CPSM Supply Management Core 4 — Questions and Answers
Question 1: Under the UCC Article 2, a purchase order becomes a binding contract when:
- The buyer signs and dates the purchase order
- The seller acknowledges receipt of the order
- A valid offer is accepted by the other party (Correct answer)
- Both parties exchange written signatures
Correct answer: A valid offer is accepted by the other party
Under UCC Article 2, a contract for the sale of goods is formed when a valid offer is accepted, and acceptance can occur through conduct such as shipment of goods.
Question 2: A supply manager implementing Just-in-Time (JIT) inventory should PRIMARILY focus on reducing:
- Purchase price per unit
- Number of approved suppliers
- Lead time variability (Correct answer)
- Inventory carrying costs only
Correct answer: Lead time variability
JIT depends on predictable, short lead times; lead time variability forces safety stock buffers that negate JIT's waste-elimination benefits.
Question 3: Which sustainability standard specifically addresses supply chain labor practices and social responsibility?
- ISO 14001
- SA8000 (Correct answer)
- ISO 9001
- OHSAS 18001
Correct answer: SA8000
SA8000 is an international social accountability standard focused on workplace conditions including child labor, forced labor, health and safety, and freedom of association.
Question 4: A buyer receives goods that do not conform to the contract specification. Under the UCC 'perfect tender rule,' the buyer may:
- Only reject goods if the defect is material
- Accept, reject, or partially accept the shipment (Correct answer)
- Only request a price reduction for the defect
- Accept the goods and file a warranty claim within 30 days
Correct answer: Accept, reject, or partially accept the shipment
The UCC perfect tender rule allows the buyer to accept all goods, reject all goods, or accept conforming units and reject nonconforming units if the seller tenders imperfect goods.
Question 5: A supply manager calculates a supplier's on-time delivery rate at 72% over 12 months against a target of 95%. The MOST appropriate next step is to:
- Immediately terminate the supplier contract
- Issue a corrective action request and establish an improvement timeline (Correct answer)
- Increase safety stock to compensate for poor delivery
- Re-negotiate price as compensation for disruptions
Correct answer: Issue a corrective action request and establish an improvement timeline
A corrective action request (CAR) formally documents the performance gap, requires root cause analysis from the supplier, and establishes measurable improvement milestones.
Question 6: Which contract pricing arrangement provides the GREATEST cost control incentive for the supplier?
- Cost-plus-percentage-of-cost
- Firm fixed price (Correct answer)
- Cost-plus-fixed-fee
- Time and materials with a ceiling
Correct answer: Firm fixed price
A firm fixed price contract places all cost risk on the supplier, creating maximum incentive for the supplier to control costs because any overrun comes out of their profit.
Question 7: The term 'demand aggregation' in strategic sourcing refers to:
- Forecasting future demand using historical data
- Combining purchase volumes across business units to increase buying leverage (Correct answer)
- Reducing the number of SKUs in the product catalog
- Synchronizing production schedules with supplier capacity
Correct answer: Combining purchase volumes across business units to increase buying leverage
Demand aggregation consolidates purchasing volumes across multiple departments, plants, or business units to negotiate better pricing and terms through increased leverage.
CPSM Supply Management Core 4
Under the UCC Article 2, a purchase order becomes a binding contract when: