CPSM Supplier Relationship Management 1 — Questions and Answers
Question 1: Which SRM model segment typically receives the most strategic investment and collaborative development efforts?
- Transactional suppliers
- Preferred suppliers
- Strategic suppliers (Correct answer)
- Commodity suppliers
Correct answer: Strategic suppliers
Strategic suppliers are critical to competitive advantage and receive the highest investment in joint development, executive engagement, and long-term partnership activities.
Question 2: A Supplier Scorecard is primarily used to:
- Negotiate lower prices during contract renewal
- Measure and communicate supplier performance against defined KPIs (Correct answer)
- Qualify new suppliers for the approved vendor list
- Determine which suppliers should be consolidated
Correct answer: Measure and communicate supplier performance against defined KPIs
Supplier scorecards provide a structured, data-driven mechanism to track performance metrics and enable transparent two-way feedback between buyer and supplier.
Question 3: Which of the following best describes 'supplier development' in the context of SRM?
- Increasing the number of suppliers in a category
- Helping existing suppliers improve capabilities to meet buyer requirements (Correct answer)
- Developing internal procurement staff to manage suppliers
- Creating a new supplier portal system
Correct answer: Helping existing suppliers improve capabilities to meet buyer requirements
Supplier development involves deliberate buyer investment—through training, process support, or co-investment—to improve a supplier's performance, quality, or capacity.
Question 4: A Supplier Relationship Manager notices a key supplier's on-time delivery has dropped below 80% for three consecutive months. The MOST appropriate first step is to:
- Immediately terminate the contract and source an alternative
- Issue a formal corrective action request (CAR) and schedule a root-cause meeting (Correct answer)
- Reduce purchase orders to the supplier by 50%
- Escalate to legal for breach of contract proceedings
Correct answer: Issue a formal corrective action request (CAR) and schedule a root-cause meeting
A corrective action request combined with a root-cause analysis meeting is the structured, collaborative first step that gives the supplier an opportunity to identify and fix underlying issues.
Question 5: Which metric is MOST relevant when evaluating supplier quality performance?
- Days Sales Outstanding (DSO)
- Parts Per Million (PPM) defect rate (Correct answer)
- Inventory Turnover Ratio
- Cash-to-Cash Cycle Time
Correct answer: Parts Per Million (PPM) defect rate
Parts Per Million defect rate directly measures the frequency of defective units supplied, making it the standard quality KPI in supplier performance management.
Question 6: In SRM, a 'preferred supplier' designation typically means the supplier:
- Has exclusive rights to supply all volumes in the category
- Has demonstrated superior performance and receives volume preference over others (Correct answer)
- Is owned by a minority group and receives diversity credits
- Has the lowest unit cost in the category
Correct answer: Has demonstrated superior performance and receives volume preference over others
Preferred supplier status is earned through consistently high performance and typically grants the supplier priority consideration for new business within the category.
Question 7: Which of the following is a key benefit of implementing a formal SRM program?
- Eliminates the need for contract management
- Reduces the total number of suppliers automatically
- Enables early access to supplier innovation and reduces supply disruptions (Correct answer)
- Transfers all supply chain risk to the supplier
Correct answer: Enables early access to supplier innovation and reduces supply disruptions
A structured SRM program builds trust and open communication, which encourages suppliers to share new ideas and proactively flag risks before they become disruptions.
CPSM Supplier Relationship Management 1
Which SRM model segment typically receives the most strategic investment and collaborative development efforts?