Free ISM CORE Practice Exam with Questions & Answers | Set: 5

A stakeholder want refers to something that is desired but not essential for the completion of the task or project. In this case, requiring that a supplier provide accommodations for the company's representatives during visits is a want. It is not a core requirement for the supply of the component or service but is a preference that enhances convenience for the company’s representatives.

References

CIPS (Chartered Institute of Procurement & Supply). Differentiating Needs and Wants in Procurement.

ISM (Institute for Supply Management). Understanding Stakeholder Requirements.

Initial Bids Review: Evaluate the bids submitted by the suppliers ($110,000, $114,000, and $135,000).

Lowest Bid Consideration: The lowest initial bid of $110,000 should be the baseline because it represents the market's competitive price before any negotiation.

Calculate Cost Avoidance: After negotiations, the final cost is $105,000. The cost avoidance is calculated against the $110,000 baseline, showing the savings achieved through negotiation.

References

Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2016). Purchasing and Supply Chain Management. Cengage Learning.

Burt, D. N., Petcavage, S. D., & Pinkerton, R. L. (2010). Supply Management. McGraw-Hill Education.

To address the problems encountered in past projects, issuing a Request for Qualifications (RFQ) is the best initial step. An RFQ allows the supply management office to pre-qualify contractors based on their ability to perform the required work, available resources, past performance, and other relevant criteria. This step helps ensure that only capable and reliable contractors are invited to bid, which can mitigate the risks of contractors dropping out, underperformance, and the perception of ineffectiveness. Additionally, it can increase the chances of receiving competitive bids that meet the desired value. References:

"Contractor's Guide to Change Orders" by Andrew M. Civitello Jr.

"Construction Contracting: A Practical Guide to Company Management" by Richard H. Clough, Glenn A. Sears, and S. Keoki Sears

The use of procurement cards is best suited for tactical spend, which involves low cost/low complexity items. These items do not require extensive procurement processes and can be efficiently managed through procurement cards, simplifying the purchase and payment processes. Leverage, critical, and strategic spend categories typically involve more complex and higher-value transactions that require more thorough procurement procedures. References: Procurement best practices, procurement card program guidelines.

Proprietary Elements: The device contains proprietary engineering and design elements that are not widely known.

Intellectual Property (IP) Protection: Protecting these elements is critical to maintaining the company’s competitive advantage.

Supplier Evaluation: When evaluating suppliers, the risk of IP theft or misuse should be a primary consideration.

Security Measures: Assessing suppliers' security measures and their ability to protect sensitive information is essential.

Balancing Risks and Costs: While other factors like component availability and logistics are important, the potential impact of IP risks outweighs them due to the proprietary nature of the product. References

WIPO (World Intellectual Property Organization) guidelines on intellectual property management.

Cost Savings Reporting: Accurate cost savings reporting is essential for demonstrating the value that supply management brings to the organization.

Alignment on Definitions: When the executive team and internal stakeholders are aligned on the definitions of cost savings, it ensures that the reported savings are understood and accepted across the organization.

Value Demonstration: This alignment shows that supply management is effectively contributing to the company’s financial performance and strategic goals.

Other Considerations: While auditability, baseline adjustments, and risk management are important, the primary reason for alignment is to clearly demonstrate the value added by supply management.

References

ISM Professional Series: Cost Management

CIPS Knowledge on Financial Management in Procurement

Identify the Issues: The supply manager should first clearly outline the specific issues with Supplier X, such as the price increases and declining technical support.

Develop Win-Win Scenarios: Before entering negotiations, it is essential to develop scenarios that can create mutual benefits for both MNO, Inc. and Supplier X. This approach fosters a collaborative relationship rather than an adversarial one.

Long-term Value: By focusing on long-term value, the supply manager can address the current issues and also set a precedent for future interactions. This may involve proposing solutions like better support mechanisms or more favorable pricing structures in exchange for commitments from MNO.

Collaborative Relationship: Building a collaborative relationship helps in negotiating terms that are beneficial and sustainable for both parties. This includes working together to find efficiencies or improvements that can lead to cost savings or enhanced service levels.

References:

CIPS: "Guide to Supplier Relationship Management"

ISM: "Negotiation Strategies for Long-Term Supplier Relationships"

The supply manager aims to regain the lost cost savings by collaborating closely with the new supply base. Supplier alliance development is a strategic approach that involves working together with suppliers to improve processes, reduce costs, and enhance overall performance. Given the reduction in raw material lead times and offshore assembly cycle times, a strong alliance with suppliers can streamline the supply chain, optimize efficiencies, and restore cost savings.

References

Strategic Supply Chain Management by Cohen and Roussel.

Best practices in supplier relationship management and alliance development.

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

After a bid process concludes and an award is made, it is important to inform unsuccessful bidders that they were not awarded the contract and notify the end users of the successful supplier. This debriefing process maintains transparency and professionalism. Unsuccessful bidders should be given feedback on why their bids were not selected to help them improve future proposals, while end users need to know which supplier will be fulfilling the contract to ensure smooth coordination and implementation.

References:

CIPS (Chartered Institute of Procurement and Supply). (2021). Procurement and Supply Chain Management.

National Institute of Governmental Purchasing (NIGP). (2018). Public Procurement Guide.