Although the 0.60 mm packaging seems cheaper in unit cost, it results in higher total costs due to increased breakage. Therefore, the 0.50 mm packaging is more cost-effective. References: Cost analysis in supply chain management, procurement decision-making based on total cost of ownership.

Project Timeline: The construction must begin within four months and be completed within a year.

Performance Monitoring: To ensure timely completion, setting clear milestones and requiring progress reports keeps the project on track and allows for early identification of potential delays.

Liquidated Damages: Including liquidated damages clauses for noncompliance provides a financial incentive for the contractor to meet deadlines and minimizes the risk of delays.

Accountability: This comprehensive approach ensures accountability and provides mechanisms to enforce timely project completion.

References

ISM. (n.d.). Effective Contract Management and Performance Monitoring.

CIPS. (n.d.). Best Practices in Project Management for Procurement.

Documenting Negotiations: Maintaining detailed records of each stage of the negotiation process ensures transparency and accountability.

Justification for Concessions: Documentation provides a clear rationale for any concessions made during negotiations, supporting internal review and approval processes.

Consistency: Ensures that all team members are informed and that the negotiation strategy is consistently applied.

Post-Negotiation Analysis: Helps in reviewing the negotiation process to identify areas for improvement and lessons learned for future negotiations.

References

ISM. (n.d.). Best Practices in Negotiation Documentation.

CIPS. (n.d.). The Importance of Documentation in Procurement Negotiations.

Reaching out to suppliers for innovative ideas on products and services is the best long-term strategy for creating top-line revenue growth and increased sales for both the organization and its key suppliers. Collaborating with suppliers can lead to new product developments, process improvements, and innovative solutions that drive growth and competitive advantage. Identifying low-cost options (Option A) focuses on cost reduction rather than growth. Reviewing SOW standards (Option C) and asking sales and marketing for industry trends (Option D) are useful but not as impactful as direct collaboration with suppliers for innovation.

References:

The Procurement and Supply Manager's Desk Reference by Fred Sollish and John Semanik

Supply Chain Collaboration: How to Implement CPFR and Other Best Collaborative Practices by Ronald K. Ireland and Colleen Crum

Current Issue: The projects lack innovation and are at risk of delays and budget overruns.

Supplier Expertise: Suppliers often possess specialized knowledge, skills, and experience that can drive innovation and efficiency in projects.

Collaborative Approach: By leveraging suppliers' expertise, the organization can gain new ideas, improve project planning, and avoid past issues related to delays and budget overruns.

References

CIPS. (n.d.). Leveraging Supplier Innovation.

APQC. (2019). Best Practices in Supplier Collaboration.