ISM CORE - Supply Management Core Exam

When dealing with a complex system implementation in stages, it is critical to begin the project promptly to maintain the schedule. However, if later milestones and deliverables are not yet defined, a flexible approach is necessary. Creating an initial Statement of Work (SOW) allows the project to start with the first phase, and provisions for negotiating subsequent SOWs as the project progresses ensure that the remaining stages can be defined in detail later. This approach balances the need for a timely start with the flexibility to adapt as more information becomes available.References:

Project Management Institute (PMI). A Guide to the Project Management Body of Knowledge (PMBOK Guide).

CIPS (Chartered Institute of Procurement & Supply) guidelines on SOW management.

For a firm procuring waterproofing consulting services for the first time:

Preparing a flexible scope of work: Flexibility can be useful but may lead to ambiguity and lack of focus.

Identifying preferred consultants: Researching and identifying consultants with proven expertise ensures the firm selects qualified professionals, especially critical for a first-time procurement.

Hiring a staffing agency: Typically used for temporary staff rather than specialized consulting services.

Subcontracting the work to the general contractor: Effective for general construction tasks but might not guarantee specialized waterproofing expertise.

Given the critical nature of the service and the firm’s inexperience, the best course of action is to identify preferred consultants with expertise in waterproofing.

References:

Procurement strategy literature on consulting services.

Industry best practices for selecting specialized consultants.

Sharing Business Plans: When supply management shares company business plans with suppliers, it provides transparency and insight into the company's future direction and goals.

Supplier Investment: By understanding the company’s plans, suppliers can see the potential long-term benefits of the relationship, encouraging them to invest time, resources, and innovation to meet the company's needs.

Strategic Alignment: This alignment helps in building stronger partnerships, fostering collaboration, and ensuring that suppliers are aligned with the company’s strategic objectives.

Avoiding Problems: While preventing misunderstandings and setting the stage for discounts are benefits, the primary reason is to demonstrate the value of the relationship to suppliers.

References

ISM Professional Series: Supplier Relationship Management

CIPS Guide to Supplier Relationship Management

The hard dollar savings for the first year is calculated by comparing the originally quoted license fee with the negotiated license fee. The original license fee was $2,000,000. After negotiations, the fee was reduced to $1,500,000. The hard dollar savings is the difference between these two amounts:

Original fee: $2,000,000Negotiated fee: $1,500,000Hard dollar savings: $2,000,000 - $1,500,000 = $500,000

Therefore, the hard dollar savings for the first year is $500,000.

References:

Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2015). Purchasing and Supply Chain Management.

ISM (Institute for Supply Management). (2020). ISM Glossary of Key Supply Management Terms.

Identify the Change Requirement: The engineering department wants to replace a highly regulated imported chemical with a domestic, non-hazardous alternative.

Evaluate the Impact:

Assess the cost implications of switching chemicals, including sourcing, handling, and compliance costs.

Consider the impact on production processes, product quality, and customer acceptance.

Total Cost Analysis: Performing a comprehensive total cost analysis will provide a clear picture of all associated costs, ensuring that the decision is financially sound and aligns with the company’s strategic objectives.

Subsequent Steps: If the cost analysis is favorable, update project timelines, check supplier certifications, and notify customers. References:

Total Cost of Ownership (TCO) Analysis Frameworks

Chemical Supply Chain Management

Best Practices in Supplier Evaluation and Selection

The situation where the third party recycles metals but not aluminum cans from the break room is likely due to an incomplete scope of work. The scope of work should clearly outline all tasks and responsibilities, including specific details like recycling aluminum cans. Performance goals (Option B) and warranties (Option C) deal with performance standards and product guarantees, respectively, while a conflict management plan (Option D) addresses dispute resolutions, none of which directly relate to the failure in defining the recycling tasks.

References:

Contract Management Guide

Service-Level Agreement Best Practices

The BEST method for comparing a supplier’s performance to that of another organization is D. Benchmarking. Benchmarking involves comparing the performance of your suppliers against predefined standards or best practices, identifying key performance indicators (KPIs), and gathering relevant data to evaluate supplier performance objectively1. This process is crucial for understanding where improvements might be made and for maintaining high-quality standards, ensuring timely delivery, and optimizing cost-effectiveness23.

Item cost: $0.76

Packaging for shipment: $0.02

Shipping from Indonesia: $0.14

Duty: $0.03

Customs clearance: $0.10

Storage at buyer’s warehouse: $0.09

Shipment from warehouse to plant: $0.06

Calculate the total landed cost per unit: Sum of all the costs.

Total Landed Cost = $0.76 + $0.02 + $0.14 + $0.03 + $0.10 + $0.09 + $0.06 = $1.20

References

CIPS. (n.d.). Understanding Total Landed Cost in Procurement.

ISM. (n.d.). Calculating Total Landed Cost for Procurement Decisions.

Positional bargaining is a negotiation strategy where each side adopts a fixed position and then negotiates to close the gap through concessions and compromise. This approach focuses on maintaining specific demands and making adjustments to reach a mutually acceptable agreement. It contrasts with interest-based bargaining, which focuses on underlying interests rather than fixed positions.

References

Getting to Yes: Negotiating Agreement Without Giving In by Roger Fisher and William Ury

Harvard Business Review articles on negotiation tactics

The MOST likely concern for JKL, Inc. regarding the supplier’s increased production rate from 100 to 105 units a month would be B. Deteriorating quality. When production rates increase beyond the standard capacity, there is a risk that the quality of the products may decline as the process may be rushed or overextended1. This is a common concern in supply chain management, as maintaining the quality of products is crucial for customer satisfaction and the company’s reputation2.