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A supply manager for JKL, Inc., a high-tech services firm, is asked to expedite an order for training on new fire suppression equipment. The equipment Is due to arrive within the month and must be put into immediate use to comply with governmental regulations. A training company has already been found by JKL ' s human resources department and has committed to providing classes on a rush schedule. JKL has not done business with this training firm before, although they have received excellent evaluations from other clients.
In this situation, which of the following is the FIRST action the supply manager should take?
A supply manager conducts a two-step bidding process for production material. A supplier is selected and a contract is signed. During the post-contract debriefing session, another supplier offers a lower price and payment terms that are more advantageous to the buying organization. Should the supply manager accept the supplier ' s offer?
A company creates a corporate sourcing team with category management responsibilities. Previously, the firm had no dedicated sourcing staff, and all procurement was decentralized and transactional. The sourcing team is ready to commence its initial project. Which of the following should the team do FIRST?
MNO, Inc. is a manufacturing operation that has recently expanded from domestic to global locations. MNO ' s supply management department is considering a plan to obtain raw materials from suppliers nearby each location. The organization currently handles its sourcing from headquarters, which provides coordination and support for all contracts. Which of the following strategies will likely be MOST useful to MNO ' s expansion efforts?
Which of the following is MOST important to address in an exit plan when an organization Is transitioning to a new supplier?
A buying firm learns that its sole supplier of a critical part is being sued by an employee for negligence. The firm is currently in negotiations with this supplier. To minimize or avoid risk, which of the following is the BEST tactic for the buying firm to utilize in this situation?
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 firm buys a particular product that has low business impact and low supply market complexity. How would this product be categorized using the Kraljic classification model?
Which of the following is the MOST important reason for supply management to share company business plans with current and prospective suppliers?
While preparing for negotiations with a supplier, a supply manager learns that the supplier has fallen short of its sales goals for the year. The supply manager uses this information to focus on attaining below-market pricing, with the expectation that the supplier will be eager to improve its sales figures. However, continued discussions with the supplier yield no progress. Which of the following has the supply manager MOST likely failed to consider?
A bottleneck supplier consistently poses a risk of shutting down a company ' s production lines due to delivery issues. Which of the following is the BEST long-term solution to this problem?
A supply manager Is planning for negotiations with a sole-source supplier of an essential part. The buying firm is already one of the supplier ' s top customers, and will need even larger quantities of the part to expand its product line in the near future. The supply manager learns that the supplier may experience some financial risks over the coming year, and that the supplier is anxious to solidify its relationships with major customers to mitigate that risk. Which of the following Is the BEST way for the supply manager to gain a deeper understanding of the supplier ' s position?
A major supplier for JKL, Inc. has a production capacity of 100 units a month. For the last six months, however, the supplier ' s production rate has climbed to 105 units a month. JKL audits the
supplier and takes note of the higher production rate. In this situation, which of the following would MOST likely be of concern to JKL?
A firm issues an RFQ for specialty electronics to be used within a new product line. Internal needs are assessed and specifications are prepared by engineering. The bid is sent to five current suppliers, all of whom are familiar with the firm ' s supply chain. However, only two of these suppliers respond, and their quotes are much higher than expected. Which of the following is the MOST likely explanation for what occurred?
Which of the following is considered the HIGHEST level in a supply chain ' s strategic plan?
A team from RST, Inc. is conducting a negotiation session with a supplier. During the session, RST ' s lead negotiator perceives that various members of the supplier ' s team are being evasive on the issue of the supplier ' s capacity to handle the project. However, there is no apparent sign that the other members of RST ' s team share this perception. Given this situation, which of the following is the BEST course of action for the lead negotiator to take?
During negotiations with a supply manager from FGH Inc., a supplier states that if FGH buys the 200 gigabyte version of its software package at a price of $700, the supplier will include a never-before-sold malware license valued at $147. FGH needs both the malware and the software package. If the supply manager agrees to the offer, FGH may claim a
A firm has repeatedly experienced communication problems with three crucial suppliers. The firm ' s supply manager concludes that many of these problems are the result of not having regular business reviews with these suppliers. However, all three suppliers have indicated that they do not see the value in regular business reviews. Given this situation, which of the following is the BEST course of action for the supplier manager to take?
A company ' s internal ordering system for indirect spend generally works well, though one group of products is often ordered under the wrong commodity codes, making spend history inaccurate. Which of the following will MOST likely improve data accuracy?
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?
XYZ, Inc. is negotiating with Supplier DEF for materials needed in manufacturing. The negotiations are moving slowly, primarily due to delays and postponements by the supplier. DEF has been the primary source for the material under negotiation, and while there are other potential sources, lead times would not make it feasible for XYZ to seek an alternative on such short notice. Which of the following tactics is DEF MOST likely employing?
A supply manager for an electronics firm has been asked to source packaging for the company ' s new printed circuit board. The specifications recommend 0.50 mm tolerance, with a projected breakage ratio of 0.50% at a cost of $1.00 each. However, the manager is able to find an alternative source of packaging that is specified at 0.60 mm tolerance, with a projected breakage ratio of 0.75% at $0.80 ea.
If the cost of the new circuit board is $50 per unit, which packaging should the supply manager recommend, and why?
A firm is developing a solicitation to purchase materials in order to meet the needs of a new product launch. The firm anticipates that some or all of its existing suppliers will respond to the solicitation. Given this situation, which of the following is the BEST requirements gathering approach for the firm?
A supply manager Is evaluating bids for a new delivery van. Supplier J, which has provided similar equipment in the past, quotes a price of $50,000. Supplier K quotes a price of $52,500, but Includes an offer to buy back the van at the end of five years for $3,000. Both suppliers ' bids meet specifications and delivery requirements. At a 10% opportunity cost of capital, and with the 5-year present value of $1 at $.62, which supplier should the supply manager choose, and why?
MNO, Inc. has been one of XYZ Company ' s most valuable customers for a number of years. During a formal competitive bid event for a new product introduction, MNO becomes a supplier to XYZ. In this situation, which of the following should be of GREATEST concern to these organizations?
Motivated by public relations considerations, a company decides to insource the manufacture of a major product. This decision was MOST likely made to bring about
A procurement specialist reviews a report from a financial agency about a potential supplier. The report reveals that the supplier had a lien against some of its assets a few years ago, that the supplier has had several delayed payments over the last few months, and that the supplier ' s debt-to-equity ratio equals 2.0. Which of the following is the BEST course of action for the procurement specialist to take?
MNO Inc. is a U.S.-based manufacturing company that imports sub-assemblies from Asia and incorporates them into several products. The firm orders in large quantities to obtain the lowest price per unit, and then pulls the items as required to produce finished goods. MNO wishes to improve its cash flow and seeks ways to reduce the impact of import duties. Which of the following Is the BEST approach for the company to use?
An audit identifies discrepancies in purchasing and payments within a specific division of a company. An investigation determines that a supply manager has been paying invoices for materials not yet received. Though the firm has mechanisms in place to report any concerns, the supply manager was granted the authority to place orders, receive material, and pay invoices, and therefore none of the employees believed this was a reportable offense. This situation represents a failure of which of the following?
Which of the following refers to a stakeholder want as opposed to a stakeholder need?
A manufacturing company with plants and suppliers in numerous locations wants to cut its travel budget for the next year by 20%. Which of the following is MOST likely to help reduce travel costs?
ABC, Inc. has a supply management department responsible for placing orders. In spite of this, a designer from ABC ' s engineering department places an order with Supplier X for several products.
When the shipment arrives, it is rejected by the receiving department, as they cannot verify the order with supply management. To avoid this situation, the designer should have
A buyer finds an opportunity to reduce costs for a particular service through competitive bidding. The buyer issues a request for quotation (RFQ) to prequalified suppliers. However, the statement of work is incomplete, and not clear enough to get an accurate price for the service. Which of the following is the BEST course of action for the buyer to take in order to get a proper statement of work included in the RFQ?
Smith agrees to work for Acme Company for 12 months on a time and materials contract, with right of termination for convenience. Under the terms of the contract, Smith ' s fee is payable quarterly. After six months, Smith provides notice of termination. Smith was only paid for the first three months of the contract, and Acme Company is withholding payment of the outstanding balance. If Smith files a lawsuit to recover damages, Smith is MOST likely to be compensated for which of the following types of damages?
Telling a seller during negotiations that " This is our best and final offer " is a(n)
When developing a sourcing strategy, which of the following is the BEST source of data on the spend profile of a category?
To weigh the benefits and risks of outsourcing a function, a supply manager conducts due diligence from cost, cultural, and service perspectives. The skills the supply manager is employing can BEST be described as
Questions pertaining to standardizing products, reducing the number of suppliers, and combining volumes to attain better pricing are BEST addressed by which of the following?
A state university is looking to purchase equipment to scan books and manuscripts into a digital format. Several variations of this equipment exist in the marketplace, and the university has not decided which format is best for their needs. There is also a possibility that the cost for additional storage requirements will be shared with the state. Given this situation, which of the following is the FIRST course of action the university should take?
MNO, Inc. purchases benchmarking data services from Supplier X, which is the sole source for data relevant to MNO ' s industry. In recent months, Supplier X ' s pricing has increased and its technical support has worsened. MNO ' s supply manager is preparing to negotiate for contract renewal with Supplier X and needs to resolve these concerns. Which of the following is the BEST course action for the supply manager to take before conducting negotiations?
Which of the following contract types is an agreement to pay a specified price when the items or services have been delivered and accepted?
A supply manager submits requests for additional personnel and equipment, which are approved. However, the organization ' s training budget is cut, giving less opportunity to train new employees. The supply manager is concerned that this will adversely affect the department ' s ability to build expertise. Given this situation, which of the following is the MOST effective action for the supply manager to take?
A supply manager ensures that each stage of the negotiation process is documented, beginning with the preparations for the negotiation. What is the PRIMARY purpose of maintaining such information?
A manufacturing firm which prides itself on excellent customer service, quality, and prompt delivery decides to outsource several of its high volume, cost-driven products. The firm ' s supply manager is tasked with ensuring that service level expectations are maintained during the transition. Which of the following is the BEST step for the supply manager to take to ensure a smooth transition?
PQR’s supply manager signs a contract with Supplier X for delivery of parts totaling $1,250,000 per year for four years. Accompanying the contract is a copy of the organization’s signing policy, which states that supply managers have authority to execute contracts up to $1,000,000 per year. Supplier X questions the discrepancy, but is told verbally by the supply manager that the policy has changed, and supply managers now have a $1,500,000 per year signing limit for up to five years.
Senior management at PQR discovers the supply manager ' s misstatement and tries to disavow the contract. This attempt will likely be
A supply manager Is leading a team in developing a strategic sourcing strategy for the company ' s corporate-wide desktop and laptop computer procurement. Several business unit managers get into a heated debate over the relative Importance and exposure of desktop computers for their specific business units. Some units consider the desktop computer to be a low risk/low value commodity, while others consider them to be high risk/high value critical items. How should the supply manager proceed?
Rebates are considered part of which of the following types of cost management?
Consider the following data for four separate machines:
Purchase Price Projected Annual Savings Estimated Life (in years)
Machine W $100,000 $17,000 6
Machine X $112,000 $23,000 7
Machine Y $143,000 $19,000 9
Machine Z $150,000 $25,000 8
Which machine produces the HIGHEST simple return on investment (ROI) over its useful life?
According to the Law of Agency, a supply manager acting as an agent makes decisions and acts in whose interest(s)?
A supply manager is drafting a request for proposal (RFP) for courier services. Which of the following requirements is MOST likely to affect external stakeholder satisfaction?
A supply manager identifies an overseas source for parts used by the organization. The supplier ' s capacity, performance, reputation and sample quality are all acceptable. During final price negotiations, the supplier requests that the contract be based on its local currency. Which of the following is the FIRST course of action the supply manager should take in order to address the possible impact of this request?
Which of the following refers to the legal principle that prevents a person from asserting a position Inconsistent with his or her prior conduct, if injustice would result to a person who has changed position in reliance upon that conduct?
A software design firm has traditionally done most of its work in-house, including support services and distribution management. The firm is planning a large expansion, and is evaluating how the various departments can support It. The chief executive officer (CEO) recommends concentrating on core competencies to increase the firm ' s agility and emphasize what differentiates them from competitors. Which of the following is the BEST way supply management can support this recommendation?
A company that makes specialized equipment for a very competitive industry relies on several critical engineered imported components. The components present a high degree of risk that could impact the future growth of the company. Given this situation, which of the following is the BEST course of action for the buying organization to take when preparing for negotiations with suppliers?
A company currently has contracts with several temporary labor suppliers with detailed requirements for the same skill set. The hourly rates charged by each of these suppliers vary widely. The firm wants to have all temporary labor services provided by one supplier at the lowest possible cost. Given this situation, which of the following is the BEST course of action for the firm to take?
A corporation acquires a startup company, with the objective of branching out into a new product line. The firm ' s procurement team needs to enlarge the supply base in order to meet the new production requirements. Which of the following is the BEST way for the team to ensure suppliers are aligned with organizational goals?
BCD, Inc. manufactures a product for a highly regulated industry. All details of the product must be traceable. The firm ' s engineering team specifies the types and quantities of materials within
blueprints, but this is insufficient, as a record of material usage needs to be maintained. The product development group asks supply management to develop a system. Given this situation, which
of the following is the BEST course of action for supply management to take?
A manufacturer develops a new product that will be more efficient and easier to use than previous versions. Prototypes are created, evaluated, and approved, and the company begins large scale
production.
Three months into production, costs rise beyond expectations, due to one of the raw materials not providing the economies of scale predicted by the design team. This results in a net loss at the
recommended price point. Which of the following actions should the design team have taken to prevent this situation?
The use of procurement cards to simplify purchases of low cost/low complexity items is BEST suited for which of the following categories of spend?
A procurement manager solicits bids for renovation of a building and writes a service level agreement. The agreement includes language regarding the proper disposal of waste. This is an example of a(n)
A supply manager needs to develop additional raw material suppliers in support of a category management plan created for a specific region. The project has been approved by senior management and the team has been selected. Which of the following is the NEXT step the supply manager should take?
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?
Items of low value and complexity are typically categorized as which of the following
At what point in the development of a category strategy should spend review occur?
A supply management department is looking to standardize purchases across the entire organization and leverage spend with fewer suppliers. Which of the following will be MOST useful for determining historical baseline costs?
A manufacturing company experiences an increase in returns due to product quality issues. A root cause analysis determines that the raw materials are the cause, not the production process. In order to resolve this issue and avoid similar problems in the future, the firm should FIRST do which of the following?
A firm purchases large quantities of parts from an overseas supplier in order to take advantage of volume discounts. The firm wants to delay paying duty on the parts until they are required for manufacturing. Given this situation, which of the following Is the MOST appropriate course of action for the firm to take?
CDE Inc. is a metal casting manufacturer that uses a supplier performance scorecard to measure key performance indicators (KPIs) across the business. CDE ' s supply manager wants Supplier Y to improve on a number of the measured KPIs. Which of the following is the BEST approach for the supply manager to take in order to achieve this objective?
A supplier manufactures toys of proprietary design for its customers. Since the company ' s customers are industry rivals, the supplier has mutual non-disclosure agreements with each of them. One of these customers has developed a new toy and put it out to bid. Before awarding the contract, the customer ' s procurement team conducts a site visit to the supplier ' s factory. During the tour, the supplier asks the procurement team to turn off and put away any cell phones that have cameras. Which of the following BEST describes why the supplier made this request?
The ability to explain how and why decisions are made in support of business plans is important because it allows a supply manager to
A U.S.-based supply manager wants to reduce the number of defective parts arriving from an outsourced supplier located in Malaysia. Which of the following is MOST likely to help achieve this goal?
A research company develops a tomato that grows in cold weather. The company agrees to sell ten thousand seeds to a broker for $5,000. However, an error is made on the contract which
misstates the price as $4,000. The research company and broker both sign the contract without noticing the error. Some weeks later, the broker discovers the error and refuses to pay more than
$4,000. In this situation, the FIRST course of action for the research company to resolve the dispute is to establish with the broker that
Which of the following explains external category market conditions by describing competitive factors within an industry?
TUV Inc., a small manufacturing firm, hopes to rebuild its customer base and return to profitability after a period of losing market share. Negotiations with a key supplier will be an important factor in this turnaround if target costs and pricing can be worked out.
Given this situation, which of the following would create the MOST challenging constraints In negotiations?
A university is evaluating its student registration software. The current system, purchased from Supplier A, has been in place for five years and works well, but may be outdated. A new system provided by Supplier B includes an online chat feature, which Supplier A ' s system currently does not have. While the costs for the two systems are essentially the same, Supplier B ' s system has an additional one-time implementation cost of $250,000. Supplier A informs the university It will provide its own online chat option for a one-time fee of $50,000.
The university calculates that switching to any new platform will involve migration costs. In this situation, the BEST course of action for the university is to
A machine that costs $200,000 is expected to realize an annual savings of $35,000. What is the simple ROI for this piece of equipment?
With which group of suppliers is It MOST important to conduct regular performance reviews?
Smith is a supply manager for BCD, Inc. While planning for a solicitation involving high-volume parts, Smith learns that one of the potential suppliers has recently hired, as account executive, a close relative of Smith ' s. The relative owns a large block of shares in the supplier ' s company. In this situation, which of the following is the BEST course of action for Smith to take?
A company ' s accounting department implements a new system to track liabilities for capital assets. The reports developed by this system exclude some important indirect procurement data (e.g., transactions related to test equipment), as this information is tracked by another system. Which of the following is the BEST course of action for the firm to take in this situation?
Consider the following supplier terms for the same product:
Supplier A: 2%/15, Net 30
Supplier B: 4°/o/5, Net 30
Which supplier ' s terms are more advantageous to the buying organization?
A supply manager for JKL, Inc. finds a potential new supplier for an item included In a finished product. Quality and service are comparable to those of the current supplier, and the new supplier ' s cost per unit is $.03 lower than that of the current supplier. Making the transition to the new supplier will require changes to operations costing approximately $12,000. How many units would JKL need to buy in order to justify changing suppliers?
A supply manager seeks bids on a new piece of capital equipment. The equipment is budgeted at $115,000. Three suppliers send in bids of $110,000, $114,000 and 5135,000. After receiving the bids, additional negotiations with the low bidder result in a final cost of $105,000. In this situation, what should the baseline value be for calculating cost avoidance?
One of TUV Company ' s largest suppliers has been performing poorly, and the quality of its services does not meet the needs of a particular stakeholder. Which of the following is the BEST way for TUV ' s supply manager to evaluate how to establish service level agreements (SLAs) to improve the performance of this supplier?
Which of the following is a factor to be considered in a Total Cost of Ownership analysis for fleet automobiles?
A sourcing manager is asked by a stakeholder to purchase electronic signature software. To avoid additional license fees, the stakeholder wants an inclusive price covering all of the software ' s functionality. However, the budget available for the purchase is limited, and an all-inclusive package will drive up price. Given this situation, which of the following is MOST important for the stakeholder to provide before the sourcing manager contacts potential suppliers?
A US-based manufacturing firm receives a quoted price for an item from an offshore supplier of $.40 each (in US dollars), delivered duty paid to its US plant per Incoterms® 2020 rules, in minimum quantities of 20,000 units. The buying organization uses 80,000 units per year, and the carrying cost is 25%. The item price is fixed for one year. What are the total costs of purchasing annual requirements from this supplier?
TESTED 11 May 2026