ISM Updated CORE Exam Questions and Answers by edgar

When a supplier states that a product is covered by a government contract, implying that they cannot offer a lower price, it is essential for the supply manager to verify this claim. The supply manager should require the supplier to provide specifics on the government contract restrictions. This will help determine if the price is indeed fixed by the government or if there are other negotiable aspects. By understanding the exact restrictions, the supply manager can better navigate the negotiation process, ensuring compliance while potentially identifying areas for negotiation that are not restricted.

References:

Federal Acquisition Regulation (FAR) guidelines on government contracts.

"The Art of Negotiation" by Michael Wheeler.

Institute for Supply Management (ISM) guidelines on government contract negotiations.

To calculate the projected time required to produce the eighth unit under an 80% learning curve, we use the learning curve formula. The learning curve indicates that each time production doubles, the time required per unit decreases to 80% of the previous time.

The formula for the learning curve is: ????????=????1×????log⁡????(???????????????????????????????? ????????????????????)Tn​=T1​×nlogb​(learning curve) Where:

????????Tn​ is the time for the nth unit.

????1T1​ is the time for the first unit (30 minutes).

????n is the unit number (8).

????b is the base of the logarithm (2 for doubling).

Learning curve = 0.80.

Using the formula: ????8=30×8log⁡2(0.80)T8​=30×8log2​(0.80) ????8=30×8−0.3219T8​=30×8−0.3219 ????8=30×0.512T8​=30×0.512 ????8=15.36 minutesT8​=15.36 minutes

References:

Chase, R. B., Jacobs, F. R., & Aquilano, N. J. (2006). Operations Management for Competitive Advantage. McGraw-Hill.

Learning curve theory and application articles from professional operations management resources.

To determine the annual cost reduction:

Calculate the current annual cost: $20,000/month for Scope A + $2,000/month for Scope B = $22,000/month. Annually, this is $22,000 * 12 = $264,000.

Calculate the new annual cost with the new supplier: $19,000/month for both Scope A and Scope B. Annually, this is $19,000 * 12 = $228,000.

Determine the annual cost reduction: $264,000 (old annual cost) - $228,000 (new annual cost) = $36,000. References:

Procurement and Supply Chain Management by Kenneth Lysons and Brian Farrington

Principles of Supply Chain Management: A Balanced Approach by Joel D. Wisner, Keah-Choon Tan, G. Keong Leong

The best method for conducting regular business reviews with suppliers is to choose suppliers based on the necessity of their product to operations. Prioritizing suppliers who provide critical products ensures that the most important aspects of the supply chain are managed effectively. This approach helps in maintaining the continuity and efficiency of operations and allows the firm to address potential issues with key suppliers promptly.

References

ISM (Institute for Supply Management). Supplier Relationship Management Best Practices.

CIPS (Chartered Institute of Procurement & Supply). Conducting Effective Supplier Reviews.