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CPSM Exam 2 Exam Questions
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Certified Professional in Supply Management (CPSM)
CPSM Exam 2: Effective Supply Management Performance
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A manufacturer in the U.S. is considering entering the Canadian market and is exploring a bilateral trade agreement that eliminates tariffs on certain products. Which of the following agreements would most likely apply?
CAFTA
TPP
USMCA
GATT
Answer: C
Explanation: The USMCA (United States-Mexico-Canada Agreement) is a trade agreement between the U.S., Canada, and Mexico that eliminates tariffs on numerous goods, specifically benefiting manufacturers looking to enter the Canadian market.
A firm with a net income of $300,000, total assets of $1.5 million, and total liabilities of $600,000 has a return on assets (ROA) of what percentage?
25%
20%
18%
15%
Answer: B
Explanation: ROA = Net Income / Total Assets = $300,000 / $1,500,000 = 0.20 or 20%.
When assessing supplier risk, a company evaluates financial stability on a scale of 1 to 10. If Supplier A scores 8, Supplier B scores 5, and Supplier C scores 3, what is the average financial stability score of these suppliers?
5.5
6.0
4.5
8.0
Answer: A
Explanation: Average score = (8 + 5 + 3) / 3 = 16 / 3 = 5.33, rounded to 5.5.
In conducting a spend analysis, a company discovers that its spend on office supplies has increased by 25% over the last year, resulting in a total spend of $125,000. What was the spend on office supplies the previous year?
A. $100,000 B. $90,000 C. $80,000 D. $75,000
Answer: A
Explanation: Let previous spend be X. Then, X + 0.25X = $125,000. Thus, 1.25X = $125,000, and X =
$125,000 / 1.25 = $100,000.
A company utilizes the PDCA cycle to improve its supply chain processes. If the 'Plan' phase involves identifying 3 key areas for improvement and the 'Do' phase implements changes resulting in a 15% reduction in waste, which of the following is the most effective way to measure the impact during the 'Check' phase?
Reviewing historical data
Conducting employee interviews
Analyzing customer satisfaction surveys
Comparing waste levels before and after implementation
Answer: D
Explanation: The 'Check' phase is focused on measuring the effectiveness of changes by comparing relevant metrics, in this case, waste levels before and after the implementation.
A supply chain team is preparing to conduct a benchmarking study against competitors. Which of the following steps should be prioritized to ensure the study yields actionable insights?
Select metrics that are easy to collect data for
Avoid involving external experts
Limit the scope to only financial metrics
Identify key performance indicators (KPIs) relevant to the industry
Answer: D
Explanation: Identifying key performance indicators (KPIs) relevant to the industry is crucial for ensuring that the benchmarking study provides actionable insights that can lead to meaningful improvements.
In a recent supplier scorecard review, a company noticed that one supplier consistently underperformed in terms of quality metrics. What should be the company's immediate action to address this issue?
Terminate the supplier contract
Increase the order volume to incentivize better quality
Conduct a supplier performance meeting to discuss issues
Reduce payment terms to encourage improvement
Answer: C
Explanation: Conducting a performance meeting allows the company to address the underperformance directly, understand the supplier's challenges, and collaboratively develop improvement strategies.
A supply chain analyst is tasked with improving the lead time. If the current lead time is 25 days, and the analyst wants to implement a strategy that reduces lead time by 30%, what will be the target lead time after the reduction?
18 days
17.5 days
20 days
22 days
Answer: B
Explanation: A 30% reduction in 25 days is 7.5 days (0.30 * 25 = 7.5). Thus, the target lead time is 25 -
7.5 = 17.5 days.
In a recent risk assessment meeting, a company identified a risk scenario involving potential geopolitical tensions affecting supply routes. What is the most effective response strategy for such a risk?
Establishing dual sourcing strategies for critical materials
Ignoring the risk due to its uncertainty
Focusing solely on domestic suppliers
Increasing inventory levels without a clear strategy
Explanation: Establishing dual sourcing strategies mitigates the impact of geopolitical tensions by ensuring alternative supply routes are available.
As part of a sustainability initiative, a company is considering implementing a zero-waste policy across its supply chain. What should be the initial step in this process?
Set ambitious targets for waste reduction
Revise contracts with suppliers to include sustainability clauses
Establish a communication plan to inform stakeholders
Conduct a waste audit to identify current waste levels
Answer: D
Explanation: Conducting a waste audit provides a baseline understanding of current waste levels and informs subsequent actions toward achieving zero waste.
A company needs to evaluate the cash flows of a project that will require a $700,000 investment today and is expected to provide cash inflows of $200,000 in Year 1, $300,000 in Year 2, and $400,000 in Year 3. If the required rate of return is 7%, what is the NPV?
A. $75,479 B. $150,000 C. $181,000 D. $204,000
Answer: A
Explanation: Calculate the present value of each cash flow and subtract the initial investment.
During a performance review, a company discovers that its supplier quality ratings have declined over the past quarter. Which of the following actions would best align with a data-driven decision-making approach to address this issue?
Analyze defect trends and communicate findings to suppliers
Increase the frequency of supplier audits without data analysis
Replace suppliers based on suspicion of quality issues
Decrease the number of suppliers to focus on fewer sources
Explanation: Analyzing defect trends and communicating findings to suppliers is a data-driven approach that enables targeted improvements and fosters collaboration.
An importer is tasked with classifying a new product for customs clearance. If the product is a combination of a non-functional decorative item and a functional electronic device, which of the following Harmonized System (HS) codes should be prioritized for classification?
The code for the functional electronic device
The code for the non-functional decorative item
The code for the product that contributes more to the value
The code that relates to the most recent international trade agreements
Answer: C
Explanation: Classification usually follows the principle of determining the component that gives the product its essential character, often tied to value.
A company is interested in improving its supplier engagement on sustainability issues. What is the most effective way to facilitate this engagement?
Conducting one-off training sessions
Establishing ongoing communication and collaboration channels
Imposing strict requirements without dialogue
Limiting supplier participation in sustainability initiatives
Answer: B
Explanation: Ongoing communication and collaboration foster a culture of sustainability and encourage suppliers to engage actively in sustainability efforts.
In a Lean transformation, a company emphasizes the importance of 'Kaizen'. Which of the following best describes the concept of Kaizen?
Large-scale changes implemented infrequently
Solely management-driven improvements
A focus on eliminating all waste immediately
Continuous, incremental improvements involving all employees
Answer: D
Explanation: Kaizen emphasizes continuous, incremental improvements involving all employees, fostering a culture of ongoing enhancement within the organization.
In a recent survey, employees reported feeling unrecognized for their contributions. As an emotionally intelligent leader, what is the most appropriate action to take?
Conduct a team meeting to address the issue
Increase employee salaries
Implement a recognition program that highlights achievements
Encourage employees to communicate their needs directly
Answer: C
Explanation: Implementing a recognition program demonstrates appreciation for contributions, positively impacting employee morale and engagement.
In a situation where a supplier is unable to fulfill an order due to a sudden regulatory change affecting their production capabilities, which of the following actions should the supplier take to mitigate potential claims?
Notify the buyer immediately and provide documentation of the change
Ignore the situation until the next order
Continue production at a loss to meet obligations
Seek a third-party mediator
Answer: A
Explanation: The supplier should promptly notify the buyer and provide documentation to demonstrate the regulatory change's impact, which could invoke force majeure protections.
In a scenario where a company relies heavily on a single supplier for critical components, what is the most advisable risk mitigation strategy to implement?
Developing a strong relationship with the supplier
Implementing stringent supplier performance metrics
Increasing the inventory of components from the supplier
Diversifying the supplier base to include multiple sources
Answer: D
Explanation: Diversifying the supplier base to include multiple sources is the most advisable strategy to mitigate risks associated with reliance on a single supplier, reducing vulnerability to disruptions.
A company is analyzing its global supply chain for sustainability practices. Which metric would be most relevant in assessing the environmental impact of its logistics operations?
Total shipping costs incurred over the year
Carbon emissions produced during transportation
Average delivery time for shipments
Number of suppliers engaged in sustainability initiatives
Answer: B
Explanation: Carbon emissions are a direct measure of the environmental impact of logistics operations, making them a crucial metric for sustainability assessment.
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