ISM LEADership and Transformation in Supply Management Exam Practice Test

Answer : A

Given the growing reliance on off-shore suppliers, the supply manager should first analyze potential threats such as transportation disruption and political unrest.

Risk Analysis: Identifying and assessing potential risks associated with international sourcing is critical. This includes understanding transportation risks, political stability, and other factors that could disrupt the supply chain.

Proactive Management: By analyzing these threats, the supply manager can develop strategies to mitigate risks, such as diversifying suppliers, establishing contingency plans, and monitoring geopolitical developments.

Chopra, S., & Sodhi, M.S. (2004). Managing Risk to Avoid Supply-Chain Breakdown. MIT Sloan Management Review, 46(1), 53-61.

Manuj, I., & Mentzer, J.T. (2008). Global Supply Chain Risk Management Strategies. International Journal of Physical Distribution & Logistics Management, 38(3), 192-223.

Answer : D

The Hazard Communication Standard (HCS) is considered a 'right-to-know' requirement concerning hazardous substances.

HCS Overview: The HCS requires employers to inform employees about the hazards of chemicals they are exposed to in the workplace. This includes proper labeling, safety data sheets, and training on handling hazardous substances.

Right-to-Know: This standard ensures that employees have access to information regarding the hazardous chemicals they may encounter, promoting workplace safety and health.

Occupational Safety and Health Administration (OSHA). (2012). Hazard Communication Standard (HCS). [Online]. Available: https://www.osha.gov/hazcom

Goetsch, D.L. (2011). Occupational Safety and Health for Technologists, Engineers, and Managers. Prentice Hall.

Answer : A

Given the concern about the lack of diversity in its supply base and the potential reputational risk, the best course of action for the firm is to develop a company-wide social responsibility program. This approach ensures a holistic and strategic commitment to diversity and social responsibility.

Comprehensive Approach: A company-wide social responsibility program encompasses various aspects of diversity, equity, and inclusion. It ensures that the firm's commitment to diversity is embedded in its corporate culture and practices.

Supplier Diversity: By integrating supplier diversity into a broader social responsibility program, the company can systematically increase the representation of diverse suppliers, including women-owned, minority-owned, and other underrepresented groups.

Reputation Management: A robust social responsibility program addresses reputational risks by demonstrating the firm's proactive stance on diversity and social responsibility. This can enhance the company's image and align with the values of a diverse customer base.

Carroll, A.B. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34(4), 39-48.

Freeman, R.E., & McVea, J. (2001). A stakeholder approach to strategic management. Darden Business School Working Paper.

Answer : C

Risk Assessment Overview: The sole source supplier has a single database location, creating a risk for the supply of an integral component.

Long-term Solution: Reducing the component's uniqueness to allow for alternate sources is a strategic approach. It mitigates the risk associated with dependency on a single supplier and enhances supply chain resilience.

Collaborative Approach: Working with engineering to modify the component design ensures compatibility with multiple suppliers, broadening the supplier base and reducing supply chain vulnerability.

Importance of Alternative Sources: Diversifying the supplier base is crucial in risk management to avoid disruptions caused by supplier-specific issues.

Reference: Supply chain risk management literature, such as 'The Resilient Enterprise' by Yossi Sheffi and guidelines from the Institute for Supply Management (ISM), supports the strategy of reducing dependency on single suppliers through component standardization.

Answer : C

In a situation where there is a discrepancy in labor rates charged by a trusted long-term supplier, the first step should be to perform a validation process. This involves verifying the accuracy of the charges and comparing them with the contractual agreement. Conducting a validation process ensures that any errors are identified and corrected systematically, maintaining trust and transparency between FGH and the supplier. This step is essential before moving to other actions like cost/benefit analysis or establishing a time frame for recovery, as it confirms whether there is indeed a discrepancy that needs to be addressed.

Baily, P., Farmer, D., Crocker, B., Jessop, D., & Jones, D. (2015). Procurement Principles and Management. Pearson Education.

Lysons, K., & Farrington, B. (2012). Purchasing and Supply Chain Management. Pearson Education.

Answer : C

Given the uncertainty about the sustainability of the new supply chain and the potential strain on current IT resources, the best approach is to consider outsourcing the new supply chain. Outsourcing can provide the necessary expertise and infrastructure without overburdening the company's existing IT resources. Leadership and transformation management documents highlight the strategic use of outsourcing to manage risks and leverage external capabilities. This approach allows the firm to capitalize on the profitable market opportunity while mitigating the risks associated with market instability and IT resource constraints. Reference also point to the importance of flexibility and adaptability in supply chain management, which can be achieved through strategic partnerships with third-party providers.

Answer : C

Definition of Direct Cost: Direct costs are expenses that can be directly attributed to the production of a specific product or service. This includes raw materials, labor, and any other costs directly associated with manufacturing.

Highly-Customized Computer Part: The customized nature of the computer part makes it a direct cost because it is a specific component needed for the product assembly.

Relevance to Production: Since the part is essential for the assembly of the product, its cost is directly traceable to the product, fitting the definition of a direct cost.

Reference: Cost accounting literature, such as 'Cost Accounting: A Managerial Emphasis' by Charles T. Horngren, defines and discusses the classification of direct costs and their importance in product costing.