ISM Leadership and Transformation in Supply Management LEAD Exam Practice Test

Answer : B

Regulatory Compliance: OSHA regulations mandate that Safety Data Sheets (SDS) must be accessible for all hazardous chemicals used in the workplace. This requirement applies to all materials, including those used by contractors.

Employee Safety: Ensuring SDS are available for all chemicals used on-site is crucial for maintaining a safe working environment. Employees must be aware of potential hazards and how to handle chemicals safely.

Risk Management: Continuing operations without the necessary SDS poses a risk to employee safety and exposes the company to regulatory penalties.

Corrective Action: Discontinuing work with the janitorial services firm until the SDS are provided is a proactive measure to mitigate this risk.

Contractual Obligation: The janitorial service is in breach of the safety requirements agreed upon. Immediate cessation of their services until compliance is achieved is necessary.

Reference: OSHA's Hazard Communication Standard (29 CFR 1910.1200) and industry best practices for contractor management support this approach.

Answer : C

Scenario Overview: The supply manager is part of a cross-functional team managing critical parts. Despite the supplier's strong record in quality and pricing, frequent follow-ups and expedited shipping are issues. The supply manager assembles data and discusses risks, leading the team to explore alternative suppliers.

Stakeholder Engagement Definition: This involves effectively communicating with and involving stakeholders in decision-making processes to ensure their needs and concerns are addressed, leading to better decisions and outcomes.

Application in Scenario: The supply manager engaged stakeholders (the team) by presenting data on supplier performance and highlighting potential risks. This facilitated informed discussions and helped align the team's perspective towards considering alternative suppliers.

Outcome: Through stakeholder engagement, the team identified alternative suppliers with comparable pricing and quality but better delivery reliability, achieving a successful outcome.

Reference: Stakeholder engagement is a key principle in project management and strategic sourcing, as outlined in the Project Management Institute's (PMI) PMBOK Guide and supply chain management literature such as 'Supply Chain Management: Strategy, Planning, and Operation' by Sunil Chopra and Peter Meindl.

Answer : C

The junior buyer observing a senior buyer conduct various sourcing events is an example of shadowing.

Shadowing: This method involves one individual observing the day-to-day activities of another, gaining insights into their tasks and responsibilities. It is an effective way to learn through observation and informal mentorship.

On-the-Job Learning: Shadowing provides practical exposure to real-world scenarios and decision-making processes, which is crucial for developing the skills of a junior buyer.

Knowledge Transfer: This method facilitates the transfer of tacit knowledge, which can be difficult to acquire through formal training programs alone.

Noe, R.A. (2017). Employee Training and Development. McGraw-Hill Education.

Goldstein, I.L., & Ford, J.K. (2002). Training in Organizations: Needs Assessment, Development, and Evaluation. Wadsworth.

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.

Answer : A

To address inconsistencies in reporting cost reductions, the best approach is to discuss balanced scorecards with the supply management team.

Balanced Scorecards: This management tool helps align business activities with the vision and strategy of the organization, improving internal and external communications, and monitoring organizational performance against strategic goals.

Comprehensive Evaluation: By implementing balanced scorecards, the supply management department can create a comprehensive evaluation framework that includes both cost savings and cost avoidance, ensuring consistent and accurate reporting.

Goal Setting: Balanced scorecards facilitate setting specific, measurable targets for team members, enhancing accountability and performance tracking across different dimensions of cost management.

Kaplan, R.S., & Norton, D.P. (1996). The Balanced Scorecard: Translating Strategy into Action. Harvard Business Review Press.

Niven, P.R. (2006). Balanced Scorecard Step-by-Step: Maximizing Performance and Maintaining Results. John Wiley & Sons.

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 : B

Long-Term Planning: Succession planning focuses on preparing for future leadership and critical role needs within the organization.

Talent Development: By developing a strong talent pool, the organization ensures it has capable leaders and skilled employees ready to step into key positions as they become available.

Organizational Stability: A robust succession plan provides stability and continuity, minimizing disruptions when transitions occur.

Competitive Advantage: Having a well-prepared talent pool gives the organization a competitive advantage, as it can quickly and effectively respond to changes and opportunities.

Reference: Succession planning frameworks (e.g., SHRM - Society for Human Resource Management, HBR - Harvard Business Review) highlight the importance of talent development as the primary benefit of succession planning.