Supply Management Core Practice Test

CPSM-Exam-1 test Format | Course Contents | Course Outline | test Syllabus | test Objectives

Exam Name: CPSM test 1: Foundation of Supply Management
Certification: Part of the Certified Professional in Supply Management (CPSM) program
Administered By: Institute for Supply Management (ISM)
Exam Format: Multiple-choice questions
Number of Questions: 165 questions
Duration: 2 hours and 45 minutes (165 minutes)
Passing Score: Scaled score of 400 or higher (on a scale of 100 to 600)
Delivery Method: Computer-based testing at approved testing centers or online proctored exam

- Procurement
- Procurement processes and strategies
- Sourcing methods
- single sourcing
- multiple sourcing
- global sourcing
- provider identification and selection
- Procurement ethics and compliance
- Procurement technology and tools
- e-procurement
- ERP systems

- Request for Proposal (RFP)
- Request for Quotation (RFQ)
- Purchase Order (PO)
- Total Cost of Ownership (TCO)
- Make-or-Buy Decision
- Strategic Sourcing
- Spend Analysis

- provider Relationship Management
- provider evaluation and qualification
- provider performance management
- provider development and collaboration
- provider risk management
- Contract management and negotiation

- Key Performance Indicators (KPIs)
- Service Level Agreement (SLA)
- provider Scorecard
- provider Diversity
- provider Relationship Management (SRM)
- Contract Compliance

- Supply Chain Management
- Supply chain design and optimization
- Inventory management
- Just-in-Time
- Economic Order Quantity
- Logistics and transportation management
- Demand planning and forecasting
- Supply chain risk management

- Supply Chain Visibility
- Bullwhip Effect
- Lean Supply Chain
- Demand Forecasting
- Inventory Turnover Ratio
- Lead Time

- Legal and Contractual Issues
- Contract law basics
- Intellectual property rights
- Legal and regulatory compliance
- Dispute resolution mechanisms
- Ethical and sustainable procurement practices

- Uniform Commercial Code (UCC)
- Force Majeure
- Breach of Contract
- Indemnification
- Non-Disclosure Agreement (NDA)
- Incoterms
- FOB
- CIF
- DDP

- Cost and Financial Management
- Cost analysis and reduction strategies
- Budgeting and financial planning
- Total Cost of Ownership (TCO)
- Cost modeling and price analysis
- Financial statements and metrics

- Cost-Benefit Analysis
- Return on Investment (ROI)
- Fixed Costs vs. Variable Costs
- Direct vs. Indirect Costs
- Activity-Based Costing (ABC)
- Working Capital

- Risk Management
- Risk identification and assessment
- Risk mitigation strategies
- Supply chain disruptions and contingency planning
- Cybersecurity risks in supply management

- Risk Appetite
- Risk Mitigation
- Business Continuity Planning (BCP)
- Force Majeure
- Risk Register
- Contingency Plan

- Quality Management
- Quality standards and certifications
- ISO 9001
- Quality control and assurance
- Continuous improvement methodologies
- Six Sigma
- Lean
- provider quality management

- Total Quality Management (TQM)
- Quality Assurance (QA)
- Quality Control (QC)
- Defect Rate
- Root Cause Analysis
- Continuous Improvement (Kaizen)

- Technology and Data Analytics
- Procurement and supply chain technologies
- ERP
- MRP
- SCM software
- Data analytics and reporting
- Automation and artificial intelligence in supply management
- Blockchain and its applications in supply chain

- Enterprise Resource Planning (ERP)
- Material Requirements Planning (MRP)
- Big Data Analytics
- Predictive Analytics
- Internet of Things (IoT)
- Blockchain

- Sustainability and Social Responsibility
- Sustainable sourcing practices
- Environmental and social responsibility in supply chains
- Ethical sourcing and fair trade
- Circular economy principles

- Corporate Social Responsibility (CSR)
- Carbon Footprint
- Green Procurement
- Circular Supply Chain
- Fair Trade
- Triple Bottom Line
- People
- Planet
- Profit

- Global Supply Management
- Global sourcing strategies
- International trade regulations and compliance
- Cultural considerations in global supply chains
- Currency and payment risks

- Incoterms
- EXW
- CIF
- DDP
- Tariffs and Duties
- Free Trade Agreements (FTA)
- Letter of Credit (LC)
- Exchange Rate Risk
- Global Sourcing

- Project Management
- Project planning and execution
- Stakeholder management
- Project risk management
- Project performance measurement

- Work Breakdown Structure (WBS)
- Critical Path Method (CPM)
- Gantt Chart
- Project Charter
- Stakeholder Analysis
- Project Lifecycle

- Communication and Negotiation
- Effective communication strategies
- Negotiation techniques and tactics
- Conflict resolution
- Cross-functional collaboration

- BATNA (Best Alternative to a Negotiated Agreement)
- Win-Win Negotiation
- Active Listening
- Stakeholder Engagement
- Conflict Resolution
- Persuasion Techniques

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ISM
CPSM test 1
Certified Professional in Supply Management (CPSM) 2024
CPSM test 1: Foundation of Supply Management
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Question: 731
porate sustainability goals?
onduct a sustainability audit of current practices
rioritize suppliers based on their sustainability certifications et sustainability targets for suppliers in contracts ommunicate sustainability goals to all stakeholders involved
wer: C
anation: Setting sustainability targets in contracts ensures that provider ccountable for meeting specific sustainability standards, integrating
nizational goals directly into sourcing practices.
stion: 732
ng a company merger, acquisition, or divestiture, what is one of the m
In developing a strategic sourcing plan, what is the most effective way to incor
1. C
2. P
3. S
4. C
Ans
Expl s are
held a orga
Que
Duri ost
critical factors to consider in order to maximize the success of the integration process?
1. Maintaining the existing corporate culture of either organization without change
2. Developing a comprehensive integration plan that includes cultural integration, communication, and stakeholder engagement
3. Focusing exclusively on financial synergies while neglecting operational
integration
4. Rushing the integration process to realize quick financial gains Answer: B
re that both organizations can effectively work together post-merger, cing resistance and enhancing overall performance.
stion: 733
ch of the following statements best reflects a commitment to ethical cing?
rioritizing cost over provider practices voiding provider evaluations
onducting thorough due diligence on suppliers ocusing only on domestic suppliers
wer: C
anation: Thorough due diligence ensures that suppliers adhere to ethic
Explanation: A comprehensive integration plan that addresses cultural integration, communication, and stakeholder engagement is crucial for maximizing the success of mergers and acquisitions. This approach helps to ensu
redu
Que
Whi sour
1. P
2. A
3. C
4. F
Ans
Expl al
practices, reinforcing the company�s commitment to responsible sourcing.
Question: 734
A company is considering financing a new inventory system through a vendor
financing option that includes an interest-free period. Which financial metric should the supply manager primarily focus on to evaluate the financial viability of this option?
1. Payback period
2. Net present value (NPV)
3. Return on investment (ROI)
wer: B
anation: Net present value (NPV) will allow the supply manager to as alue of the financing option by considering cash flows over time, cially with an interest-free period that impacts upfront costs.
stion: 735
When attempting to develop criteria for evaluating the performance of a su agement department, which qualitative measure is crucial to include?
mployee feedback and satisfaction levels ompliance with procurement regulations upplier relationship strength
ost reductions achieved
Cost of goods sold (COGS) Ans
Expl sess
the v espe
Que
man
1. E
2. C
3. S
4. C
Answer: A
pply
Explanation: Employee feedback and satisfaction levels provide valuable insights into the department's internal culture and effectiveness, complementing quantitative measures.
Question: 736
While reviewing a contract for compliance, you notice that the provider has not met the reporting requirements stipulated in the agreement. What is the appropriate action to take to ensure compliance and accountability?
gnore the reporting requirements if they do not seem critical
ocument the non-compliance and initiate discussions with the supplie ess the issue as per the contract
mmediately impose penalties without discussion
ccept the situation as a minor issue and move forward wer: B
anation: Documenting the non-compliance and initiating discussions w upplier to address the issue as per the contract ensures accountability a pliance. This approach fosters a cooperative relationship while address genuine obligations.
stion: 737
ffectively analyze issues raised in supply management audit reports, w
I
D r to
addr
I
A
Ans
Expl ith
the s nd
com ing
contr
Que
To e hich
analytical method should be employed?
1. Root cause analysis to identify underlying problems
2. Predictive analytics to foresee future compliance issues
3. Descriptive analysis of past audit findings
4. Comparative analysis with industry benchmarks
Explanation: Root cause analysis is vital for identifying the underlying problems, enabling organizations to implement effective corrective actions.
viewing the financial performance of the supply management departm anager discovers that the return on investment (ROI) for certain urement initiatives is lower than expected. What is the best course of n to address this issue?
liminate all low-ROI initiatives ublish a report outlining the findings crease budgets for all initiatives
nalyze the underlying causes of low ROI wer: D
anation: Analyzing the underlying causes of low ROI is essential to rstand whether adjustments can be made to Boost performance or if urces should be reallocated.
Question: 738
In re ent,
the m proc actio
1. E
2. P
3. In
4. A
Ans Expl
unde reso
Question: 739
When conducting a provider performance evaluation, which key performance indicator (KPI) is most indicative of a supplier's reliability?
1. Cost competitiveness
2. Order accuracy
3. Lead time consistency
Answer: C
Explanation: Lead time consistency is critical for evaluating reliability, as it ensures that a provider can meet delivery schedules consistently.
stion: 740
ch of the following actions is crucial for effectively implementing and toring sustainability initiatives within a supply chain?
stablishing cross-functional teams that include supply chain partners ssigning sustainability responsibilities to a single individual
reating a sustainability report that is only shared externally etting vague sustainability goals without specific metrics
wer: A
anation: Establishing cross-functional teams that include supply chain ers is crucial for effectively implementing and monitoring sustainabil tives, as it fosters collaboration and shared accountability.
Que
Whi moni
1. E
2. A
3. C
4. S
Ans Expl
partn ity
initia
Question: 741
When evaluating financing strategies for a strategic acquisition, the supply manager must consider the cost of capital. Which of the following would most accurately reflect the true cost of capital for the organization?
1. Weighted average cost of capital (WACC)
2. Historical cost of equity
3. Market value of debt
4. Average interest rate on loans Answer: A
prehensive view of the organization's cost of financing, considering th ortionate costs of equity and debt.
stion: 742
m is evaluating two different suppliers for a critical component, each ing different payment terms. provider A offers a 10% discount for ear ment, while provider B offers extended payment terms of 90 days. Whi cial analysis technique should the supply manager use to determine t
ption?
reak-even analysis ash flow analysis
omparative advantage analysis otal cost of ownership analysis
Explanation: The weighted average cost of capital (WACC) provides a com e
prop
Que
A fir
offer ly
pay ch
finan he
best o
1. B
2. C
3. C
4. T
Answer: D
Explanation: Total cost of ownership analysis considers all costs associated with each provider option, including discounts and payment terms, allowing for a comprehensive comparison.
Question: 743
In the context of sales and operations planning, which of the following best describes a key benefit of integrating feedback loops into the product development process?
reduces the need for cross-functional collaboration
allows for continuous improvement based on customer input delays the product launch to accommodate feedback
wer: C
anation: Integrating feedback loops facilitates continuous improveme wing the product to evolve based on real customer input, leading to gre et success.
stion: 744
ch of the following best describes a successful strategy for retaining to ly management talent in a competitive market?
roviding a one-time signing bonus
It complicates the decision-making process
It
It
It
Ans
Expl nt,
allo ater
mark
Que
Whi p
supp
1. P
2. Regularly changing job responsibilities to keep work interesting
3. Offering flexible work arrangements and a positive culture
4. Avoiding discussions about career advancement opportunities Answer: C
Explanation: Offering flexible work arrangements and fostering a positive
culture contribute to employee satisfaction and retention, especially in competitive job markets.
Question: 745
and product category. What is the most effective method to evaluate t ntial risks associated with each strategy?
eview case studies of similar sourcing strategies in the industry onduct a risk assessment workshop with key stakeholders nalyze historical data on provider performance
onsult with legal to understand contractual implications wer: B
anation: Conducting a risk assessment workshop with key stakeholder ws for a comprehensive evaluation of potential risks associated with ea cing strategy, fostering a collaborative approach to risk management.
stion: 746
A procurement team is analyzing different sourcing strategies for a high- dem he
pote
1. R
2. C
3. A
4. C
Ans
Expl s
allo ch
sour
Que
When revising business plans and operating policies, which of the following is crucial for ensuring that the revisions are based on accurate and relevant information?
1. Relying on anecdotal evidence from select employees
2. Ignoring feedback from operational staff
3. Making revisions based solely on executive preferences
4. Conducting comprehensive data analysis and benchmarking against industry
Answer: D
stion: 747
ocurement team is tasked with validating cost savings achieved throu us initiatives over the past year. What is the most reliable method to t onfirm these savings?
elying on provider invoices for confirmation of savings omparing current costs to budgeted amounts only onducting annual reviews without ongoing monitoring
tilizing a standardized savings tracking template to document all initi wer: D
anation: Utilizing a standardized savings tracking template to docume tives ensures consistency and reliability in tracking and confirming c
Explanation: Conducting comprehensive data analysis and benchmarking against industry standards provides a solid foundation for making informed revisions to business plans and operating policies, ensuring relevance and effectiveness.
Que
A pr gh
vario rack
and c
1. R
2. C
3. C
4. U atives
Ans
Expl nt all
initia ost
savings over time, providing a clear reference for validation.
Question: 748
When creating risk mitigation plans, which of the following aspects should be
1. Stakeholder engagement and communication
2. Comprehensive risk assessment
3. The personal preferences of the risk management team
anation: The personal preferences of the risk management team shoul prioritized, as effective risk mitigation must align with organizational ctives rather than individual opinions.
stion: 749
e assessing internal customer requests for new products, you find that requests lack clear justification. What is the most effective method t
yze these requests?
mplement a formal request-for-proposal (RFP) process evelop a standardized template for submitting requests et up a committee to review and prioritize requests
reate a feedback loop to gather insights from internal customers
Cost-benefit analysis of risk responses Answer: C
Expl d be
least obje
Que
Whil
many o
anal
1. I
2. D
3. S
4. C
Answer: B
Explanation: A standardized template for submitting requests encourages clarity and consistency, helping to ensure that all necessary information is provided for effective analysis and decision-making.
Question: 750
Which forecasting technique is best suited for capturing the impact of sudden economic downturns on supply chain demand?
1. Causal models
egression analysis ime series forecasting
wer: A
anation: Causal models are specifically designed to capture the onships between variables, making them effective in understanding th ct of sudden economic downturns on supply chain demand.
stion: 751
ch of the following best describes the role of artificial intelligence in ly chain management, particularly in the context of optimizing operati esses?
enhances decision-making through advanced data analysis
Moving averages
2. R
3. T
Ans Expl
relati e
impa
Que
Whi
supp onal
proc
1. AI
2. AI automates all supply chain functions
3. AI solely focuses on reducing costs
4. AI replaces human judgment entirely Answer: A
Explanation: Artificial Intelligence (AI) enhances decision-making by
analyzing complex datasets to uncover insights and trends that human analysts may overlook. This capability supports more informed and strategic operational decisions in supply chain management.
Question: 752
ecent provider innovation workshop, several ideas were generated tha potentially Boost product quality. What is the best next step for th
urement team to take in order to capitalize on these ideas?
mmediately implement all suggested ideas rioritize the ideas based on feasibility and impact
onduct a survey to gauge provider interest in the ideas resent the ideas to senior management for approval
wer: B
anation: Prioritizing the ideas based on feasibility and impact allows t urement team to focus resources on the most promising innovations th eliver significant benefits.
stion: 753
In a r t
could e
proc
1. I
2. P
3. C
4. P
Ans
Expl he
proc at
can d
Que
When monitoring the effectiveness of social responsibility programs, which of the following methods provides the most comprehensive insights?
1. Periodic surveys of employee satisfaction
2. Annual reviews of community engagement activities
3. Regular audits of program metrics and stakeholder feedback
4. Ad-hoc meetings to discuss program outcomes Answer: C
stion: 754
context of operations planning and scheduling, which of the followi odologies is most effective for ensuring that production aligns with omer demand while optimizing resource utilization?
igid batch production schedules ontinuous production processes ean manufacturing principles
olely focusing on historical production data wer: C
anation: Lean manufacturing principles emphasize efficiency and onsiveness to customer demand, optimizing resource utilization while mizing waste in the production process.
Explanation: Regular audits of program metrics and stakeholder feedback provide comprehensive insights into the effectiveness of social responsibility programs, allowing for data-driven adjustments and improvements.
Que
In the ng
meth cust
1. R
2. C
3. L
4. S
Ans Expl
resp mini
Question: 755
A successful provider diversity program requires:
1. A focus solely on cost reduction
2. Commitment from top management
3. Limiting provider options
4. Avoiding public recognition Answer: B
re that values diversity and supports related initiatives throughout the nization.
stion: 756
ecuting a category management plan, a procurement manager discove istorical data is inconsistent and unreliable. What should be the first s
mprove data quality for future decision-making?
mplement a new data management system
rain staff on data collection and management best practices onduct a thorough audit of existing data sources
ollaborate with IT to integrate data across systems wer: C
Explanation: Commitment from top management is essential for fostering a cultu
orga
Que
In ex rs
that h tep
to i
1. I
2. T
3. C
4. C
Ans
Explanation: Conducting a thorough audit of existing data sources is essential to identify inconsistencies and establish a baseline for improving data quality, which is crucial for informed decision-making in category management.

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