CPSM COURSEWARE · 2020-06-10 · Task 3-C-5 Application Question #1 Nada Riyadh, the global director of supply management for Sunburst Hotels located in Saudi Arabia, was dreading

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CPSM® COURSEWARE

© Copyright 2020. Institute for Supply Management TM; All Rights Reserved.

Leadership and Transformation in

Supply Management Exam

Exam 3

Certified Professional in Supply Management®

Exam 3: Categories and Tasks Leadership and Business Acumen –

Strategy Development – Task 3-A-1 – Task 3-A-2 – Task 3-A-3 – Task 3-A-4

Leadership and Business Acumen –

Stakeholder Engagement – Task 3-B-1 – Task 3-B-2 – Task 3-B-3 – Task 3-B-4 – Task 3-B-5 Leadership and Business Acumen –

People Development and Coaching – Task 3-C-1 – Task 3-C-2 – Task 3-C-3 – Task 3-C-4 – Task 3-C-5 – Task 3-C-6 – Task 3-C-7 – Task 3-C-8

Systems Capability and Technology – Task 3-D-1 – Task 3-D-2

Risk and Compliance

– Task 3-E-1 – Task 3-E-2 – Task 3-E-3 – Task 3-E-4 – Task 3-E-5 – Task 3-E-6 – Task 3-E-7 – Task 3-E-8 – Task 3-E-9

Corporate Social Responsibility and Ethics

– Task 3-F-1 – Task 3-F-2 – Task 3-F-3 – Task 3-F-4 – Task 3-F-5 – Task 3-F-6

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©2020 ISM All Rights Reserved

Exam 3

TASK 3-A-1

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Exam 3

Task 3-A-1 Task Outline

1) Supply management organization mission, processes, capabilities

2) Definition of customer requirements

3) Corporate processes and organizational dynamics

4) Influence

5) Internal negotiations and synergies

3-A-1 Participate in organization- wide objective setting.

All of the content in this task is bridge exam material.

Full 6Q; Bridge 4Q

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Exam 3

Supply Managers Should Understand the

Organization’s

Key objectives

Staffing

Policy development processes

Existing policies

Supply management’s

– Mission

– Processes

– Capabilities

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Exam 3

Supply Management Mission

Supply management’s primary mission is to

support organizational needs through

– Identifying

– Acquiring

– Accessing

– Positioning

Whatever the organization needs or potentially

might need to succeed

We must be proactive in this

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Exam 3

Supply Management’s New Environment

Forward looking, anticipatory approach

Planning, forecasting, collaboration

Strong focus on internal customer satisfaction

Assessment of internal competencies

Outsourcing many activities

– Materials and products

– Information technology

– Design activities

Much of this shifted to suppliers

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Exam 3

Supply Management Processes -

Typical Strategic sourcing and supplier base management

Strategic supply management

Management of countertrade activities

Market intelligence management

Purchase of materials and components

Project management services

Services procurement and contracting

Inventory management and control

Investment recovery and recycling

Outsourcing and subcontracting

Forecasting and planning

Supply management research

Value analysis

Value engineering

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Exam 3

Supply Management Capabilities -

Typical

Selection, development and maintenance of supply

– Stay abreast of market conditions

– Ensure supplier competitiveness

– Identify new suppliers

– Develop value-adding relationships

– Improve supplier performance

Develop a value-adding supplier base

Cross-functional, cross-organizational collaboration

Communicate/coordinate with internal customers and

suppliers

Ensure that agreement terms are followed

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Exam 3

To represent supply management in company-wide matters, supply managers should understand

External customer needs and expectations

What is required to meet those needs

How supply management helps to meet those needs

In other words, how does supply management “fit” into the external customer value proposition?

Definition of Customer Requirements

Supply managers meet internal customer needs by

Providing reliable sources of products and services

Consistently meeting operational requirements

– Optimize total cost of ownership

– Ensure supplier capabilities

– Ensure quality of product and performance

– Ensure timely delivery

– Ensure accurate delivery points

Internal Customers External Customers

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Exam 3

Supply Management’s Organizational “Fit”

Examples

– In a manufacturing environment: assurance of

quality/quantity of parts and materials

– In a service organization: assurance of performance

quality, locations of service equipment, etc.

– In a distribution organization: ensuring

• Adequacy of facilities and equipment

• Quality and service levels of logistics providers

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Exam 3

Corporate Processes and Dynamics

Supply managers should understand corporate

processes, including which functions are most

influential and what they need to succeed

Examples

– In manufacturing organizations: engineering and

manufacturing are likely to have the most clout

– In service organizations: marketing may have the most

clout

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Exam 3

Corporate Processes and Dynamics –

Cont.

Awareness of organizational dynamics enables supply management to provide maximum support where it makes the most impact

When proposing a supply management initiative, show how it helps achieve organizational goals

This implies that supply management can directly affect important organizational outcomes – Ensure that the net effect is positive

– Example: be sure that savings from lowering inventory through smaller deliveries is greater than the transportation cost increases

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Exam 3

Influence

The degree to which supply

management influences

organizational decisions

depends on the degree to

which supply is seen as

integral to organization

success

Low

Low

High

High

Org

an

izati

on

al P

erc

ep

tio

n o

f

Su

pp

ly M

an

ag

em

en

t’s

Co

ntr

ibu

tio

n t

o S

uccess

Supply Management’s

Influence 14


Exam 3

Influence – Cont.

Supply strategies must integrate with and support

organizational strategies. This can be difficult

because

– Historically, supply was perceived as “tactical” and did

not participate in corporate planning

– Senior management is often slow to realize the potential

of a world-class supply function

Supply management must “market” the function by

showing how it helps achieve critical objectives

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Exam 3

Internal Negotiations and Synergies

Refers to the way

– Changes are made

– Improvements are approved

and implemented

– Budgets are developed

– Strategies, objectives,

policies and procedures are

proposed, developed and

implemented

To participate, must have

knowledge of

organization’s

– Mission

– Internal processes

– Capabilities

– Customer requirements

– Corporate processes

– Dynamics

– Influence processes

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Exam 3

Organizational Synergy

Synergy is a mutually advantageous conjunction,

where the whole is greater than the sum of its parts

– Example: a cross-functional new-product development

team could likely bring the product to market faster than

by using the old “step-by-step” approach

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Exam 3

Task 3-A-1 Recall Question #1

The ability of a supply management professional to effect

change in an organization is most commonly a result of

her ability to ____________ others?

(A) Influence

(B) Control

(C) Leverage

(D) Support

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Exam 3


In general, the concept of “the whole is greater than the

sum of the individual parts” refers to:

(A) Influence.

(B) Leverage.

(C) Leadership.

(D) Synergy.

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Exam 3

Task 3-A-1 Application Question #1

You are a retailer of leisure products. Business has suffered over many years due to a soft economy. Market pressures have forced your firm to lower prices. At a press conference this morning, your CEO stated, “In spite of lower sales prices and the poor economy, we are on target to increase profits and expect to beat analysts’ projected earnings targets due to our vision to be the most streamlined and efficient supplier of fairly-priced quality leisure products.”

Given this information, as the head of supply management, what is the MOST appropriate mission statement for your department?

(A) Ensure products are available at the right price at the right time.

(B) While never diminishing quality, ensure all purchases are at the total lowest cost and all processes provide maximum value.

(C) Improve internal client perception of what we have to offer through stellar customer service and support.

(D) Maximize quality, service, and product availability.

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Exam 3


You are the head of supply management in the corporate office of a decentralized organization. Your strategic goal is to have 90% of your company’s spend under uniform management processes within five years. To accomplish this, you will need to influence others to follow strict bidding and contract processes.

Given this information, what is the MOST appropriate way to accomplish this goal?

(A) Build a sense of trust and credibility with stakeholders by demonstrating the value in adopting these new processes.

(B) Mandate the new processes be followed, and distribute quarterly status reports as to which units are complying and which are not.

(C) Do the work yourself with your own corporate staff and then hand off finished solutions for implementation to each business unit.

(D) Centralize all supply management, leverage the corporation’s spend and roll out new programs across the enterprise.

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Exam 3

Task 3-A-1 Summary and Review

Identify the basis of supply management’s mission

List some typical supply management processes

List some typical supply management capabilities

Define the two dimensions of customer requirements and key elements of meeting each

Discuss the impact of organizational dynamics on supply management

What affects supply management’s influence on overall organizational decisions?

Name four major outcomes of internal negotiations and synergies

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Exam 3

TASK 3-A-2

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Exam 3

TASK 3-A-3

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Exam 3


1) Corporate goals

2) Elements of a business plan

3) Concept of goal alignment

4) Product price structure

5) Contribution to profit

6) Business planning process

7) SWOT analysis

8) Financial measures and other metrics

Develop, implement, revise and support business plans and operating policies and

procedures


Full 6Q; Bridge 6Q

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Exam 3

Corporate Goals

Goals are commonly defined as

– Broad statements of ideal future conditions

– Statements of anticipated or projected outcomes

– Specific objectives relating to specific time periods

– Objectives made specific in terms of time and degree

– The object of plans

From these definitions, several themes emerge

– A focus on the future

– A focus on desired outcomes

– The link between goals and plans

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Exam 3

Corporate Goals – Cont.

So, goals may be defined as the desired end

results towards which effort and resources are

directed. Goals should be

– Specific

– Measurable

– Attainable

– Results-oriented

– Time bound

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Exam 3


Supply managers should understand the

differences in

– Strategic and operational goals

– Amounts of employee input

– Level of goal difficulty

– Quantitative and qualitative goals

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Exam 3


GOALS

OPERATIONAL

•More specific than strategic goals

•Usually related to lower level

organizational goals

•Usually have shorter time frames

Strategic

vs

Operational

Quantitative

vs

Qualitative

STRATEGIC

•Tend to be associated with

corporate level goals

QUANTITATIVE

•Can be objectively measured

•Typically involve use of hard data

QUALITATIVE

•Often referred to as “soft dollar”

impact

•Usually, difficult to measure

objectively 29


Exam 3


Amount of employee input: employees are

generally more committed to goals when they are

involved in setting them

Level of goal difficulty. Goals should

– Be attainable

– Require focused effort

– Stretch employee comfort zones

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Exam 3

Elements of a Business Plan

A vision statement – The overarching purpose of the organization and its role in society

A mission statement (should address questions like) – Who are we?

– What need to we want to meet?

– How will we meet those needs?

– What are our central values?

A value statement (sets forth values in critical areas) – Hiring practice

– Resource allocation

– Performance measurement

– Treatment of suppliers

– Treatment of employees

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Exam 3

Elements of a Business Plan – Cont.

Strategy (strategy leads to strategic planning and

involves decisions in areas such as)

– Allocation of scare resources

– Customer analysis

– Competitor analysis

– Market analysis

– Government regulations

Strategy development is a dynamic process

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Exam 3

Types of Strategies

Corporate strategies (concerned with issues such as)

– Businesses in which the firms wishes to compete

– Goals concerning allocation of resources

Business unit strategies (concerned with establishing)

– Business-specific strategy

– How business strategy related to corporate strategy

Supply management strategies

– Typically, commodity specific

– Must support corporate and business unit strategies

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Exam 3

The Planning Hierarchy

Vision

Plans

Goals

Strategy

Mission

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Exam 3

Business Planning

Business plans evolve from corporate goals and are,

simultaneously

– Determination of organizational goals and objectives

– Roadmaps to achieving goals

– Formulation of specific courses of action

– A systematic consideration of alternatives

– Policies, programs, and procedures that lead to achievement

Business plans should answer questions such as

– What is our business?

– Who are our customers?

– Where are we going?

– How will we get there?

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Exam 3

SEVEN KEY AREAS OF BUSINESS PLANNING

1. Overview of the business A history of the organization

Organizational vision, mission, stated goals

2. Marketing plan (provides

analysis of:)

The market

Particular market segments of interest

The industry

Key competitors

3. Market strategy (should cover:) The value proposition

Goals; e.g., market share, sales revenue

4. Management and human capital Internal human resources

Skills, abilities, knowledge

5. Operations capabilities Technology, capacity, skill levels, etc.

6. Financial plan Revenues and expenses

Assets and liabilities

Historical and projected

7. Critical business risks Factors that could cause plan to change

Contingencies, etc.

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Exam 3

Proactive Plans Address Issues Such As

Resource requirements

Authority level for decision making

Individual skill requirements

Performance time frames

Additional supplementary data as appropriate

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Exam 3

Important Point

Plans are developed and implemented in

a dynamic environment. The only

certainty is that they will need

modification over time

That requires systematic monitoring to

ensure timely modification of plans

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Exam 3

Types of Plans – Other than Strategic

Tactical plans

– Typically for time frames up to a year

– They provide control and measurement mechanisms

Standing plans

– Used over and over until changed

– Examples include policies and procedures

Single-use plans

– Created for a particular situation

– End when goals are reached

– May be long or short term

– Example: increase capacity

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Exam 3

The Concept of Goal Alignment

Internal

– Connecting individual

department, function and

employee efforts directly to

the vision and mission

– Individual unit objectives

must support overall

organizational goals

External

– Relate to stakeholders

outside the organization

– Includes suppliers and final

customers

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Exam 3

Product Price Structure

Product pricing structure is a key part of the

business plan

While pricing strategy may be business unit

specific, the primary decision is whether to use a

market-based or cost approach to pricing

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Exam 3

Product Price Structure – Cont.

Requires consumer research

– Seeks to determine what customers ideally would pay

Requires market research on competitors

– Competitor intelligence facilitates analysis of their prices and services

Based on this research, organization seeks to identify what differentiates its product or service from competitors

The goal: to set a price that optimizes revenue and profit

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Exam 3


Determines selling price by examining cost structure and adding

reasonable profit

In free market, this is dominant pricing model

Common when a fixed price is not appropriate (e.g., scope of

work known, but new product)

Buyers should ensure accurate seller costs and reasonable profit

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Exam 3


Loss leader pricing

– Seeks to recover variable cost

– Seller may be seeking to “buy-into” the business

• Offer low price with view towards a profit on subsequent work

• Attempt to dominate market and force competitors out

• Retail: draw customers into the store where they may buy

profitable items

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Exam 3


Market demand pricing – Similar to market-based pricing

– Seller determines demand and prices accordingly

– Objective: gain a certain market share

– Often called “skimming market share”

• Ex: Xbox and iPod: initial prices high, but dropped during growth and maturity phases

Time and material contract – Hourly rates, plus materials and expenses

• Ex: auto repair and consultants

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Exam 3

Contribution to Profit

Cost savings – Paying less than was previously paid

– Sources might include • Negotiated price reductions

• Volume leveraging

• E-procurement or systems contracts

• Outsourcing

• International sourcing

• Inventory reduction

• Spot or hedge buys

• Transportation improvements

Process improvement – Re-engineering

– Outsourcing

– Having suppliers assume different roles

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Exam 3

Contribution to Profit – Cont.

Collaborative cost takeout efforts

– Close collaboration with suppliers

– Joint efforts may include

• Reward sharing

• Joint performance improvement efforts

• Increased quality

• Product substitution

Collaboration may take the form of

– Early supplier involvement

– Joint, mutually beneficial strategies

– Shared design or product/process enhancement

– Collaborative Planning Forecasting Replenishment (CPFR)

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Exam 3

The Business Planning Process

Supply managers are the primary communicators

in the procurement process

All involved should understand

– Their roles

– Organizational objectives

– The plan from an operational perspective

Planning time frames

– Long term strategic: 5-10 years

– Short term strategic: typically 1-2 years – up to 5 years

– Operational: up to a year

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Exam 3

Key Considerations in Developing

Commodity Plans Forecasted requirements

Source selection

Type of market

– Traded on an exchange

– Manufacturer or distributor

– Domestic or foreign

Form in which the commodity will be purchased

– Raw, refined, converted, etc.

Total supply availability

Logistics

Geopolitical control of the commodity

Costs of acquisition

Communication with stakeholders

Overall financial considerations

49


Exam 3

SWOT Analysis

Used to objectively view an organization’s

strengths, weaknesses, opportunities and threats

Opportunities

We

ak

nes

se

s

Str

en

gth

s

Threats

Q1

Q3

Q2

Q4

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Exam 3

SWOT Analysis – Cont.

May be directed toward any key area of activity; e.g.,

Governmental

– Government regulation

– Compliance with laws and

regulation (SOX)

– Specific industry regulations

(hazardous waste handling)

– International aspects as appropriate

Market

– Global market analysis

– Trends in particular markets

– Geographic market shifts

– Cost trends and changes

Environmental

– Global market environment

– Market conditions in key supplier

markets worldwide

– Buyer vs seller markets

Emerging supply chain practices

– Current developments

– Likely future developments

– Whether or not these constitute

opportunities or threats

Note: see Tasks 2-C-2(5) and 2-G-1

51


Exam 3

Financial Measures and Other Metrics

Supply management plans should show how the

function will contribute to

– Improvement of key business metrics

– Achievement of organizational goals

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Exam 3


Which of the following statements is NOT an example of a

corporate goal?

(A) Broad statements of ideal future conditions

(B) General statements of anticipated or projected outcomes

(C) Objectives made specific in terms of time and degree

(D) Tactical plans with implementation strategies

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Exam 3


Which of the following elements is NOT part of a business

plan?

(A) Business overview and operations capability

(B) Marketing plan and market strategy

(C) Supplier relationship management and total quality plan

(D) Management and human capital

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Exam 3


As part of a long-term strategy, Linda Petit, the CEO of Lahaina Manufacturing, has established four key goals for this fiscal year:

– Increase Lahaina Manufacturing’s top line revenue.

– Increase volume.

– Reduce cost.

– Bring new, innovative product offerings to the marketplace.

Which of the following statements best illustrates how supply management can have the MOST impact toward achieving these goals?

(A) Increase revenue

(B) Increase volume and reduce cost

(C) Bring innovation from suppliers, reduce cost and increase volume

(D) Supply management does not have a direct impact on any of the organization’s goals as stated.

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Exam 3

Task 3-A-3 Comprehension Question #1

The Director of Supply Management for O’Shea Company

must create strategies that align with the company’s

business objectives to increase revenue, reduce cost and

generate new products. When creating strategies, which

criteria are MOST important for the director to consider?

Identification of:

(A) Actionable, measurable tasks.

(B) Investment in staffing levels required.

(C) Business changes required.

(D) Strategies which are long-term.

56


Exam 3


Define goals and identify the criteria they should meet

Explain the differences in (1) strategic and operational goals and (2)

quantitative and qualitative goals

Identify seven key areas of business planning

Name and define four types of business plans

Compare internal and external goal alignment

Discuss the following pricing structures

– Market-based

– Cost approach

– Loss leader

– Market demand

Discuss three areas where supply management has responsibility for

contribution to profit

List some of the considerations in developing a commodity supply plan

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Exam 3

TASK 3-A-4

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Exam 3

TASK 3-A-4

59


Exam 3


1) Methods of evaluating assets and corporate value

A. Contractual issues

B. Management of redundancy and complexity

C. Liability exposure

D. Divestiture of assets

E. Global economic considerations

Participate in company mergers, Acquisitions and/or divestitures.


Full 6Q; Bridge 5Q

60


Exam 3

Introduction

The goal of for-profit organizations is to maximize

long term profitability

They continually develop strategies to accomplish

this

Generally, a for-profit organization will

– Identify specific businesses in which to participate

– Identify value-creation activities in relation to those

businesses

– Determine the need to expand or contract those

businesses

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Exam 3

Five Basic Business Related Strategies

Diversification Addition of new businesses distinct from existing businesses

Geographic diversification: occurs when marketing begins in

new geographic areas

Horizontal

integration

Carried out through either a merger or an acquisition

– Merger: combining two or more businesses

– Acquisition: one organization acquiring another

Usually on the same level of the supply chain

Could be similar products or substitute products

Vertical

integration

Expanding upstream (e.g., acquiring suppliers)

Expanding downstream (e.g., acquiring distribution/retail outlets)

Outsourcing A version of “make-or-buy”

Typically, core competencies are not outsourced

Prevalent in high-technology (contract manufacturing)

May lead to “virtual corporation” (most activities outsourced)

Divestiture

Involves selling a specific business that no longer offers

strategic advantage or value add

62


Exam 3

Issues Related to Evaluating

Assets and Corporate Value

63


Exam 3

Evaluating Assets and Corporate Value

Contractual Issues

When seeking to vertically integrate, the search for

candidate organizations is initially broad. This

initial stage seeks to identify a list of candidates. It

should include

– Supply market analysis

– A list of major suppliers to the market

– A list of current or former suppliers

– Supplier recommendations about other organizations

64


Exam 3


Assignment Consent

The transfer of a claim or right to another party

Assignment rights should be covered in the

contract

When dealing internationally

– Determine if supply contracts are directly transferable

– Determine if supply contracts are cancelable

– Ex: foreign law may limit the scope of inventory

management by not allowing certain materials out of the

country

65


Exam 3


Confidentiality

A confidentiality agreement is a contract between

the parties

Outlines confidential material or knowledge to be

shared

The parties agree not to share any information

covered by the confidentiality agreement

66


Exam 3


Due Diligence

Acquiring firms should be duly diligent in evaluating

potential acquisitions

Initial analysis focuses on strengths and

weaknesses

Assuming an “okay” initial analysis, detailed

analysis should be performed in three key areas

– The external environment

– The internal environment

– Financial strength and status

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Exam 3

Due Diligence – Three Key Areas

External environment

for supplier’s

products/services

Internal environment in

terms of

Financial strength and

status (analysis of key

indicators)

Market demand

Competitors

Market share

Market growth trends

Regulatory issues

Legal and political

climate

Product lines

The customer base

Manufacturing systems

and processes

The distribution system

Technical talent

Quality systems

Certifications

Profit levels

Profit margins and

growth

Breakeven points

Current ratio

Inventories

Long-term liabilities

Debt ratios and net

worth

A history of sales and

sales growth rates

Sustainability of sales

growth rates

68


Exam 3


Current Contractual Obligations

Supply management should review all contractual

obligations to ensure continued supply

With each supplier, execute a statement that

outstanding contracts will be performed

69


Exam 3


Management of Redundancy and Complexity

Redundancy

– Economy-of-scale is an objective of mergers and

acquisitions

– Elimination of redundancy

• Can help justify a merger or acquisition

• Eliminating redundancy often results in reduction of staff

Complexity

– Bringing organizations together can create complexities

– It is usually more complex than anticipated

70


Exam 3


Liability Exposure

An acquired firm’s liabilities are also acquired

This could include – Products

– Retirement and pension plans

– Hazardous cleanup

– Etc.

Supply management’s typical role in mergers and acquisitions typically includes – Evaluation of service contracts

– Determining whether they are beneficial or detrimental to the merged organization

71


Exam 3


Divestiture of Assets

Assets may be disposed or divested – Could be after an acquisition…..because they are not

needed

– Could be required by the FTC as a condition of a merger • Generally, if a merger will substantially reduce competition

• An agreement to divest certain assets is called a “consent decree”

Typical assets for divestiture include – Overlapping or redundant capabilities

– Products or services that don’t match strategic interests

– Outdated facilities

– Excessive liabilities or legacy costs

72


Exam 3


Global Economic Considerations

Mergers and acquisitions are often viewed as a

pathway to growth

Combinations of companies may result from

– Partnerships

– Alliances

– Outright acquisition

Typically, supply management’s role is to help

identify candidates for outsourcing that will

– Contribute to globalization

– Enhance organizational competitiveness

73


Exam 3


The transfer of a claim or right from one party to another

is commonly referred to as:

(A) Due diligence.

(B) Assignment consent.

(C) Divestiture of assets.

(D) Outsourcing.

74


Exam 3


In general, assets that are likely candidates for divestiture are those in which:

I. Redundant capabilities exist between the organizations.

II. Services are aligned with the organization’s strategic interests.

III. Facilities are outdated.

(A) I and II only

(B) II and III only

(C) I and III only

(D) I, II and III

75


Exam 3


Corporate management is pursuing a horizontal

integration strategy and has identified several

organizations for merger consideration. As a senior

supply manager, you are tasked with leading the team in

developing the detailed analysis for one of the target

organizations. In a meeting with the team, you review the

high-level overview created when initial target companies

were identified and discuss what approaches to employ.

Team members consist of members from the supply

market intelligence (SMI) and the mergers and

acquisitions (M&A) teams who will be collecting

competitive intelligence to develop the detailed analysis

requested by management. Cont.

76


Exam 3

Task 3-A-4 Application Question #1 – Cont.

What should you do in reviewing the target company’s

external environment for products and services?

(A) Conduct an analysis of market demand, competitors, market share, market

growth trends, regulatory issues and legal and political climate.

(B) Examine the competitive information collected by the SMI team and evaluate

it, then create a narrative of the findings for senior management.

(C) Evaluate all elements of a high-level overview to understand the key

differentiators among the top competitors in the target company’s market.

(D) Conduct an analysis of the internal environment in terms of customer

base, manufacturing systems, technical talent and quality systems, and

report this to senior management.

77


Exam 3


A supply manager was recently assigned to the corporate

merger and acquisitions (M&A) team as a subject matter

expert in supply management.

The supply manager focuses on creating a process to

identify redundancies and complexity in the supply base,

supply management processes, contracts, technologies,

job descriptions and roles. Failure to identify and mitigate

these risks may result in service disruptions to both

internal and external customers during a merger.

Cont.

78


Exam 3

Task 3-A-4 Application Question #2 – Cont.

What actions should the supply manager take in

developing a plan to reduce these risks without

increasing costs?

(A) Conduct a supply management alignment initiative relative to both the supply

organization and other major groups within the merged company.

(B) Conduct a preliminary assessment of the risks related to the supply base,

supply management processes, contracts, technologies, job descriptions and

roles.

(C) Review all contracts to determine if they are assignable after the merger.

(D) Conduct an analysis of the proposed transaction in relation to the short- and

medium-term business goals of the acquiring organization.

79


Exam 3


Discuss five basic strategies organizations pursue to attain

business goals

Describe supply management’s role in analyzing potential

merger and acquisition (M&A) opportunities including key

areas of concern

Define due diligence and list major areas that should be

addressed in detailed analyses of external and internal

environments and financial strength and status

Describe how and when to divest assets

80


Exam 3

TASK 3-B-1

81


Exam 3

Task 3-B-1 Task Outline

1) Role/perception of supply management within the organization

2) Establishment of trust and credibility

3) Feedback techniques

4) Influence techniques

5) Leadership techniques

6) Internal business partners’ roles, goals and objectives

7) Joint accountability

Develop and evaluate supply Management relationships with Internal departments.

This task contains no bridge exam material.

Full 5Q; Bridge No Q

82


Exam 3

Supply management effectiveness and

efficiency is critical to successful long-term

relationships with internal customers

Developing processes and guidelines,

establishing objectives and measuring

results will ensure that supply

management professionals focus on this

important task

83


Exam 3

Role and Organizational Perception of

Supply Management

Perception is critical….must view us as partners

Supply must be viewed as

– Progressive

– Innovative

– Entrepreneurial

– Service-oriented

– Focused on broad organizational goals

These focal points facilitate internal customer

willingness to work with supply with respect and

appreciation

84


Exam 3

Establishment of Trust and Credibility

Establishment of trust and credibility

– Internal support and cooperation is based on belief that

supply can contribute to functional and organizational

success

– Trust and credibility are earned over time

– They must be reinforced regularly

85


Exam 3

Feedback Techniques

Internal customer feedback should be organized

and regular

Two common methods of obtaining feedback

– Surveys

– Interviews

86


Exam 3

Influence Techniques

Must know how to use influence techniques

effectively

Three possible tactics (according to the Center for

Creative Leadership)

– Depend on logic, target the listener’s rationale and

intellectual position

– Appeal to the emotions or some emotional motivator

– Support a cooperative effort, build connection with

others

87


Exam 3

Leadership Techniques

Supply managers lead teams in support of organizational goals

Team leadership techniques (Sykes, 2007) – Provide clear expectations

– Give employees the tools for success

– Recognize good work

– Get interested in employees

– Value employee opinions

– Grow employee capabilities

– Communicate progress

– Make partners of your employees

88


Exam 3

Internal Business Partners’ Roles, Goals

and Objectives

Must understand internal customer roles and goals

Know what is important to them

Maintain mutually supportive and cooperative

relationships

89


Exam 3

Joint Accountability

Occurs when all involved assume accountability for

results

Supply management cannot excel, acting alone

Each function must perform its own work well

But, must be aware of its impact on the overall

outcome

90


Exam 3

Task 3-B-1 Recall Question #1

According to the Center for Creative Leadership, “depend

on logic,” “appeal to the emotions” and “support a

cooperative effort” are three tactics that BEST represent:

(A) Influence techniques.

(B) Control techniques.

(C) Leverage techniques.

(D) Support techniques.

91


Exam 3


In the supply management profession, the term that

MOST closely means “the quality or power of inspiring

belief” is:

(A) Influence.

(B) Leverage.

(C) Leadership.

(D) Credibility.

92


Exam 3

Task 3-B-1 Application Question #1

The supply management department goal for the next five years is to provide year-over-year savings of at least 3%. The department recently completed a multi-year aggressive campaign to drive down the cost of the goods and services purchased. It may not be feasible to go back to the suppliers to ask for further concessions at this time. Creativity and internal customer support will be key to the department’s success.

Which of the following is the BEST way to meet this goal?

(A) Developing a business plan

(B) Instituting joint accountability

(C) Empowering internal customers

(D) Demonstrating that staff will be trusted

93


Exam 3

Task 3-B-1 Summary and Review

How does trust and credibility affect supply

management success?

Identify three influence tactics

Identify the Sykes Group leadership techniques for

outstanding teams

At what point can you say that “joint accountability”

occurs?

94


Exam 3

TASK 3-B-2

95


Exam 3


1) Purpose of teams

Lead or participate in cross-functional and/or Multifunctional teams.



96


Exam 3

Cross-Functional Teams

A cross-functional team is a group of individuals from various functions,

brought together to achieve clear, worthwhile and compelling goals that

could not be reached without a team

Teaming leverages resources across organizations by utilizing the

expertise of team members

When teams are international in scope, additional considerations such

as the diverse cultures and language abilities of members may need to

be addressed

International teams may never meet in person, but rather virtually on

the Web or other communication media

97


Exam 3


Purpose of Teams

Role of supply management in teams

– Support/service/information

• Provide information on sources, availability, and supply markets

• Supply should be the primary contributor of supply market intelligence

– Project management

• Refers to coordinating the organization, planning, scheduling,

controlling, monitoring and evaluating activities in order to meet the

objectives of a project

– Leadership

• As processes become more strategic, there is greater demand for

supply management leadership

• Supply management becomes a leader in the organization when it is

called upon to exercise its expertise in important business decisions

and acquisitions

98


Exam 3


Purpose of Teams – Cont.

Facilitation – There are six aspects

– Organizing the team

• Assembling team members

• Developing goals and guidelines

• Agreeing on processes to be utilized

– Assessing team requirements

• Determining how members will work with members from other

functions

• Establishing a collaborative environment

• Determining what results the team will be expected to produce

99


Exam 3



Facilitation – Cont.

– Understanding team support roles

• Identifying roles and responsibilities of team members and

sponsors

• Typical roles include

– Sponsor – has ownership/responsibility for team assignment

– Team leader – a key link to other parts of the organization

– Team members – attend meetings and contribute expertise

– Team facilitator – ensures member participation and consensus

– Team recorder – captures ideas and decisions and posts for the

team

100


Exam 3



Facilitation – Cont. – Working together

• Fostering mutual trust, concern, support, respect and celebration

• Fostering a positive emotional status

– Balancing diversity • Discovering and using team members’ cultural strengths

• Matching cultural strengths with team requirements

• Clarifying team cultural conflicts

– Running team meetings • Planning, coordinating and facilitating

• Documenting

• Assigning action plans

• Evaluating team results

101


Exam 3


Advantages of Teams

Brings together functions with vested interest in outcome

Provides a forum for contribution by each member

Enhanced communication among functions

Reduced cross-functional friction

Shared ownership of decisions and results

Stronger sense of unity of purpose

Better identification and resolution of problems

Faster solutions to mutual problems

Increased innovation

Increased organizational synergy

102


Exam 3


Other Important Considerations

Consensus building – Teams may have a diversity of ideas, motivations, and expectations

– Team leaders need methods to reduce these to a consensus

– Example: Prioritize from a larger list of possible actions. Then, prioritize the reduced list, etc., until a useful consensus is reached

– Should decide early in the process how consensus will be achieved

Time considerations – Teams may be one-time, short-term or ongoing

– One-time or short-term teams may face a time factor

– The relative level of urgency will influence the team process

Ownership issues – Individual contribution vs team contribution…..team should decide

– Better to get strong individual contribution as part of team effort

– Recognition of individual effort tends to increase it

103


Exam 3


Other Key Considerations – Cont.

Managing or introducing change – Cross-functional teams have representatives from all involved

functions

– These individuals are advocates for change from their areas

– They help build support for the team effort in their functional areas

Groupthink – Refers to a situation where individual team members simply “go

along” with the thoughts of others, rather than create their own

– This avoids the discomforts of critical and original thinking

– It rises out of a desire to minimize conflict and criticism

– A team involved in groupthink is less creative and less effective

– Members should support the team, but contribute with a degree of conceptual autonomy

104


Exam 3



Synergy

– A situation where the whole is greater than the sum

of its parts

– Team synergy leads to solutions that may not be

possible for individual team members working alone

– Requires shared vision, goals and process

expectations

105


Exam 3



Phases of team building – Forming

• Teams seek to understand their charters, assess their resources and establish a useful working environment

– Storming • Individual agendas are asserted, team goals are challenged and

dissention among members is common

– Norming • Members recognize that, to reach their goals, they must work together

• There is general agreement on what should be done…..and how

– Performing • The team is clearly focused and working towards project completion

– Adjourning

106


Exam 3



Conflict resolution – A structured resolution process is recommended, such as

• Identify the cause of conflict

• Determine team acceptable solution criteria

• Generate solution options, without regard for acceptance or feasibility

• Prioritize the possible solutions to those that are feasible

• Determine the best solution

• Achieve team consensus on the best solution

Personality profiles – Generally, the more diverse the team, the richer the contributions

– But, extreme diversity can be counter-productive

– Consider personality and cultural profiles when forming a team

– Objective: the right people with right qualifications, in the right place

107


Exam 3



Effectiveness measures – Members who receive open/honest evaluation, perform better

– Evaluate both individual and team performance

– Two critical issues

• How to evaluate performance

• Who is responsible for evaluating performance

– Individual evaluation

• Part time member evaluation should include a team-related component

• Best if the team-related evaluation comes from the team

• Full time member evaluation should be completed by the team leader with Input from team members

– Team evaluation

• Evaluation should focus on achievement of goals

• Members should receive accurate, specific, prompt, direct, reliable and appropriate feedback along the way

108


Exam 3


The BEST reason for forming a cross-functional team is

because it is:

(A) A way to motivate people.

(B) A good way to build consensus.

(C) A good way to foster team spirit throughout the organization.

(D) A method of sharing the credit and the blame.

109


Exam 3


Which one of the following is a true statement about the

phases of team building?

(A) Staffing the team is known as the forming phase.

(B) The storming phase is when the team discusses the main goal(s) of

the team.

(C) During the norming phase, the team establishes goals and objectives

and prioritizes them.

(D) During the adjournment phase all teamwork stops.

110


Exam 3

Task 3-B-2 Case Study #1

Discussion Questions:

1. What is a cross-functional team?

2. Would Goods’ assignment fit the ISM Glossary definition of project

management?

3. Does Goods’ role in this case qualify him as a leader in the supply

management sense?

4. According to the CPSM Study Guide, when does the supply

management function become involved in a product return issue?

5. Goods has decided to call in a consultant. As that consultant, what

would you advise Goods to do?

111


Exam 3


What is a “cross-functional” team?

Identify four typical supply management roles on

teams

What is “groupthink?”

Define “synergy”

Identify the five phases of team building

Identify the six step approach to conflict resolution

Describe the common link between effective

metrics and employee performance

112


Exam 3

TASK 3-B-3

113


Exam 3


1) Knowledge assessment and situational analysis

2) Compliance metrics

3) The “learning organization” concept

Disseminate information and promote training related to supply management policies

and procedures.



114


Exam 3

Knowledge Assessment and Situational

Analysis

Supply must clearly understand its current “situation”

This requires an assessment

– Knowledge of policies and procedures across the organization

• Supply

• Other functions that touch the supply management process

• External personnel who interact with supply

– Current level of compliance

– Organizational support

Then, a plan can be developed to close any gaps

Don’t overlook a need to include supplier employees when

developing training

115


Exam 3

Compliance Metrics

After training, develop a method to monitor compliance

The method selected must include useful metrics

Typical policies and procedures to be monitored include – Bid procedure

– PO transaction process

– Releases against existing orders

– Supplier negotiations

– Inventory management

– Transportation

– Ethics

– Supplier relations

– Social responsibility

– Compliance with laws and regulations

116


Exam 3

Compliance Metrics – Cont.

Possible approaches – Periodic review of documentation

– Discussion with involved individuals

– Reports on non-compliance

117


Exam 3

The “Learning Organization” Concept

Learning organizations don’t just adapt to change, they learn from

change

– They challenge their mental models, core beliefs and their processes of

thinking and solving problems

Peter Senge developed the term “learning organization” and believes

there are five components that enable an organization to “learn.” They

are

– Systems thinking

– Personal mastery

– Mental models (deeply ingrained assumptions, generalizations)

– Building shared visions

– Team learning (involves the capacity to think and reason together

118


Exam 3

The “Learning Organization” Concept –

Cont. Learning oriented supply management focuses on combining

– Adaptability – Continuous improvement – A strong sense of purpose

Traits of learning-dominated supply management – Shared vision – Using conflict constructively (forces reassessment) – A spirit of creativity and innovation – Commitment to education – Perceptive risk-taking (forces risk assessment) – Development of entrepreneurial talent (facilitates ownership)

Some of the tools that facilitate a learning organization – Knowledge management systems (systematic methods to acquire,

categorize and use knowledge) – Environmental knowledge scanning and intelligence – Internal data warehouse systems to capture and record data – Personal decision dashboards to use key data in decision-making

119


Exam 3


Which one of the following is NOT one of Senge’s five

disciplines of a learning organization?

(A) Personal mastery

(B) Compliance metrics

(C) Mental models

(D) Building shared visions

120


Exam 3


All of the following are management tools learning

organizations might use EXCEPT:

(A) Knowledge management systems.

(B) Well defined problem-solving methodologies.

(C) Personal decision dashboards.

(D) Internal data warehouse.

121


Exam 3


All of the following are traits of learning-dominated supply management organizations:

(A) Shared vision

(B) Perceptive risk-taking

(C) Entrepreneurial talents

(D) Constructive conflict

Choose from the options above (A, B, C or D) the trait that BEST characterizes each of the following. A choice may be used once, more than once or not at all.

1. Supply professionals take new ideas, concepts and practices and convert them into profitable realities.

2. Where, how and why supply management contributes to organizational effectiveness.

122


Exam 3


What is “situational analysis?”

What is a “learning organization?”

Peter Senge identified five components that

converge to enable an organization to “learn.”

What are they?

Identify six traits of a learning organization

Identify four management tools typically found in a

learning organization

123


Exam 3

TASK 3-B-4

124


Exam 3


1) Level of communication

2) Methods of communication

Market the value of strategic sourcing and sourcing strategies and initiatives to

management and Internal stakeholders.


Full 5Q; Bridge 2Q

125


Exam 3

As supply management organizations develop and

implement more strategic sourcing initiatives,

supply managers must interface with a wider array

of internal and external parties

The other party may not understand supply

management and strategic sourcing

Accordingly, we must convincingly market the value

of supply management initiatives

126


Exam 3

Level of Communication

Senior management – Tactical

• Tangible cost takeout

• Preferably short term (over next 6 months)

– Strategic

• Organizational health

• Helping to meet customer expectations

• Contribution should be visibly and measurably linked to achievement of organizational strategic objectives

Internal customers – Communicate regularly on status, results and new opportunities

– Market the value of supply management

– Assist internal customers in solving supply related problems

– Be proactive

127


Exam 3

Methods of Communication

Feedback mechanisms

– Used to develop insight into how supply management is performing

– Forms of feedback might include

• Periodic performance review (monthly, quarterly, etc.)

• Off-site workshop

• Audit by third party consultants (to identify strengths and weaknesses)

• Satisfaction surveys

• Intranet blogs (where feedback and suggestions are posted)

360 degree survey

– Incorporates review from supervisors, co-workers, subordinates and

external suppliers

– Facilitates a more “rounded” perspective of performance

128


Exam 3

Presentation Skills

A key success factor

Requires ability to adapt a presentation to the

environment

– Consider the objective, the subject and the audience

– Recognize potential distractions and what must be done

to overcome them

– Select the appropriate medium

– Target the ultimate decision-maker, who may not be

present at the meeting

129


Exam 3

Presentation Skills – Cont.

Presentations may be used to gather all

decisionmaking participants together, and to

– Ensure uniform understanding

– Help reach group consensus

– Obtain a group reaction to a situation

– Identify or solve a problem

– Obtain approval or acceptance of an idea or plan

– Resolve conflict

– Assign responsibility

130


Exam 3

Seven Steps to an Effective Presentation

1.Define the objective

– What is the focus of the presentation?

– What do you want the audience to know or believe?

– Will it be audience-centered…..and not presenter-centered?

2.Analyze the audience

– Know the audience’s background and level of understanding

of the topic

– Know the audiences attitude towards the presenter and the

topic

– Put yourself in the audience’s position

131


Exam 3

Seven Steps to an Effective Presentation –

Cont.

3. Plan the presentation tactics – Is one presentation sufficient, or will several be needed?

– Decide on length and timing

– Determine who will attend

– Plan how to overcome identifiable obstacles

4. Organize the presentation – Develop a strong opening that introduces the presenter and

sets up the topic

– Establish the issue and what is expected of the audience

– Identify the main theme (what you wish to communicate to the audience)

– Develop a strong ending

132


Exam 3


Cont. 5. Prepare the script

– Avoid unnecessary jargon

– Define unfamiliar terms

– Don’t use acronyms. They are short forms of jargon

– Consider the detail. Too little will confuse. Too much will be tedious

– Come to the point quickly

– Don’t emphasize differences between you and the audience

– Maintain unity. Don’t over-crowd slides

– Keep visual aids simple

– Use detail in visual aids sparingly. The presenter provides the details

– Keep visuals in a single presentation consistent in design

– Make visuals readable. Use simple, bold print, etc.

– Integrate audio and visuals. Let each channel do some of the work

133


Exam 3


Cont.

6. Consider physical factors that may affect the audience

– Temperature, room size, shape of the room, acoustics, air

circulation, ability to adjust the lighting, seating arrangement, sound

amplification, etc.

7. Deliver the presentation

– Be yourself. You don’t have to be perfect

– Engage the audience by using eye contact and involvement

– Be energetic

– Be empathetic with the audience

– Be aware of distractions such as repetitive body movements,

playing with objects, adjusting the microphone, etc.

– When things go wrong, keep going

134


Exam 3

Intranet

Organizations are increasingly using Intranets to share information related to supply strategies

May be an “informational” site

Or, may be a “shared” site where users can download

Using the Intranet, stakeholders should be able to identify – Current market conditions

– Strategic sourcing decisions that took place

– Actions that will follow the strategies

Performance data and scorecards may be shared at a site

135


Exam 3


Which of the following processes will negatively impact

selling the value of supply management to internal

stakeholders?

(A) The development of a strategy to meet senior management’s

business objectives

(B) Meetings with internal stakeholders to assure business needs are met

(C) Sharing results of a supply management audit

(D) A 360° survey to look for deficiencies resulting in changes in

organization, processes and systems

136


Exam 3


To assure that supply management is aligned to the

business strategy and cross-functional goals, a

feedback mechanism is required. Which of the

following choices is the BEST feedback mechanism?

(A) Measure the number of cross-functional and management complaints.

(B) Informally interview key managers.

(C) Conduct a 360° survey.

(D) Rely on your manager for feedback.

137


Exam 3


The MOST effective methods of communicating with top

management are:

(A) Detailed weekly reports.

(B) Formal quarterly presentations, including strategies and results.

(C) Informal meetings with senior managers.

(D) Following the chain of command and talking directly with your

immediate supervisor.

138


Exam 3


In a typical company more than 50% of operating budget

is influenced by supply management. Based on this fact,

which choice reflects what a company’s senior

management is LEAST interested in?

(A) Tangible cost reduction goals

(B) Sourcing strategies

(C) Value enhancement

(D) Metrics on orders placed and requisitions processed

139


Exam 3


How does supply management’s communication

with senior management differ from communication

with first line supervision?

What is a “360 degree” survey?

Identify the seven steps in delivering an effective

presentation

140


Exam 3

TASK 3-B-5

141


Exam 3


1) Meeting dynamics

2) Issues in the external role and perception of supply management

3) Professional decorum

4) Feedback to management

5) Confidentiality

6) Legal restrictions (e.g., antitrust, export)

Represent Supply management in meetings with corporations, Government agencies,

Professional Associations and/or other organizations.

This task contains bridge and non-bridge exam material.

Full 6Q; Bridge 2Q

142


Exam 3

Meeting Dynamics

Meetings frequently involve groups or teams

This makes the issue of team dynamics important

During its life, a team will move through 5 stages

– Forming

– Storming

– Norming

– Performing

– Adjourning

Guidelines for the leader of a meeting

– Have a clear purpose and agenda

– Encourage participation from everyone. Don’t dominate the meeting

– Start and finish on time

– Keep the discussion on track

– Record all ideas, solutions, recommendation, decisions and concerns that are developed

143


Exam 3

The External Role and Perception of

Supply Management Research indicated in 2005 that senior management had the following

perceptions of supply management

– 60% view supply management as primarily a “price minimizer”

– 35% wanted supply management, on its own initiative, to utilize supplier capabilities to take out cost and speed up cycle times

– 20% wanted supply management, on its own initiative, to actively seek top-line revenue product and service innovation opportunities

About half of executives view supply as non-strategic

The other half wants supply to identify opportunities for the whole organization and take the lead in capitalizing on it

Three points about how supply management is changing

– Supply chains are different today

– Many impacts on supply management come from outside the field

– Supply must adapt to these impacts and position itself to add value

– Roles have changed: from buyer to supply manager

144


Exam 3

Three Important Points

Supply management and Sales are responsible for most of

an organization’s contacts with the external business

community. Accordingly, supply management contributes

heavily to an organization’s external image

Different countries have different customs for business

relationships

Supply managers must clearly understand how business is

conducted, what is acceptable or unacceptable, and what is

legal or illegal in each foreign country where sourcing is

conducted

145


Exam 3

Professional Decorum

Difficult to describe

What is acceptable in one sector or industry in the U.S.,

may not be in another

This is further complicated when compared across various

countries and cultures

In fact, what is legal in one country may not be in another

Supply managers must adapt as necessary

Perceptions, even if incorrect, can be damaging

There is no substitute for ethical behavior

146


Exam 3

Feedback to Management

Must take the initiative to communicate effectively with management

Should indicate how supply management is supporting and contributing to organizational objectives

Must be results-oriented, with plans to deal with variances

Present proposals for new initiatives as business cases

Guidelines for communicating to management – Be thorough…..don’t assume the executive is familiar with details

– Synchronize team efforts prior to presentation (if applicable)

– Focus on what matters, not the trivial many little details

– Use graphs and charts

– Exercise good form – be concise and coherent

147


Exam 3

Other Key Considerations

Confidentiality

– Agreements should protect confidential

information

Legal restrictions (anti-trust, export, etc.)

– Supply managers should be aware of many

different types of laws

148


Exam 3

Types of Laws

Agency law

Contract and commercial law

e-commerce laws

Anti-trust laws

Trade regulations

Industry-specific laws and regulations

Government procurement regulations (where applicable)

Patent, copyright, trade secret and trademark laws

Environmental laws

Employment laws and regulations

Worker health safety laws

Transportation and logistics laws and regulations

Financial laws and regulations

Additional laws as appropriate

Export controls

149


Exam 3


Consider the following phases of team development:

I. Norming

II. Adjourning

III. Forming

IV. Performing

V. Storming

Select the choice that BEST describes the proper sequence of these phases (from first to last):

(A) I, III, IV, II, V

(B) II, IV, I, V, III

(C) III, V, I, IV, II

(D) III, I, V, IV, II

150


Exam 3


If a supply manager shares details of contract pricing and

other terms with another supply manager using the same

service provider, which of the following would he violate?

(A) Electronic commerce laws

(B) Trade secrets

(C) Antitrust law

(D) Contract law

151


Exam 3


Senior managers at Wylie Corporation still view supply management as “reactive purchasing”; that is, when the organization needs something, the supply management people buy it.

This is viewed as critical on several fronts. First, although supply regularly reports significant cost takeout, the supply manager knows that senior management’s lack of understanding could easily translate into a reluctance to provide needed resources. Second, without sufficient resources to conduct business with a value-adding, strategic mindset, suppliers are more likely to perceive supply as less capable and “without clout” in the organization.

Cont.

152


Exam 3

Task 3-B-5 Application Question #1 – Cont.

The supply manager knows that supplier perception of the function’s strength in the organization affects the manner in which they interact with supply management. The supply manager believes the best approach is to modify senior management’s perception of the function.

Thinking strategically, and with a view toward modifying senior management’s perception of the organization, which of the following is the supply manager’s BEST course of action?

(A) Be sure that the organization never runs out of needed materials.

(B) Present a complete business case to senior staff on the potential contributions of the supply function.

(C) Employ advanced negotiation skills to optimize value from each negotiation.

(D) Report supply management cost takeout in terms of its impact on return on assets.

153


Exam 3


The management team of Able Corporation, an organization providing catering services to universities, recently held their semi-annual presentation on the state-of-the-company. In the presentation, management expressed a need for renewed emphasis on the company’s public image.

More specifically, management requested that all functions identify the various ways the function might further enhance the company’s external image, and present them to their immediate manager.

What can supply management do to enhance Able Corporation’s public image?

(A) Discuss organizational policy regarding supplier relations at each meeting with a supplier.

(B) Develop a clear, concise supplier orientation booklet and share with suppliers.

(C) Seek agreements with key suppliers that facilitate discontinuing incoming inspection.

(D) Clearly articulate a policy of not using any supplier that works with or provides environmentally unsafe chemical samples.

154


Exam 3


Identify four key guidelines for effective meetings

Identify three key points about the way supply

management is changing

Identify five guidelines for communicating with

management

We identified 14 types of laws of interest to supply

management. Briefly describe each

What is meant by the term “export control?”

155


Exam 3

TASK 3-C-1

156


Exam 3

Task 3-C-1 Task Outline

1) Functional impact of organizational structure

2) Organizational types and their implications

3) Key issues

4) Workload distribution

Evaluate the supply management organizational structure and modify as necessary in

order to achieve the optimal structure.



157


Exam 3

Functional Impact of Organizational

Structure

Centralized/decentralized/hybrid models – Centralized

• An organizational structure in which authority and responsibility for most supply-related decisions are assigned to a central organization

– Decentralized • An organizational structure in which authority and responsibility

for most supply-related decisions are assigned to individual sites, functions or managers

– Hybrid • Supply management authority and responsibility is shared

between a central supply organization and individual sites or business units

158


Exam 3

Functional Impact of Organizational Structures

Key Influences on Structure

Degree of similarity of purchases across business units

Whether facilities are geographically dispersed or

concentrated

Total organizational spend

Potential for cost savings by leveraging across business

units

Level of technology and resulting level of coordination

across business units

Management philosophy

– Control oriented (likely more centralized)

– Profit center driven (likely more decentralized)

159


Exam 3


Advantages of Centralization

Increased volume-related leverage

More effective communication with suppliers

Increased ease of implementing e-procurement tools

Improved coordination of communication with global

suppliers (communication originates from one point)

Increased buyer specialization

Increased job satisfaction

More time to manage

Lower operating costs (economies-of-scale)

160


Exam 3


Advantages of Decentralization

Easier, more direct communication with internal

customers

Broadened responsibilities

Greater decision making authority (due to a flatter

organization)

Better timing of purchases

161


Exam 3


Hybrid Supply Management Organizations

Centralize or decentralize as advantageous and

appropriate

Forms of hybrid organizations

– Lead divisional buying

– Buying councils or commodity teams

– Corporate steering committee

– Shared services groups

– Geographical or regional buying teams

162


Exam 3

Functional Impact of Organizational

Structures – Cont. Product or brand management

– Supply management is organized along the end product or brand

– There may be a separate supply group for each product or brand

– Typically, these groups will aggregate common items and leverage the volume

Geographic (there are two approaches)

– Global approach

• Approach used when global operations use similar goods

• Supply seeks suppliers that can serve all locations globally

– Regional approach

• When multiple operations are located in a specific region (U.S., North America, etc.)

• Suppliers could be anywhere in the world

• Contracts would originate from regional supply management offices

– In both cases, the objective is economies-of-scale

163


Exam 3

Organization Types and Their Implications

Functional organization – Organized primarily by area of expertise

– Best suited to small organizations operating in stable

environments

– Advantage: high level of specialization on a narrow

range of skills

– Disadvantages • Response time may be slow if used in large organizations

• Possibility of conflict over product priorities

• May disperse overall responsibility

– Generally, as an organization grows and spreads

geographically, the functional form of organization

becomes less efficient

164


Exam 3


– Cont.

Matrix organization – Typically involves dual reporting hierarchy where supply

managers are also assigned to support specific

operating units • Reports to supply management on general matters

• Reports to the operating unit on matters specific to that unit

– Promotes flexibility, cross-functional collaboration and

skills

– But, it can divide employee loyalty

– Requires good communication and interpersonal skills

165


Exam 3


– Cont.

Project organization

– Organized around specific projects

– Each project gets a new supply support organization

– When project ends, the supply support organization disbands

– Advantage: ability to focus on a particular project

– Disadvantage: reduces opportunities for leverage and synergy

Category or commodity management

– Organized around specific spend categories or commodities

– Usually a specialized team

– Usually focused on large volume, critical spends

– Also focused on spends that offer significant economies-of-scale

166


Exam 3


Key Issues – Spend management

• Refers to managing the total organizational spend

• Objective: more efficient, value-adding spending

– Aggregation management • Refers to volume aggregation on like or similar goods/services

• Objective: maximum leverage of spend and economies-of-scale

– Service to end users • Refers to how end user needs and expectations will be met

• Objective: achieve and maintain required level of service

167


Exam 3


Workload distribution (may be handled a number of

ways) – Commodity or class

– Department

– Special project

– Volume

– In rotation (work assigned to the next person on the

roster)

– Type of contract

– Staff expertise

– Supplier

168


Exam 3

Task 3-C-1 Recall Question #1

Which of the following is LEAST likely to be an advantage

of centralizing supply management?

(A) Aggregation for leverage

(B) Lower operating costs

(C) Communication with internal customers

(D) Implementation and use of e-procurement tools

169


Exam 3


Which of the following issues is LEAST important when

establishing or changing the supply management

organizational structure?

(A) Spend management

(B) Aggregation management

(C) Service to end users

(D) Workload distribution

170


Exam 3

Task 3-C-1 Application Question #1

Juan Diego is the newly hired Vice President of Corporate Supply

Management for an automotive service company. One of his first objectives

is to review, and possibly adjust, the organization’s structure to match

corporate objectives that include cost reduction and more rapid response

time to product, service and market changes. During his review he learns

that only half of the total spend consists of common items; the rest are

widely diverse. Supply management is required to provide services to sites

in six countries. Today’s corporate IT capabilities are limited. Given these

circumstances, Diego’s BEST option would be to:

(A) Centralize all commodities at the corporate level so that he can best leverage

spend and obtain as much cost reduction as possible.

(B) Decentralize all commodities to the sites so that they can source locally for

the fastest response time.

(C) Centralize all commonly used items at the corporate level to leverage spend

and allow the uncommon items to be sourced locally.

(D) Develop IT and staff capabilities to a higher level of expertise and review the

organization’s structure after this is done.

171


Exam 3

Task 3-C-1 Summary and Review

Identify at least five of the eight advantages of

centralization

Identify at lease three of the four advantages of

decentralization

Identify and define five forms of hybrid structure

Name four types of supply management

organization structures

What is “aggregation management” and how does

it affect supply management?

172


Exam 3

TASK 3-C-2

173


Exam 3


1) Organization functional requirements

2) Position functional requirements

3) Elements of job design

4) Staffing implications

5) Span of influence

Conduct role design evaluation and potential job redesign requirements.



174


Exam 3

Organizational Functional Requirements

Functional responsibilities and objectives vary by organization

More common responsibilities include – Strategic sourcing

– Inventory management

– Warehousing

– Service contracting

– Logistics and transportation management

– Recycling and investment recovery

– Quality management

There is need for faster response, resulting in – Need to address issues across functional boundaries

– Greater emphasis on a team approach to decision-making

175


Exam 3

Position Functional Requirements

Functional strategies lead to organizational requirements

Organizational requirements lead to position requirements

Job design specifies methods and content of the work

Job analysis refers to collecting and analyzing job-related information – Facilitates hiring decisions

– Helps in determining training requirements

– Identifies performance-related successes and problems

– Facilitates sound compensation decisions

176


Exam 3

Position Functional Requirements – Cont.

Job analysis is composed of:

– Job description (details on Study Guide page 177)

– Job specifications

• Required knowledge, skills and abilities

• Education requirements

• Experience requirements

• Certifications or qualifications

– Job evaluation

177


Exam 3

Elements of Job Design

Job design has three components – Job activities (describes individual tasks)

– Work methods (how tasks will be performed)

– Job content (combinations of tasks into assignments)

Jobs performed efficiently can be boring and de-motivating

So, there is need for job enrichment – Hackman and Oldham’s job characteristics model

• Contains 5 core dimensions

– Skill variety

– Task identify

– Task significance

– Autonomy

– Feedback

– Jobs high on these dimensions positively influence employee psychological state

178


Exam 3

Elements of Job Design – Cont.

Job enrichment – Cont.

– Employees in enriched jobs will have

• A sense of meaningfulness in their work

• Responsibility for job outcomes

• Knowledge of the results of work performed

– These psychological states are associated with four

favorable individual…..and resulting

organizational…..outcomes

• High internal work motivation

• High quality work performance

• High satisfaction with the work

• Low absenteeism and turnover

179


Exam 3

Staffing Implications

After job design and description comes determination of required skills and knowledge, usually through job analysis – Typical supply management requirements include

• Product knowledge

• Principles of supply management

• Analytical ability, technology-related skills

• Negotiation skills

• Interpersonal skills

• A customer focus

• The ability to deal with and manage change

– Management positions require strategic thinking and experience

– Foreign sourcing may require country-specific knowledge

180


Exam 3

Span of Influence

Influence – Is a subtle, but complex concept

– May directly or indirectly cause behavioral change in another

– Is manifested through multiple channels, working together • Position

• Power

• Status

• Credibility

• Knowledge

• Celebrity

Span of influence is the extent to which people interact with and influence others outside their span of control

Matrix organizations encourage increased span of influence

181


Exam 3


All of the following are elements of job design EXCEPT:

(A) Work method

(B) Job activities

(C) Job content

(D) Cross-training

182


Exam 3


All of the following are individual and organizational

outcomes associated with an employee with high job

satisfaction EXCEPT:

(A) High quality work performance

(B) Low absenteeism and turnover

(C) High need for information

(D) High satisfaction with the work

183


Exam 3

Task 3-C-2 Comprehension Question #1

The CPO of a multi-national organization has decided to add a new position — Director of European Procurement — to her organization. The items listed below are elements that would be included in a job specification focusing on the knowledge, skills and abilities (KSAs) of this new position. Which of the following items is of LEAST importance for the CPO to include in the job description?

(A) Knowledge of exchange rates related to U.S. dollar and Euro

(B) Ability to speak multiple languages (Spanish, French and German)

(C) Understanding of European business practices

(D) Ability to build relationships with international suppliers

184


Exam 3


How does today’s supply management

environment differ from the older, traditional view?

What is the difference between a job description

and job specifications?

What is “job enrichment?”

Name the three key components of job design

How does job design impact staffing?

Define the term “span of influence”

185


Exam 3

TASK 3-C-3

186


Exam 3


1) Organizational expectations of supply management

2) Reasons for departmental performance appraisal

3) Steps in department-level evaluation

4) Concepts of a strategic supply management department

5) Evaluation of outsourced supply functions

6) Evaluation of feasibility and impact of outsourcing supply functions

Develop criteria for evaluating the overall supply Management Department

performance.



187


Exam 3

Develop and Use Criteria to Evaluate

Supply Management Performance Evaluating and controlling performance is a major supply

management responsibility

Common categories of performance measures – Customer service

– Cycle times

– Quality

– Application of information technology

– Financial performance

– Organizational structure

– Flexibility

– Asset management

– Supplier management

– Workforce assessment

– Impact on capital efficiency

188


Exam 3

Organizational Expectations of Supply

Management

Congruence with organizational objectives – Supply must support organizational mission, objectives,

strategy

– So, metrics must be consistent with this intent

– Congruence with supplier and customer objectives • Supply objectives should facilitate achieving internal customer

goals

• Ultimately, external customers must be served

– Scorecard • Refers to ratings from a performance evaluation process

• Should contain both quantitative and qualitative metrics

• Should compare actual results to original objectives

189


Exam 3

Reasons for Departmental Performance

Appraisal Determine departmental effectiveness

– Refers to overall effectiveness

Determine the effectiveness of department management – Personnel capabilities, soundness of structure, scope of

responsibilities, plans, policies and procedures

Measure improvement or deterioration – Must know if process changes improve performance

– Provides early signs of deterioration

Provide incentives for improvement – People respond to the criteria by which they are measured

– Performance criteria facilitate objective measurement

Determine resources needed for improvement – Includes estimates for future resource requirements

Determine if value is added to the process

190


Exam 3

Steps in Department Level Evaluation

1. Identify department objectives

2. Identify success criteria

3. Identify appraisal factors – Contribution to profitability

– Timeliness of actions

– Materials and services costs

– Supplier reliability

– Supplier development

– Order quantity and inventory investment

– Customer satisfaction

– Creativity

191


Exam 3

Steps in Department Level Evaluation –

Cont. 4. Internal audits/self governance/self assessment

– An audit is a comprehensive, independent examination of • Organizational environment

• Objectives

• Strategies

• Activities

– An audit is used to identify strengths and weaknesses, and develop a plan to close any gaps in performance

– Internal auditors may hesitate to be critical, even when needed

– Self-governance refers to the extent to which supply management is allowed to manage itself

– Differences between internal and more independent audits indicate areas where supply management may need improvement

192


Exam 3


Cont.

5. Obtain supplier feedback – Close supplier relationships facilitate useful feedback

– Facilitation of supplier performance may be a scorecard item

6. Process benchmarking – Compares how an organization performs particular processes to how they

are performed in other organizations

– Objective: better/best practices

– Before initiating benchmarking, carefully consider

• Is the organization willing to make a major change?

• Is the expected improvement worth the expense?

• Are expected results important to the organization?

• Does the target process affect a critical success factor?

• Has investigation been completed….and all alternatives identified?

• Has the organization begun measuring the current process?

• Are the major cost and service factors known?

• Is the organization willing to finish a benchmarking study?

• Is the organization willing to reveal information about its processes?

193


Exam 3


Cont.

7. Best practice studies

– Similar to benchmarking

– Goal is to find and emulate the best practice in a

particular area

8. Exercising management control in response to

results

– Once performance evaluation results are known,

management must be willing to correct the problems

identified

– Otherwise, performance evaluation serves no purpose

194


Exam 3

Concepts of Strategic Supply Management

Is focused on supply aspects of internal customer needs

Develops and maintains long-term supplier relationships

Supply management as profit center – A profit center must meet three conditions

• Value is added

• Capital is productively employed

• Costs are incurred

Supply management as a cost center – A cost center

• Emphasizes cost, not profit

• Does not necessarily encourage risk taking

• Generally does not allow supply to spend money to make money

195


Exam 3

Evaluation of Outsourced Supply

Functions

Evaluate outsourcing providers just like any other

supplier

Examples of outsourced providers include

– Outsourcing organizations

– Cooperatives

– Consortiums

– Third-party logistics organizations

196


Exam 3

Evaluation of Feasibility and Impact of

Outsourcing Supply

Evaluate outsourcing providers as service

organizations

Treat it as a “make-or-buy” situation

Additional evaluation factors include

– Loss of direct control

– Potential for service or quality problems

– Current and future cost of outsourcing vs handling it in-

house

197


Exam 3


Which of the following broad categories of performance

identified in various studies by CAPS Research is MOST

likely to be characterized as “quantitative?”

(A) Customer service

(B) Capital efficiency

(C) Workforce assessment

(D) Organizational structure

198


Exam 3


Which of the following is LEAST likely to occur when the

executive team views the supply function solely as a cost

center rather than a profit center?

(A) Resources will be invested in the team.

(B) The team will add value through its activities.

(C) Costs will be incurred as a result of operations.

(D) Internal relationships will affect performance.

199


Exam 3

Task 3-C-3 Comprehensive Question #1

Which of the following is LEAST likely to be included as a

performance measure for a strategic procurement

function?

(A) Profit contribution

(B) Productivity improvement

(C) Total dollar spend

(D) Timeliness of actions

200


Exam 3


The PRIMARY reason for performing departmental level

evaluations is to determine:

(A) Department effectiveness in meeting organizational needs.

(B) The effectiveness of departmental management.

(C) The resources needed for departmental improvement.

(D) Whether or not value is added by the function.

201


Exam 3


When discussing organizational objectives, what is

meant by the term “congruence?”

Identify six reasons for departmental performance

appraisal

Name and define the eight steps in department-

level evaluation

Identify four supplier reliability metrics

What is the difference between viewing supply

management as a profit center, or as a cost

center?

202


Exam 3

TASK 3-C-4

203


Exam 3


1) Organizational human resource policies and procedures

2) Organization skill set requirements

3) Position skill set requirements

4) Issues in selection and recruitment

5) Issues in employee promotion

6) Issues in the termination of employees

7) Issues in employee retention

8) Legal issues in employment and interviewing

Hire, develop, retain, promote and/or dismiss supply management personnel.


Full 5Q; Bridge 2Q

204


Exam 3

Every organization has human

resource policies and

procedures, whether or not they

are documented

Supply managers must be

familiar with these policies and

procedures

205


Exam 3

Organization Skill Set Requirements

Organizations today recognize a need for

specialized supply management skills

These skills change with advances in technology

and management methods

Supply must provide training required to keep skill

sets current

206


Exam 3

Position Skill Set Requirements

Assess skill sets based on current and future

requirements

– A change in business practices may require a change in

skill set requirements

– Identify and seek special skills where needed

• Examples

– Hedging to contain commodity pricing

– Other key financial skills

207


Exam 3

Issues in Selection and Recruitment

Select employees with care

– People leave jobs when there is little challenge and

recognition

– Today’s applicants are tech savvy….and want the

organization to be also

– Working for several organizations to further careers is

common

– Employee turnover is costly

Recruitment

– Refers to where the organization will find qualified individuals

– Challenge is to discern “who will do well” from “who will apply”

208


Exam 3

Knowledge, Skills and Aptitude

A job analysis should determine

– Job qualifications

– Skills

– Background

– Experience

– Personal qualifications

209


Exam 3

Knowledge, Skills and Aptitude – Cont.

The job analysis facilitates a job description and

determination of required skills – Product or service knowledge

– Principles of supply management

– Analytical ability

– Computer-based skills

– Relationship development and management

– Management skills

– Knowledge of international business

– Negotiation skills

– Interpersonal skills

– A customer focus

– Ability to deal with and manage change

210


Exam 3


Particular positions may require international

skills – Language

– Dealing with various business cultures

– Working in different business legal environments

– Customs and international logistics

Management positions will require a

strategic mindset and a proven track record

211


Exam 3


Many organizations utilize various tests

– Burden is on the employer to ensure that the test is job related

– If not, there could be legal problems

Typical tests include

– Skill tests to identify basic abilities

– Aptitude tests to help determine knowledge base

– Personality/intelligence tests

– Physical examination

• If job related, it must be given to all applicants (in the U.S.)

• If for insurance purposes, it must be given after a job offer

– International-related skill test

– Drug tests

212


Exam 3

Knowledge, Skills and Aptitude

References, Experience and Training

Verify all applicant-provided information

– Credentials

– Education

– Certifications

Many organizations will not provide references

Performance related references

– Verify information from immediate past supervisor

– Ask for performance appraisal documents

– If this information is not available

• Ask candidates to describe what their supervisors would say

• Put the burden on the candidate….insist on a past supervisor reference

• Never ask for opinions

Don’t ask questions that can be answered with “Yes” or “No”

213


Exam 3

Interview Types

Screening interview

– Chooses candidates for further interview

Final interview

– Focuses on specific details of the job

– Seeks to determine if candidate will work well with

other team members

214


Exam 3

Interview Types – Cont.

The structured interview

– Purpose: to eliminate bias and increase validity

– Uses similar questions for all candidates

– Typical steps

• Develop hiring criteria

• Develop questions related to hiring criteria

• Identify potential answers for all questions

• Develop a scoring sheet for each answer

• Train interviewers in listening skills

• Train interviewers in giving candidates opportunity to speak

• Train interviewers in legal obligations

215


Exam 3

Interview Types – Cont.

The behavior based interview – Used to gauge candidate experiences and behaviors

– Identifies desirable experience, behavior, knowledge, skills, abilities

• Critical thinking

• Being a self-starter

• Willingness to learn

• Self confidence

• Teamwork

– Employer structures pointed questions to elicit detailed responses

– Questions are open-ended……no “Yes” or “No” answers

– Legally, questions must be job-related

216


Exam 3

Issues in Employee Promotion

Standards and certification – Establishes a minimum standard of competence

– Helps eliminate arbitrary, haphazard promotion criteria

Career advancement – People tend to leave jobs where there is no advancement potential

– Advancement may involve rotating into other functions

Advantages and disadvantages of promoting from within – Advantages

• Higher morale

• Reduced training cost

• Employee characteristics are already known

– Disadvantages • May result in a chain of lower-level promotions….and loss of stability

• May lead to promoting one who is less qualified

• Decreases the inflow of new ideas

217


Exam 3

Issues in Employee Promotion – Cont.

Advantages and disadvantages of hiring

from outside – Advantages

• Brings new ideas into the organization

• Prevents substitution of seniority for ability

• Candidate may bring other useful functional expertise

– Primary disadvantage • Training costs are higher

218


Exam 3


Training needs – Administrative, managerial, analytical and

leadership

– An ongoing requirement • First analyze skill requirements…..current and future

• Identify existing skills

• Identify gaps……and, therefore, training needs

– When developing personnel • Ensure interesting and challenging assignments

• Discuss career opportunities

• Facilitate participation in cross-functional international teams

• Send potential leaders on overseas assignments

219


Exam 3


Succession Planning

– Refers to plans for replacement of key personnel

– Important to assess if an individual is a good “global citizen”

• Cultural awareness

• Exposure to other geographies

– Rotation through non-supply functions facilitates broader growth

Objective attainment

– Employee performance review is a critical process

– Should involve mutually agreed, measurable goals

– Expectations should be clear

220


Exam 3

Issues in the Termination of Employees

Consistent documentation and evaluation – Feedback should be continuous, no periodic

– Needed improvement should be made clear….with examples

– Employees on probation should clearly understand why

– Probation and a chance to improve should precede termination

– Foreign requirements may be different

Adherence to human resource policies/procedures, union requirements, due process and legal requirements – The termination process is typically formal and well documented

– There should be rules for exempt and non-exempt employees

– Union contracts will specify worker layoff, recall and seniority rights

221


Exam 3

Issues in the Termination of Employees –

Cont. Quantifying and qualifying discussion to terminate

– Reasons should be documented and discussed with employee

– Best if a witness is present

– Seek advice from Human Resources (HR) beforehand

Outplacement – When dismissal is not for cause, an organization may offer

• Outplacement services

• Counseling

• Skills and aptitude assessment

• Assistance with resume development

• Help with networking and professional skills development

Exit interviews – Opportunity for employee to “vent” while HR gets useful feedback

– Helps clarify the underlying issues

– Provides basis for preventing a future, similar occurrence

222


Exam 3

Issues in Employee Retention

Employee retention is correlated to employee satisfaction

Factors in employee satisfaction – Mentally challenging work

– Equitable rewards (a just and fair environment)

– Supportive working conditions

– Supportive colleagues

– Job involvement (provides “ownership” in results)

– Commitment to the organization

– Cultural factors • Status, symbols may be useful…..and important

• Should research cultural needs of workers from other countries

– Compensation and benefits

– Employees place high value on sound packages

– Should be perceived as equitable and fair

223


Exam 3

Issues in Employee Retention – Cont.

Career progression

– There is a strong correlation between employee perception of

career advancement opportunities and job satisfaction

Work and life balance

– Occurs when employees perceive a proper balance between work

and personal life

– Employers recognize this with

• Concierge services

• Flexible work schedules

• Job sharing

Work environment

– Virtual, office settings, telecommuting, etc.

– Many positions can now be performed from home

– Correlates with job satisfaction 224


Exam 3

Legal Issues in Employment & Interviewing

Equal Pay Act of 1963 – Requires that employees receive the same pay if they perform the

same work and are substantially equal in skill and responsibility

Federal Civil Rights Act of 1964 (Title VII) – Makes it illegal to discriminate among employees on basis of race,

religion, color, gender or national origin

– Also includes sexual harassment

Executive Order 11246 of 1965 – Prohibits discrimination in federal employment based on race,

religion, color, national origin and gender

Age Discrimination in Employment Act of 1967 – Restricts employers of more than 20 employees from discriminating

in employment and termination of employees over 40 years old

225


Exam 3


– Cont.

Equal Employment Opportunity Act of 1972

– Amended Title VII to include employers of 15 or more

employees

– Gave EEOC power to sue offending organizations

– Required “affirmative action” to achieve a workforce

reflecting the composition of the community

National Labor Relations Act (Taft-Hartley Act)

– Grants individuals a right to organize and bargain

collectively

226


Exam 3


– Cont.

Occupational Safety and Health Act

– Prohibits a dangerous or unsanitary workplace

– In 1983 issued the Federal Hazard Communication

Standard

• Required that workers be informed in 5 key areas

– Identification of hazardous materials

– Product warning labels

– Emergency response techniques

– A written hazardous communication standard

– Employee training in understanding all of this

227


Exam 3


– Cont.

Americans with Disabilities Act (ADA) – ADA Amendments Act of 2008 became effective January

1, 2009 • Applies to companies with 25 or more employees until January

1, 2011

• Effective January 1, 2011, the Act applies to companies with 15 or more employees

– Prohibits discrimination in hiring practice due to a disability

– Must provide candidates a list of essential functions of the job

– Must make reasonable accommodations for disabled employees

228


Exam 3


The process in which organizations strategically plan for

the orderly replacement of their key executives is called:

(A) Outplacement.

(B) Succession planning.

(C) Assessment.

(D) Management by objective (MBO).

229


Exam 3


A workplace accident occurring at a supplier’s location

that causes harm to an employee might be investigated

by an organization that was created under what U.S.

federal act?

(A) Americans with Disabilities Act

(B) National Labor Relations Act

(C) Federal Civil Rights Act

(D) Occupational Safety and Health Act

230


Exam 3


Dan Callahan had worked for Capital Industries for nearly thirty years, the last ten in supply management as a senior supply manager for machined parts. The path to his position began when Dan left the armed services and began his career with Capital as a machinist. Prior to his supply management job, he spent five years as an inventory control clerk and three years as a manufacturing planner. Callahan had great industry experience, but his lack of formal education and marginal supply management skills were becoming evident to Ty Brown, the new director of supply management at Capital Industries. Everyone liked Callahan, especially the engineers he was working with, but it was becoming increasingly evident that his professional skill set needed to be upgraded. One of Brown’s initiatives was to make the supply management organization world class, beginning with an evaluation of staff expertise. What should Brown do?

(A) Encourage Callahan to get his bachelor’s degree in business.

(B) Demote Callahan to a lower level position in supply until his skill set is upgraded.

(C) Request Callahan resign his position.

(D) Create a career plan for Callahan that will leverage his skills.

231


Exam 3


How does training fit into a strategic supply plan?

What’s the difference between organization skill set requirements and position skill set requirements?

What is the link between challenging work assignments and employee turnover rates?

Identify and define four of the six types of tests for potential employees

Identify any legal implications related to testing potential employees

Describe the four types of interviews

What are the advantages and disadvantages of promoting from within, rather than hiring from outside?

Identify five of the seven factors conducive to job satisfaction

Describe the intent of the Equal Pay Act, Federal Civil Rights Act, Executive Order 11246, Age Discrimination in Employment Act, Equal Employment Opportunity Act, National Labor Relations Act, Occupational Safety and Health Act, and Americans with Disabilities Act

232


Exam 3

TASK 3-C-5

233


Exam 3


1) Determination of training and development needs

2) Types of job training (functional orientation)

3) Professional certification

4) Formal education/advanced degrees

5) Professional association involvement

Conduct/authorize job training for the professional development of the staff.



234


Exam 3

Determining Training and Development

Needs

The usual steps

– Conduct an organizational analysis

– Set an organizational structure to meet goals

– Conduct skill assessments

– Prepare individual development plans

– Plan and initiate implementation

– Measure increase in skills and competencies

235


Exam 3


Needs – Cont. Needs and skills assessment

– A “skill” is an ability gained through practice or knowledge

– Skills assessment refers to identifying currently available skills

– Skills must then be translated into competencies

– Seven major areas of training focus • Team building (leadership, decision-making, influencing)

• Strategic planning (project scoping, goal-setting, execution)

• Communication (presentation, public speaking, listening, writing)

• Technical skills (web-enabled research, sourcing analysis)

• Broad financial skills (cost accounting, making a business case)

• Relationship management (ethics, facilitation, conflict resolution, creative problem solving)

• Legal issues (contract writing, risk mitigation in a global environment)

236


Exam 3


Needs – Cont.

Gap analysis – Compares required skills to actual skills

– This facilitates a comprehensive list of deficiencies (gaps)

Designing and planning training programs – Human skills and knowledge are key enablers for supply

management

– Training must support organizational and supply strategies

– Required skill sets will change over time

– So, must periodically review and update the training plan

237


Exam 3


Needs – Cont. Top 10 skills (current) Ethics

Negotiation skills

Ability to make decisions

Interpersonal communication

Common sense

Assessing ethical situations

Influencing and persuasion

Decision-making/problem solving

Conflict resolution

Problem solving

Top 10 skills (future) Ethics

Interpersonal communication

Negotiation skills

Strategic thinking

Ability to make decisions

Influencing and persuasion

Cross-functional teams

Decision-making/problem solving

Leadership

Ability to work in teams

The future role of supply management will be more strategic,

with emphasis on teams and implementing critical strategies 238


Exam 3

Career Development and Needs

Assessment A six step process

– Assess current and future requirements

– Identify required skills

– Identify goals and gaps

– Identify key knowledge areas that will improve job competencies

– Assess training mediums

– Evaluate outsource providers and negotiate a contract

Generally, a pilot program will be used – The pilot group may consist of selected experts

– Comments from the pilot group can be useful in modifying training

239


Exam 3

Types of Job Training

Self training – Requires taking some responsibility for one’s career

– Self training takes many forms, including • Studying periodicals, books and research reports

• Studying selected business publications

• Studying trade magazines and resource materials

• Attending supply management association meetings

• Enrolling in university evening courses

• Attending seminars and workshops

Orientation – Involves introducing a new employee to the job and organization

– Employees will want to know what’s expected of them

– Thorough orientation prevents many future problems

– An employee’s first few days or months on the job play a role in developing organizational commitment

240


Exam 3

Types of Job Training – Cont.

The sponsor/mentor system – Involves the assignment of a sponsor to each new employee

– The bulk of the training rests with the sponsor

– Can be effective if the sponsor is a good teacher

– Downsides • The sponsor can only teach what he/she knows

• The sponsor’s own work may go lacking

Classroom training – A series of targeted courses

– Provides a formal framework to expose a new employee to • Organizational and supply management philosophies

• Job processes

241


Exam 3


Functional rotation – Rotating a new employee through a series of brief assignments in

supply management and other functions

– Objective is to gain understanding of the complete supply cycle

– Results are evaluated using a 4-level model (Kirkpatrick, 1994)

• Reaction – evaluation completed after a training session

• Learning – seeks to measure increases in knowledge and skill

• Behavior – assesses if on-the-job skills and behavior have changed

• Results – quantifies how training/development affects the bottom line

Professional certification – Requires demonstration of proficiency and knowledge in specific

job-related areas…….based on a body of knowledge

– Certification endorses skills beyond specific position requirements

– Re-certification requires individuals to stay current

242


Exam 3


Formal education/advanced degrees

– Colleges and universities offer degree programs

– Advanced degrees in supply management are available

– Many are offered on-line or “distance learning”

Professional association involvement

– An excellent way to facilitate growth and development

– ISM, ISM affiliates, local chapters

– ISM has affiliates in other countries

– Opportunities for leadership roles

243


Exam 3


The reconciliation of individual skills and competencies

with essential performance criteria is completed through

the use of a(n):

(A) Strategic plan.

(B) Environmental scan.

(C) Gap analysis.

(D) Key skill analysis.

244


Exam 3


A certification that endorses skills associated with a

specific profession is typically awarded through a:

(A) Third party organization.

(B) Company’s human resources department.

(C) College or university.

(D) Standardized exam.

245


Exam 3


Nada Riyadh, the global director of supply management for Sunburst Hotels located in Saudi Arabia, was dreading the meeting she was about to have. Layla Lanka, the senior supply manager for administrative services, wanted to talk about the mandatory career development program that Riyadh recently discussed with her. All of Riyadh’s direct reports had recently completed an evaluation of their skills and it was determined during the gap analysis that Lanka was lacking in interpersonal communication and strategic thinking skills, two very important talents that were required to support the hotel chain’s strategic sourcing initiative. Riyadh had provided Lanka with a career development plan, but she refused to attend the two recommended courses at the local community college. She threatened to quit if she was pressed to do so. Lanka was an experienced and dedicated employee with expertise in e-commerce. Riyadh needed to keep Lanka in the organization, but her interpersonal communication and strategic thinking skills needed quick upgrades to meet changing business conditions. Cont.

246


Exam 3

Task 3-C-5 Application Question #1 – Cont.

What should Riyadh do?

(A) Find another job for Lanka in the company that better matches her skills.

(B) Determine if there were alternate educational methods available for Lanka.

(C) Ask Lanka to retake the skills assessment survey to see if there was an error

in scoring.

(D) Force Lanka to take the courses, or ask her to leave the organization.

247


Exam 3


What is the first step in determining training and

development needs?

What is “gap analysis?”

Identify and define each of the six-steps in a supply

management career development and needs

assessment process

Identify and define five types of job training

Identify and define each level of Kirkpatrick’s four-

level model for evaluating the effectiveness of

training

248


Exam 3

TASK 3-C-6

249


Exam 3


1) Issues in the evaluation of employees

Evaluate Supply Management Employee performance.




Exam 3

Introduction

Management must – Clearly establish organizational business objectives

– Evaluate performance of supply management employees at all levels

Good practice requires that measures must be – Aligned vertically and horizontally

– Comprehensive

– Dynamic and aggressive

– Transparent and broadly communicated

– Tied to incentive compensation

– Backed with resources

– Championed by strong leadership


Exam 3

Issues in the Evaluation of Employees

Evaluations must be objective

Align employee objectives to organizational goals

– Supply management department’s goals should support

organizational objectives

– Each employee’s objectives also support organizational

goals

Determine criteria for success

– Identify how supply management contributes to

organizational objectives

– Develop measurements to move in that direction


Exam 3

Issues in the Evaluation of Employees –

Cont.

Determine appraisal factors – use both – Quantitative factors

• Elements that can be measured numerically

• Examples include cost, quality, delivery performance

– Quantitative factors • Elements that are more subjective to measure

• Examples include teamwork, creativity, customer focus

Conduct interviews/provide feedback – Need effective two-way communication and clear, open,

honest dialogue

– Feedback should include assessment of effectiveness as well as input to improve


Exam 3

Issues in the Evaluation of Employees –

Cont.

Sources of feedback

– Team and/or peer input

– Self assessment

– Internal customer input

– Supplier input

Employee accountability (for example, performance

improvement plan)

– Performance assessment process should provide employees an

understanding of how they can improve their contribution to the

organization

– In case of low performing employees

• Need clearly documented improvement plan

• Including consequences for not improving/sustaining performance


Exam 3


Which of the following individual performance rating

factors is considered MOST qualitative?

(A) On-time delivery performance

(B) Quality of materials or services

(C) Responsiveness to customers’ questions

(D) Quantity of work completed


Exam 3


When a supply manager diagnoses a weakness in an

employee’s performance, what category of evaluation is

considered the MOST descriptive?

(A) Summative

(B) Investigative

(C) Formative

(D) Reflective


Exam 3

Task 3-C-6 Case Study #1


1. What resources or tools might Manoj use to assist him in developing

his new individual performance metrics?

2. What are some of the characteristics of best practice performance

metrics for individuals in a supply management function?

3. What are the key issues in defining effective individual metrics within

the supply function?


Exam 3


Describe criteria that effective performance

measures must meet

Discuss the steps involved in the evaluation of

employees

Identify multiple sources of input that can be used

to assess an employee’s contribution to the

organization


Exam 3

TASK 3-C-7

259


Exam 3


1) Issues in organizational management and administration

2) Group dynamics

3) Leadership principles

4) Change management techniques

Supervise and lead supply Management employees.



260


Exam 3

Issues in Organizational Management and

Administration

Delegation of authority and responsibility

– Involves the assignment of tasks, granting of authority

and holding people responsible for results

– Involves the following phases

• Assignment of tasks – clarify tasks and goals

• Granting of authority – refers to authority to carry out the tasks

• Responsibility – refers to responsibility to fulfill assigned tasks

– Employee has immediate responsibility

– Manager still has “ultimate” responsibility

• Parity of authority and responsibility

– Responsibility and authority should be matched

– May affect “who” is selected for a particular task

261


Exam 3

Issues in Organizational Management and

Administration – Cont. Chain of command

– Refers to the internal reporting hierarchy

– Best if each subordinate is responsible to only one supervisor • Referred to as “unity of command”

– Responsibilities in matrix structures should be clearly understood

– “Flat” vs “Tall” organization structures

Span of influence – Refers to the extent to which people interact with/influence others

– Matrix organizations encourage increased span of influence

– Supply management is a “boundary-spanning” function

Span or information dissemination – Refers to the diffusion of information in order to spread useful

information within and outside the organization

– A wide span of information dissemination facilitates a wide span of influence

262


Exam 3

Theories of Management

General theories – Holds that managerial skills are transferable to any organization

– Based on the propositions that

• All managers perform the same universal functions

• All business operations can be divided into six basic activities

– Technical (producing, manufacturing, providing services)

– Commercial (buying and selling)

– Financial (acquiring capital)

– Security (protecting employees and property)

– Accounting (records keeping)

– Managerial

Operational theories – Hold that worker output increases as they become more specialized

– It was later shown that this can be “overdone”

263


Exam 3

Theories of Management – Cont.

Motivational theories – Held that people and relationships should be a primary focus

– Seek to improve productivity by balancing working conditions and motivational influences

– The “Hawthorne effect” holds that workers produce more if they perceive management support and interest in them

– Contingency theory states that • Managers should identify what techniques fit a particular situation

• Example

– If technology is complex, workers must be more skilled

– If workers more skilled, they will want some control over the work

– If worker decision-making is allowed, then leaders must move from a command-and-control style to a counsel-and-coach style

• The theory argues that there is no one best way to motivate a person

– Ultimately, a manager’s job is to clearly link good performance to a desirable outcome

264


Exam 3


Diversity in the workplace – in supply management, diversity usually refers to – Sourcing from different categories of suppliers

– The use of minority-, women-, and veteran-owned businesses indicates use of a diverse supplier base

– Also involves dealing with opportunities and challenges • Cross-cultural communication

• Differences in expectations

• Varying work ethics

– Diversity should be an element in supplier evaluation

Reward and recognition programs – Research confirms that recognition and opportunity for growth are

positively correlated with employee satisfaction

– Recognizes that individuals can “make a difference”

– Facilitates reinforcement of desirable behavior

265


Exam 3

Group Dynamics

Recognizes that people are social, even in the workplace – Formal work group

• Formally organized for an identifiable purpose

• Task forces, teams, committees

– Informal work group • Usually small and structured around member interests

• May be social, special interest or pressure groups pushing for change

• Managers must align group interests with those of the organization

• Specific approaches include – Seek appropriate input on decisions that affect them

– Use the input to arrive at group-oriented decisions

– Create a climate and reward system to encourage cooperation

– Seek to align informal group objectives with positive outcomes

266


Exam 3

Group Dynamics – Cont.

Characteristics of a good group include

– Ability to focus on the mission

– Open recognition of its strengths and weaknesses

– Ability to integrate personal agendas into a “team”

agenda

– Ability to define, simplify and solve problems, using facts

and logic

– Commitment and enthusiasm

– Ability to experience and express pleasure in other’s

success

– Ability to accept praise with grace

267


Exam 3

Group Dynamics – Cont.

Advantages of a group – Collective knowledge, skills, and creativity

– Dynamic cross-functional interaction

– Reduced time required to solve a problem or make a decision

Possible disadvantages – Group often lacks the power or authority to make major

decisions

– May have little insight into its performance over time

– Managers may seek to influence activities or decision

– Meetings may be dominated by one individual

268


Exam 3

Leadership Principles

Refers to the ability to influence individuals or group members

Leaders have a clear vision and can articulate it to others

Leadership functions (two major groups) – Task related

• Refers to problem solving behavior

• Involves making decisions, offering input, suggesting alternatives

– Group maintenance • Includes anything that helps the group operate more effectively

• Mediating disputes, compliments on results, recommendations

Leadership styles (two major styles) – Task-oriented

• Leaders seek to direct and closely supervise subordinates

– Employee-oriented • Leaders seek to motivate employees rather than control them

269


Exam 3

Leadership Principles – Cont.

The contingency approach to leadership

– Seeks to match leadership techniques to the specific situation

– Identifies three elements of a work situation

• Quality of the leader-member relationship (most important)

• Structure of the task (workers should clearly understand

expectations)

• The leader’s position power

The path-goal approach (expectancy theory)

– Holds that individual motivation depends on reward

expectation

– Leadership directly influences the reward structure and

indirectly influences motivation level

270


Exam 3

Leadership Principles – Cont.

Group leaders

– They set direction, align people and resources, motivate

and inspire

– Position power is usually low, so must use

influence/persuasion

– An effective group leader

• Facilitates group analysis and decision making processes

• Encourages member participation, conflict resolution and

consensus building

• Is able to work with little, no or unclear authority

• Adapts as requirements and working conditions change

• Works with the group to establish goals

271


Exam 3

Change Management Techniques

Managing change means making change in a planned and

systematic fashion

Objective: effectively implement new methods/systems

Managing the change process involves

– Getting people to adopt change

– Clearly articulating what is going to change

– Establishing a “saleable” rationale for change

Steps for managing change include

– Collect data

– Identify and evaluating value-adding opportunities for change

– Design a strategy that covers rationale, implementation plan, individual

involvement, resource requirements, time frame and evaluation methods

– Implement strategy

– Review periodically

272


Exam 3

Change Management Techniques – Cont.

The usual reasons for failure to effect needed

change

– Inconsistency between management’s words and

actions

– No effective system to evaluate the change

– No change in recognition, information or organizational

systems

– Unrealistic timelines

– An assumption that training is all that’s needed to effect

change

– Lack of consistent communication

273


Exam 3


What definition BEST ensures a subordinate being

empowered to complete a task?

(A) Assignment of tasks

(B) Parity of authority and responsibility

(C) Presence of responsibility

(D) Chain of command

274


Exam 3


The theory that states employees would work harder if

they believed management was concerned about their

welfare is called:

(A) Scientific management.

(B) The Hawthorne effect.

(C) Theory X.

(D) Theory Y.

275


Exam 3


Asian Group, Inc.’s Chief Procurement Officer has determined there are significant issues with the quality of plumbing services the company provides to their plants and office buildings worldwide. They have received numerous complaints and requests for either rework or refunds. The quality issues and the potential financial ramifications could significantly impact the firm’s shareholder value. Which of the following approaches should the CPO employ to BEST address the situation? (A) Delegate the task to a single subordinate.

(B) Set up a formal work group.

(C) Hold a staff meeting and ask the staff to solve the problem.

(D) Institute an informal work group.

276


Exam 3


Identify and define the five phases of delegation

What is the “Hawthorne effect?”

Define “contingency theory”

What are the organizational implications of a “diverse” work force?

What is the difference between a formal and an informal work group?

Identify five of the seven characteristics of a good work group

Define “leadership”

Identify the five steps for managing change

Identify the typical reasons for failure of change initiatives

277


Exam 3

TASK 3-C-8

278


Exam 3


1) Cross-training

2) Mentoring

3) Professional development

4) Delegation of leadership opportunities

5) Human resources policies, procedures and planning

6) Elements of a succession plan

7) Organizational structure

8) Educational opportunities

9) Job rotation

Create and manage a succession plan.


Full 4Q; Bridge 3Q

279


Exam 3

Succession Planning

Succession planning refers to a process of

preparing for eventual replacement of key players

Suitable, high-potential employees are identified

and prepared through mentoring, training and job

rotation

280


Exam 3

Cross-Training

Refers to training employees on jobs other than their own

Multiple-skill capability enhances departmental flexibility

Broadens skill sets, which can lead to – Future promotion

– Pay increases

– A more challenging job

Could lead to broader responsibility

Is positively linked to – Job enrichment – the addition of tasks and more control or

responsibility

– Job enlargement – the addition of tasks on the same level of skill and responsibility

Requires a change based mentality

281


Exam 3

Mentoring

A formal employee development process in which an experienced worker assists in training and support

Also referred to as the “sponsor” or “buddy” system

Initial job instruction comes from a supervisor

But, the “bulk” of training comes from the mentor

Mentoring usually begins after formal orientation

Level of effectiveness depends on the mentor

Possible downsides – Restricts training to one individual

– A mentor can only teach what he/she knows

– May negatively impact performance in the mentor’s job

282


Exam 3

Professional Development

Refers to increasing skills and knowledge of current and future jobs

Goal is to achieve career objectives

Types of professional development include – Job rotation

– On-the-job training

– Classroom training

– Self-training

If training for management, development should include – General leadership skills

– Managerial skills

283


Exam 3

Professional Development – Cont.

Other professional development activities

include

– Continuing education programs

– Site visits to supplier, customers and other

organizations

– Audio-visual and print media programs

– Peer-to-peer interaction

– Web-based programs

– Competency-based programs

284


Exam 3

Delegation of Leadership Opportunities

Over time, supply management could be depleted of managerial talent – Promotions

– Retirements

– Other opportunities

– Cross-functional transfers

We must continually develop future leaders

This requires delegation of key tasks – Provides experience

– Allows the supply professional to assess performance

Should include cross-cultural and other international experience

285


Exam 3

Human Resources Policies, Procedures

and Planning

Promotions and assignment changes may directly impact

supply management or the overall organization

– Performance

– Morale of other employees

Must comply with laws, regulations and organizational

policies

– Affirmative action

– Equal employment opportunity

– Non-discrimination in hiring, firing, promotion or transfer

– Skill-based job descriptions

For all these reasons, and more, Human Resources should

be consulted

286


Exam 3

Elements of a Succession Plan

Refers to a process in which successors are

identified for critical supply management

positions

Succession plans must consider – An individual’s existing talent

– The planned time cycle for succession

• Even some high-potential individuals may require more time

287


Exam 3

Elements of a Succession Plan – Cont.

Characteristics of an effective succession plan

include – Visible CEO and top management support

– A level of ownership and support by management and staff

– Simplicity….tailored to unique organizational needs

– Flexibly and visibly linked to a strategic plan

– A thorough HR resources review process

– Well developed competencies and objective assessment

– Employee input

– Association with a broader management development effort

– Plans for developmental job opportunities

– Integration with other human resources systems

– An emphasis on accountability and follow-up

288


Exam 3

Elements of a Succession Plan – Cont.

Typical activities performed in succession planning – Identification of possible successors

– Periodically challenging and updating the plan

– Agreeing on individuals and positions

– Developing individual-specific plans

– Prioritizing to accelerate closing of skill and experience gaps

– Continuous review, monitoring and updating plans in accordance with changes in required skills, organizational goals, etc.

The usual benefits of succession planning – Better match of employee and job requirements

– Ability to quickly fill vacant positions

– Active development of a highly skilled talent pool

– Developing a core group of employees with core skills and values

– Increased morale among lower level employees

289


Exam 3

Organizational Structure

Will affect succession planning and individual careers

As organizational structure changes, so will jobs – Examples: centralized vs decentralized procurement

Changing skill requirements can trigger job redesign

Mergers and acquisitions will impact succession plans – Succession plans would need modification to reflect the

changes

Flatter organizations may mean – Fewer levels of administrative responsibility

– Lower headcount, leading to changes in types and number of jobs

The move towards strategic supply management is changing job design and skill set requirements

290


Exam 3


Educational Opportunities

– Career advancement is often tied to educational degrees,

certifications, etc.

– Employees desiring promotion should be aware of the

organizational mindset on this

Job rotation

– Is often used to broaden exposure for succession candidates

– Should include both

• Basic skills sets required for a job

• The strategic implications

– Multinational organizations should provide opportunities for

international experience

291


Exam 3


Which of the following factors should be considered

LEAST in identifying a high potential employee for a

succession plan?

(A) Educational experience

(B) Job performance

(C) Age

(D) Years of service

292


Exam 3


All of the following are effective techniques used in

succession planning programs EXCEPT:

(A) Cross-training

(B) Management by objectives

(C) Mentoring

(D) Job rotation

293


Exam 3


Ann Able is a professional services procurement manager.

Carol Crawford is a marketing collateral procurement

manager. The organization recognizes talent and drive in

both women and is interested in building depth in their

supply organization. Which technique should their

organization implement to BEST offer both of them more

career development opportunities?

(A) Job rotation

(B) Mentoring

(C) Management development

(D) Cross-training

294


Exam 3


Describe the pros and cons of a “mentoring”

approach to employee training

Identify at least eight of the eleven characteristics

of an effective succession plan

What are the benefits of succession planning?

What is “job rotation” and what is its primary

objective?

295


Exam 3

TASK 3-D-1

296


Exam 3

TASK 3-D-2

297


Exam 3

TASK 3-E-1

298


Exam 3

TASK 3-E-2

299


Exam 3

Task 3-E-2 Task Outline

1) Classifications of risk stakeholders

2) Contractor tier considerations

3) Probability estimation procedures

4) Risk management procedures

Develop risk mitigation plans that align with organizational risk tolerance.


Full 4Q; Bridge 3Q

300


Exam 3

Classifications of Risk Stakeholders

Stakeholders: persons with a vested interest in something;

those who will be affected by and/or can influence a

decisionmaking process. At the corporate level,

stakeholders include management, employees,

stockholders, customers, suppliers and so on who may gain

or lose by a specific decision

Types of supply chain stakeholders

– Internal

– External

– First responders

Each of these stakeholders has something to lose if a

supply disruption occurs

301


Exam 3

Contractor Tier Considerations

Prime contract – First-tier suppliers

– Legal responsibility for performance of their suppliers, etc.

– Risk assessment of first tier must examine relationship with second and third tiers

– The primary supplier’s management of its suppliers is a strong predictor of supply chain stability

Subcontract – Second tier suppliers

– Assess risk through the lens of primary’s relationship

General – Supply chain only as strong as its weakest link

– Risk management demands examination of all involved

302


Exam 3

Probability Estimation Procedures

Typical supply disruptions include

– Misalignment of interests

– Disasters

– Union work stoppage

– Regulatory shutdown

– Transportation disruption

– Sale of the organization

To estimate probability of disruption

– Define the trading network – customers and suppliers within a commodity or

service category

– Examine history of disruption – gather historical data or poll experts within

the network

– Based on this information, develop a base probability estimate

– Conduct a supplier-by-supplier risk assessment

– Assign the likelihood of specific events occurring with specific suppliers 303


Exam 3

Risk Management Procedures

Risk management: directing or conducting the activities necessary to reduce, eliminate or mitigate the impact of factors that could lead to injury, loss, damage or failure

Risk management includes

– Identifying the risk

– Quantifying the risk

– Assigning responsibility for

• Management of the risk

• Risk mitigation actions

Risk management can be done on an organization-wide basis; however, it typically occurs on a site basis

Supply management should examine risk on a part or SKU basis if possible – This level of detail needed to effectively manage risk

304


Exam 3

Risk Management Procedures – Cont.

Risk planning – the first step in risk management

– A five-step approach to risk management

• Confirm scope and current state

• Conduct impact assessment

• Define alternatives

• Develop plans

• Implement readiness

– Examine plans continuously for effectiveness

– Share plans with supply chain partners

305


Exam 3


Risk assessment

– Risk analysis: the process of identifying elements or

factors, and their probability of occurrence, that could

lead to injury, damage, loss or failure

– Identifies and quantifies risk of a supply disruption

– Uses a framework that describes

• Attributes of suppliers

• Their relationships with the buying organization

• Their interactions with the buying organization

– Risk profile is usually a numerical score given as a result

of applying the framework

306


Exam 3


Risk mitigation: specific steps undertaken by managers to

reduce the impact of factors that might lead to injury, loss,

damage or failure and thus reduce the liability of the

organization in its relations with various stakeholder groups,

including employees and customers

Risk mitigation actions – Identified by reviewing risk profile

– Frequently, actions can be taken to change the risk profile; i.e.,

reduce risk

Risk monitoring – An important part of a risk management program

– Must identify which factors must be monitored in order for prompt

detection and reaction to occur

– Must have a plan in place and assign “person responsible”

307


Exam 3

Task 3-E-2 Recall Question #1

Typical supply network disruptions include all of the

following EXCEPT:

(A) Regulatory shutdown.

(B) Disasters.

(C) Alignment of interests.

(D) Union work stoppage.

308


Exam 3


At what level are risk management procedures most often

developed?

(A) Individual sites

(B) Corporate functional areas

(C) Geographic region of supply

(D) Production lines

309


Exam 3

Task 3-E-2 Comprehension Question #1

A major metropolitan transit authority has been purchasing fluorescent bulbs from only two suppliers for the past several years. The supply professionals have become concerned that this concentration of spend puts the transit authority at high risk should one supplier no longer be able to deliver the quantities required. All of the following risk mitigation strategies might be considered EXCEPT:

(A) Distributing the spend to several suppliers with the capacity to grow.

(B) Working with the two suppliers to ensure their continued overall business health.

(C) Moving the entire spend to one supplier, thus getting first priority for its production.

(D) Developing alternative specs that more suppliers can produce.

310


Exam 3

Task 3-E-2 Summary and Review

Describe contractor tier considerations in risk

management

Identify the first step in risk management and

describe what it entails

Define risk assessment

What is a risk profile and how can you change it?

List key elements of risk monitoring

311


Exam 3

TASK 3-E-3

312


Exam 3

TASK 3-E-4

313


Exam 3

TASK 3-E-5

314


Exam 3


1) Laws/regulations related to documentation, storage, handling,

transportation and disposal (“cradle to grave”) and (“cradle to cradle”)

2) Risk

3) Ethical issues

4) Audit

5) Organization values and policies

6) ISM “Principles of Social Responsibility and Audit”

7) Customer-driven requirements

Manage the storage and disposal of hazardous and/or Regulated materials.


Full 4Q; Bridge 3Q

315


Exam 3

Law/Regulations Related to Documentation,

Storage, Handling, Transportation and Disposal

Hazardous waste: waste that is corrosive, flammable or

toxic. Environmental laws impose various requirements

concerning storage, transportation and disposal of such

waste

Resource Conservation and Recovery Act (RCRA): a U.S.

federal law, passed in 1976, that focuses on the

management of hazardous waste, its generation, storage,

transportation and disposal

– Requires that hazardous wastes must be tracked from time they are

generated until time they are ultimately disposed of or recycled

– Imposes penalties for improper handling of hazardous waste

316


Exam 3

Law/Regulations Related to Documentation, Storage,

Handling, Transportation and Disposal – Cont.

Comprehensive Environmental Responsibility,

Compensation and Liability Act (CERCLA): a U.S. federal

law that, in combination with the Superfund law (SARA),

gives the Environmental Protection Agency (EPA) authority

to regulate hazardous waste sites and to recover costs from

organizations that are responsible for damage

– Provides for the cleanup and remediation of closed and abandoned

hazardous waste sites

Hazardous Materials Transportation Act (HMTA): U.S.

federal laws regulating transportation of hazardous

materials including classification, equipment design,

packaging and handling

– U.S. Department of Transportation (DOT) regulates HMTA

317


Exam 3

Law/Regulations Related to Documentation, Storage,

Handling, Transportation and Disposal – Cont.

Hazard Communication Standard (HCS): a U.S. federal requirement enforced by the Occupational Safety and Health Administration (OSHA) requiring that information about chemicals used in the workplace be disclosed to employees – Material Safety Data Sheets (MSDS) are used to inform workers

– Supply management professionals should obtain MSDS

Regulations regarding hazardous waste are complex and growing throughout the world – For example, in the European Union (EU), the International

Organization for Standardization (ISO) has established standards and requirements for doing business with member countries of the EU

318


Exam 3

Risk

Cradle-to-grave: responsibility or ownership from the

creation of an item to its ultimate disposal

Cradle-to-cradle – A principle in which products and services are designed with a goal

of an efficient and essentially waste-free life-cycle for all

components

– The design incorporates material inputs and outputs that are

categorized as either technical or biological nutrients • Technical nutrients are inputs or outputs that may be recycled or reused

with no loss of quality

• Biological nutrients are inputs or outputs that may be composted or

consumed

– A distinguishing characteristic of this principle is that it incorporates

putting the constituent components of the product or service back

into use (recycle, reuse, compost or consume)

319


Exam 3

Risk – Cont.

Considerations in minimizing risk include

– Contractual

– Insurance

– Legal

320


Exam 3

Ethical Issues

Not advisable to work with suppliers that are

known to have questionable ethics

Chance exposure to a number of serious business

risks

321


Exam 3

Audit

Organizations use audits to ensure compliance and reduce

risk when dealing with hazardous materials

Areas where audits occur include

– Internal: annual audit of an overall organizational hazardous

materials policy

– Supply chain: both pre- and post-purchase audits are conducted on

suppliers to ensure they are meeting legal requirements

– Reporting: audits of waste activities are conducted to ensure that

generators of hazardous waste are correctly reporting their activities

– Certification (e.g., transport, storage, abatement): contractors are

audited to ensure receipt of appropriate certificates of disposal

322


Exam 3

Organization Value and Policies

A generating organization has responsibility for their material from cradle-to-grave

Moral implications should be recognized

Should be proactive – Avoid future exposure by permanently disposing of hazardous

wastes

– Creatively turn costs of environmental compliance into profits from environmental leadership

Collection programs – Organizations need internal controls to ensure collection and

shipment of wastes to disposal facility within prescribed timeframes

– Recycling programs can reduce/eliminate transportation and disposal costs, and may yield revenue

323


Exam 3

ISM Principles of Social Responsibility and

Audit Established in 2004 to increase supply management’s

awareness of social responsibility including the environment

Environment principles include – Encourage your own organization and others to be proactive in

examining opportunities to be environmentally responsible within their supply chains either “upstream” or “downstream”

– Encourage the environmental responsibility of your suppliers

– Encourage the development and diffusion of environmentally friendly practices and products throughout your organization

Supply management leadership in this area – Supports the ideal of protecting the environment

– Ensures that the organization complies with all legal and regulatory requirements

324


Exam 3

ISM Principles of Social Responsibility and

Audit – Cont.

Business reasons for adopting environmentally responsible

practices

– Costs savings may be recognized over life cycle of a program as

sound environmental practices are adopted on the front end

– Organizations may reap competitive advantage from being known

as environmentally responsible

Supply management professionals

– Embed environmentally responsible language and specific

measurements into contracts

– Audit suppliers and their own organizations to ensure

environmentally responsible practice

• ISM and others provide information and tools for environmental audits

325


Exam 3

Customer-Driven Requirements

Customers have expectation that suppliers and

organizations with which they do business will act in an

environmentally compliant and responsible manner

Environmental regulatory agencies often publish names of

noncompliant organizations

As part of their business strategy, many organizations adopt

policies that integrate environmental protection and

stewardship

326


Exam 3


Which of the U.S. Acts provides for the clean-up and

remediation of closed and abandoned hazardous waste

sites?

(A) Comprehensive Environmental Responsibility, Compensation and

Liability Act (CERCLA)

(B) Hazardous Materials and Transportation Act (HMTA)

(C) Occupation Safety and Health Act (OSHA)

(D) Health Care System (HCS)

327


Exam 3


The PRIMARY purpose of the U.S. Federal Resource

Conservation and Recovery Act (RCRA) record-keeping

system is to:

(A) Ensure the validation methodology of assessing damages and

liabilities for violators.

(B) Provide a vehicle to ensure Sarbanes-Oxley (SOX) compliance for

the supply manager’s company.

(C) Track the life cycle of hazardous waste.

(D) Provide a vehicle to assess penalty for violators.

328


Exam 3

Task 3-E-5 Application Question #1

Megan Montie, an internal auditor assigned to the purchasing and supply chain management department, wanted to make sure the department was following the procedures of the organization while pursuing industry best practices. The procedure manual for the company looked fair and the policy statement directed personnel to follow the regulatory agencies’ requirements. However, when she compared the process to the approved government policies and procedures standards, the manual did not support the government standards.

A critical area of the policy addressed providing timely notices to the hazmat carrier and disposer. The supply manager's manual stated that after a reasonable time they should contact and follow up with the authorized disposers. Yet, when she questioned the various supply managers involved in the tasks, the answers they gave about “reasonable time” ranged from one year after tender to the carrier to three months after disposal, with some not having any idea of what might be “reasonable.”

Cont.

329


Exam 3

Task 3-E-5 Application Question #1 – Cont.

In the past, the company had been in trouble with the government because

the paperwork had not been delivered on time to the regulatory agency.

What is the “best practice” policy Montie might suggest to ensure that the

supply chain department stays on top of these critical areas of

responsibility?

(A) Before you retire from the company, or exit from the department, all

associated paperwork must be properly closed.

(B) If a copy of the hazmat's shipping manifest has not been received within 45

days, the supply manager should initiate an investigation.

(C) If the completed paperwork is not received within one year of disposition, the

supply manager should make contact with the hazmat's transporter.

(D) If the completed paperwork is not received within one year of disposition, the

supply manager should make contact with the hazmat’s disposer.

330


Exam 3


Name 4 U.S. environmental laws/regulations that

impact supply management and describe the

primary purpose of each

Define cradle-to-grave and cradle-to-cradle

Summarize the ways organizations use audits to

ensure environmental compliance

Identify two business reasons for adopting

environmentally responsible practices

331


Exam 3

TASK 3-E-6

332


Exam 3


1) Creation of measurements

2) Compliance metrics

Develop tools and processes to measure, report and improve compliance with Supply

Management policies and regulations.


Full 7Q; Bridge 4Q

333


Exam 3

Creation of Measurements

It is supply management’s responsibility to

– Create policies

– Assure they are being used by developing quantifiable

metrics

– Have systems or processes that ensure control and

compliance

334


Exam 3


Audit Processes

Supply management audit – A comprehensive, systematic, independent and periodic

examination of an organization’s supply management

• Environment

• Objectives

• Strategies

• Activities

– Used to

• Identify strengths and weaknesses

• Develop plan to improve performance

– Can be internal or external audits

If the organization is found to be non-compliant – Management plan and process-improvement plan probably

necessary

– Disciplinary action also may be necessary

335


Exam 3


Validation Process

Established to ensure that standards and rules

– Are appropriate

– Comply with legal and regulatory requirements

Validation reviews accomplished both

– Internally

– Externally through outsourcing

336


Exam 3


Reporting Requirements

Need to establish a management reporting

system/structure to ensure measurements and

processes are tracked on regular basis for

– Compliance

– Information accuracy

Accomplished through

– Established management meetings

– Audit meetings

– Peer review meetings

337


Exam 3


Remediation

If audit reveals deficiency

– Process improvement plan should be established to

• Correct the defect

• Establish solutions

• Define actions to be taken

– Often, a written action plan must go back to auditor

338


Exam 3


Training

Training should keep up with evolution of supply chain

management, both internally and externally

Training on supply management policies and procedures

must include

– Supply management personnel

– Supply management’s customers

Methods of training

– Web-based education

– Face-to-face classes

– Lessons learned packages

– Discussion after audit reviews

Can be accomplished internally or through external

education sources

339


Exam 3

Compliance Metrics

Organizational Policies (e.g., Supplier Diversity, Social Responsibility)

Policy: a plan to guide decisions and achieve rational

outcomes

Many organizations

– Follow unique policies based on requirements established by

• Organization leaders

• Stakeholders

– Require compliance by their suppliers

Among these policies are

– Supplier diversity

– Social responsibility

– Ethics


Exam 3

Compliance Metrics

Organizational Policies – Cont.

Supplier diversity policies

– Many organizations establish policies regarding

purchasing from a diverse supplier base including

• Minority-owned business enterprises (MBE)

• Women-owned business enterprises (WBE)

• Business enterprises with gay, lesbian, bisexual or transgender

ownership (GLBT)

• Business enterprises owned by people with disabilities (PWD)

341


Exam 3

Compliance Metrics


Social responsibility policies – Social responsibility: a framework of measurable policies and

resulting behavior designed to benefit the workplace, the individual, the organization and the community in the following areas

• Community

• Diversity

• Environment

• Ethics

• Financial responsibility

• Human rights

• Safety

– An emerging trend for organizations worldwide

342


Exam 3

Compliance Metrics


Ethical supply management policies

– Most organizations have ethical policies and practices in

the form of how business should be conducted by their

employees

– Many organizations have used ISM’s Principles and

Standards of Ethical Supply Management Conduct as

their guide


Exam 3


The development, implementation and validation of

corrective action for non-performance or non-compliance

to performance measures is known as:

(A) Team input.

(B) Validation.

(C) Critical to quality.

(D) Remediation.

344


Exam 3


Supply management organizations must develop tools

and processes to audit compliance. The MOST important

reason for such processes and tools is to:

(A) Meet the needs of the audit group of corporate headquarters.

(B) Ensure standardization of policies throughout the supply

management organization.

(C) Provide a benchmark for the company to use when working with other

organizations within the same industry.

(D) Ensure results of actions and decisions of the supply management

organization can be measured and improved as required.

345


Exam 3

Task 3-E-6 Case Study #1


1. Why would the Bay Company want global training in English with

sensitivity to local culture?

2. How could a supplier be measured on compliance with company travel

policy?

3. Why would the Bay Company want instructors to be able to

troubleshoot room

temperature?

346


Exam 3


Explain how each of the following are used to

ensure compliance with supply management

policies

– Audits

– Validation

– Reporting

– Remediation

– Training

Describe supplier diversity, social responsibility

and ethics policies and identify who has to comply

347


Exam 3

TASK 3-E-7

348


Exam 3


1) Typical types of audits (e.g., ISO, GAAP, SOX)

2) Measurement of change initiatives

3) Validation of current policies, procedures, work instructions and forms

4) Corrective action process

5) Audit schedules and reports

Analyze and resolve issues raised in supply management audit reports.


Full 6Q; Bridge 2Q

349


Exam 3

Introduction

Reasons for audit

– Compliance with given standard(s)

– Prevention of mistakes and problems

– Gauging system and process efficiency and

effectiveness

– Regulatory or industry compliance requirement

Types of auditors

– Internal

– External

– Self-inspection

350


Exam 3

Typical Types of Audits (for example, ISO,

GAAP, SOX)

ISO (International Organization for Standardization)

– Audit conducted by an external third-party

– Initial audit for certification, then regularly scheduled audits

– ISO requires internal auditing and a corrective action program

GAAP (Generally Accepted Accounting Principles)

– Established by U.S. Financial Accounting Standards Board

(FASB)

– Widely accepted set of rules, conventions, standards and

procedures for accounting and reporting financial information

351


Exam 3

Typical Types of Audits (for example, ISO,

GAAP, SOX) – Cont.

SOX – Sarbanes-Oxley Act of 2002

– Regulates accounting profession

– Imposes extensive reporting requirements on all publicly-traded corporations in U.S.

– Requires internal financial controls to provide assurance of the reliability of financial reporting and preparation of financial statements

• There is an oversight board

• Certification of financial reports is required

• Compliance must be maintained through use of an independent audit committee

352


Exam 3

Measurement of Change Initiatives

One function of an audit

– Document the effects of changes in supply management

• Processes

• Policies

• Procedures

• Organization

– Final step in this process is periodic review of outcomes

using measurement criteria defined in the process

– Supply management audit may be used to evaluate

outcomes of previous changes

353


Exam 3

Validation of Current Policies, Procedures,

Work Instructions and Forms

Purpose of an audit – Could be as narrow as verifying that completed

purchase orders are filed correctly

– Or, as broad as an ISO 9000 systems audit

– Determines resources required

Other purposes include – Are proper monetary limits being adhered to?

– Are appropriate personnel conducting transactions?

– Are competition requirements being met?

– Are best transportation methods consistently used?

– How good are forecasts?

354


Exam 3

Corrective Action Process

Audit reports – Are based on observations

– Are representations of facts

– Do not seek to assign blame

Audits find areas for improvement – Normally requires plan that outlines steps to be taken to

address audit findings

Corrective action plan includes – Establishing time frames for improvement

– Prioritizing steps in the improvement plan

– Cost benefit analysis to determine resource allocation

355


Exam 3

Audit Schedules and Reports

Auditor’s report

– A formal opinion

– By internal auditor or independent external auditor

– A result of internal, external or self-inspection audit

– Provided to whomever requested audit

Depending on type of audit, schedules included will

vary

– For example, a financial audit includes various financial

statements and accompanying notes

356


Exam 3


All of the following are requirements of the Sarbanes-

Oxley Act (SOX) of 2002 EXCEPT:

(A) Creation of public company accounting oversight board (PCAOB).

(B) Certification of financial reports by the company Chief Executive

Officer (CEO) and Chief Financial Officer (CFO).

(C) Establishment of an independent audit committee to oversee the

relationship between the company and its auditors.

(D) Audit of supplier relationships.

357


Exam 3


Which of the following BEST defines the corrective action

process to put in place to resolve problems identified in a

supply management audit?

(A) Identify internal and external auditors, validate current policies and

review outcomes

(B) Identify cross-functional team, define requirements, plan and

implement

(C) Establish time frames, prioritize steps and perform a cost/benefit

analysis

(D) Identify individuals responsible for non-compliance, identify

remediation steps and implement

358


Exam 3

Task 3-E-7 Case Study #1


1. What benefits would Bulldogger hope to achieve through a significant

change to current process?

2. How important would it be for Bulldogger to conduct an audit of

current policies and procedures?

359


Exam 3


List reasons for an audit

Name the types of audits

Discuss ISO, GAAP, SOX

Describe the corrective action process that occurs

as a result of an audit

What is an auditor’s report?

360


Exam 3

TASK 3-E-8

361


Exam 3

TASK 3-E-9

362


Exam 3

TASK 3-F-1

363


Exam 3

Task 3-F-1 Task Outline

1) “Principles and Standards of Ethical Supply Management Conduct”

2) ISM “Principles of Social Responsibility”

3) Organizational policies

4) Industry codes of conduct

5) International issues

6) Communication and training to key stakeholders

7) Laws governing issues in ethics


Develop and implement a code of business conduct for the Supply Management

function.


Full 5Q; Bridge 2Q 364


Exam 3

365

Introduction: Social Responsibility

Organizational codes and policies vary

Matters affecting the supply chain should always

be addressed

Three key areas

– Organizational and supply chain safety

– Environmental compliance and responsibility

– Ethical standards of conduct


Exam 3

366

ISM Principles and Standards of Ethical

Supply Management Conduct

Three key principles

– Loyalty to your organization

– Justice to those with whom you deal

– Faith in your profession

From these derive 12 standards of supply

management conduct (Study Guide page 168)


Exam 3

367

ISM Principles of Social Responsibility

Community

– Local communities and citizens are stakeholders

– Standards should reflect goals of

• Maintaining ethical and environmental ecology of the communities

• Complying with all laws and regulations

• Demonstrating respect for community resources

• Aiding the community through contributions and involvement

Diversity

– Organizational policies, procedures and objectives should

address commitment to diversity in employment and suppliers

– Supply managers are key to a diversified supplier base


Exam 3

368

ISM Principles of Social Responsibility – Cont.

Environment – environmental responsibilities include

– Compliance with laws

– Commitment to sustainability

– Recycling and use of renewable resources

Ethics – informed supply managers understand ethical

matters and reflect on the ethical aspects of supply

management

Financial responsibility

– Must ensure the application of sound financial practice

– Supply managers should consider how buying decisions financially

affect both buyer and supplier organizations


Exam 3

369

ISM Principles of Social Responsibility – Cont.

Human rights – issues may relate to

– Supplier wage rates and working conditions

– Doing business in a country with human rights violations

• Many governments and economies are evolving in their

recognition of human rights

• Should have policies/principles in place for dealing with such

countries

• Contract clauses and inspection should address compliance with

Global Sullivan Principles

Safety

– Should be a key concern to supply managers

– Supply managers play a key role in promoting safety


Exam 3

370

Organizational Policies

Should have written policies and procedures dealing with ethics, safety and the environment

Content should include at least the following – A code of ethics relating to supply management

• Gratuities, conflict of interest, reciprocity, human rights, safety, environmental impact, and compliance with applicable law

– Document retention and control

– Environmental management systems (pursuant to ISO 14000)

– Organizational structure and reporting channels

– Purchasing process and authority levels

– Commitment to the local community


Exam 3

371

Industry Codes of Conduct

Refers to industry-specific codes

Example: architects have a professional code that

imposes additional standards beyond ISM

requirements


Exam 3

372

International Issues

The United Nations’ The Ten Principles of

the Global Compact deals with issues of

international business conduct

The principles have been adopted by 1,300

international organizations


Exam 3

373

International Issues – Cont.

The Ten Principles of the UN Global Compact – Human Rights

1. Business should support global human rights…within their influence

2. Ensure no complicity in human rights abuses

– Labour standards 3. Uphold freedom of association and respect collective bargaining

4. Eliminate all forms of forced and compulsive labour

5. Effectively abolish child labour

6. Elimination of discrimination in employment and occupation

– Environment 7. Approach environmental challenges with caution

8. Promote greater environmental responsibility

9. Encourage development and diffusion of environmentally friendly technology

– Corruption 10. Work against corruption in all forms, including extortion and bribery


Exam 3

374

Communication and Training to Key

Stakeholders

Important steps to implementing standards, codes

and objectives

– Training should cover principles, values, goals, ethical

standards and organizational objectives

– SOX requires evidence that employees received such

training

• This is an indication of the efficacy of internal controls


Exam 3

375

Laws Governing Issues in Ethics

Defamation is a verbal or written expression of false

statements that diminishes an organization’s or individual’s

reputation

– If it’s written, it’s called libel

– If it’s oral, it’s called slander

Disparagement is making malicious or false statements

about an organization’s products or service

Bribery refers to giving cash, gifts or other favors in

exchange for the award of business of favors (a felony in

many U.S. states)

– Thwarts free market forces

– Prevents decision-making on the basis of price and quality


Exam 3

376


A buying organization may be subject to customer-

stipulated contract terms

– May be related to their social responsibility initiatives

– May be applicable to subcontracts

– May specify a particular supplier or product


Exam 3

377

Task 3-F-1 Recall Question #1

The United Nations’ Global Compact addresses all of the

following EXCEPT:

(A) Anti-corruption.

(B) E-commerce.

(C) Environment.

(D) Human rights.


Exam 3

378


Which of the following is NOT a typical corporate

governance practice in global business?

(A) Disbursed equity ownership

(B) Disparagement

(C) Bribery

(D) Remediation


Exam 3

379

Task 3-F-1 Comprehension Question #1

Which of the following situations is NOT in conflict

with the ISM Principles and Standards of Ethical

Supply Management Conduct?

(A) Discussing order winning criteria with unsuccessful bidders

(B) Purchasing cleaning supplies from your part-time home product sales

business

(C) Buying from a customer at uncompetitive prices

(D) Installing company software on your home computer


Exam 3

380

Task 3-F-1 Comprehension Question #2

A supply manager’s statement that, “Supplier X cannot

deliver promised services on time” to another potential

purchaser of that supplier’s services when, in fact,

Supplier X does deliver on time, is an example of:

(A) Defamation.

(B) Libel.

(C) Disparagement.

(D) Slander.


Exam 3

381

Task 3-F-1 Summary and Review

Articulate the issues surrounding ethical and socially responsible behavior with external suppliers

What do we mean when we refer to “behavior that is guided by the” – Code of conduct?

– Organizational policies?

– Legal statute?

What is the UN Global Compact and what are its key components?

Define – Libel

– Slander

– Disparagement

– Bribery


Exam 3

TASK 3-F-2

382


Exam 3


1) Rationale in developing programs

2) Sources of information on socially or economically disadvantaged

suppliers/historically underutilized businesses or other country’s

equivalent

3) Small business/small disadvantaged business (SB/SDB) requirements

4) Program elements

Develop and/or implement a supplier diversity program.


Full 5Q; Bridge No Q 383


Exam 3

384

Rationale in Developing Diversity

Programs The World Trade Organization (WTO) estimates that,

in many countries, government purchases are 10-15% of Gross Domestic Product (GDP)

Objectives of diversity programs – Government

• Counteract discrimination

• Help reduce unemployment

• Expand the tax base by stimulating business growth

– Private business • Benefits to local communities and to society in general

• Build customer good will

• Comply with government regulations

• Increase competition among suppliers


Exam 3

385


Programs – Cont. Organizational policies – Many organizations develop

diversity goals and policies that support them

Impediments – Inability of small diverse suppliers to meet high level goals

– Many organizations seek to assist diverse suppliers in this regard

Benefits may include – Lower cost

– New ideas and innovation

– Enhanced community goodwill

– Increased competitiveness


Exam 3

386


Programs – Cont.

Assessing program goals – requires objective

measurement of actual to goal

Disparity studies – refers to a study of categories,

level of penetration by tier, etc.

Customer driven requirements – refers to customer

demands for use of diverse suppliers in socially

acceptable ways

Subcontracting plans – government requirements

for subcontractors are often the same as for primes


Exam 3

387

Sources of Information

U.S. Small Business Administration

– Maintains a computerized directory of diverse suppliers

– Directory has a search engine

Minority/Women Business Development Agency

– The only federal agency created to foster establishment

and growth of minority owned businesses in the U.S.

Business directories

– Provide information on certified and uncertified sources

– Sources are categorized by commodity and location


Exam 3

388

Sources of Information – Cont.

Minority/women owned business development

councils

– Established to support supplier diversity efforts

– Provide certification of Minority and Women Owned Business

Enterprises, training, organized networking opportunities, etc.

Local minority/women chambers of commerce

– Organized around the world to assist minority/women owned

businesses

Business fairs


Exam 3

389

Small Business/Small Disadvantaged

Business Requirements Certification as a SB/SDB

– Eligibility based on specific social, economic and ownership criteria

– At least 51% owned/controlled by one or more individuals who are socially

and economically disadvantaged

Registration

– Refers to registering with the national or local small business agency

Applicable classifications

– In the U.S., an organization with 51% or more ownership by one or more

socially and economically disadvantaged individuals is classified as a Small

Disadvantaged Business

Elements of a successful program

– Top management support

– Organizational policies that support the program

– A program coordinator

– Buyer diversity goals


Exam 3

390


Which of the following is the only federal agency created

specifically to foster the establishment and growth of

minority-owned businesses in the U.S.?

(A) Business directories

(B) The Small Business Administration (SBA)

(C) The Minority/Women Business Development Agency

(D) Minority/women business development councils


Exam 3

391


Which of the following BEST defines certification

classification for Minority Business Enterprises (MBEs)?

(A) Social demographics of the buying company

(B) Ethnic percentage of the supplier employees

(C) 51% owned and controlled by one or more socially and economically

disadvantaged individuals

(D) 51% women owned and controlled


Exam 3

392

Task 3-F-2 Application Question #1

Joy Jones, purchasing manager, is new to her company. She has

inherited a successful, mature supplier diversity program that tracks

payments to its direct suppliers. Diversity suppliers are routinely

included in RFPs as standard company procedure. The company is

widely recognized for its diversity program and support of diversity

suppliers.

How can Jones improve on an already successful company supplier

diversity program?

(A) Institute policies and procedures to include tier two and tier three spend.

(B) Ensure that only supply management professionals have supplier diversity goals.

(C) Shift responsibility for supplier diversity to the marketing department.

(D) Develop a strategy to replace the existing program with an entirely new program.


Exam 3

393


The supply manager of an organization is striving to enhance its supplier diversity

program. The manager knows the department is not capturing data for all of the

existing diverse suppliers currently used, nor for any new ones. Even worse, the

supplier records do not track this information. The manager tasked Bill Smith, a

subordinate, to develop a system and process to identify which suppliers are, in fact,

diversity suppliers. The manager tells Smith to determine what data is needed and

how to track the data for diversity suppliers. Later the same day a new local supplier

called on Smith and presented itself as a diversity supplier. While visiting with the

supplier, Smith decided that this would be a good opportunity to begin identifying and

developing the new process. Smith learned that he should start by establishing a

validation methodology.

What would be the BEST method to validate that the supplier is a diversity supplier?

(A) Take the supplier’s word for it and track the diversity spend.

(B) Ask the supplier to show ownership status to determine its status.

(C) Require a copy of the certification document by a recognized third party certifying

organization.

(D) Require submission of a W-9 tax ID form for their organization.


Exam 3

394


Identify six sources of information on socially or

economically disadvantaged suppliers/historically

underutilized businesses or other country’s

equivalent

What are the requirements for a supplier to

become certified as a small business/small

disadvantaged business (SB/SBD)?

What are the key organizational influences on

success of a supplier diversity program?


Exam 3

TASK 3-F-3

395


Exam 3


1) Environmental laws and

regulations

2) Risk transfer

3) Ethical issues

4) Audit

5) Organization values and

policies

Establish and monitor programs for sustainability And Environmental responsibility.


Full 5Q; Bridge 2Q

6) ISM Principles of Social

Responsibility and Audit

7) Buy–recycled programs

8) Minimization of waste

9) End of life cycle

396


Exam 3

397

Environmental Laws and Regulations

There are three categories of U.S. environmental law

– Regulation of air pollution

• The Clean Air Act of 1970…..amended many times

– Regulation of water pollution

• The Clean Water Act of 1972…..amended to include the Oil Pollution

Act and the Safe Drinking Water Act

– Regulation of solid and toxic waste disposal

• The Toxic Substances Control Act…..amended to include the

Comprehensive Environmental Response, Compensation and Liability

Act (CERCLA)

Each state has its own environmental laws and

enforcement agency

States work closely with the U.S. Environmental Protection

Agency (EPA)


Exam 3

398

Comprehensive Environmental Response,

Compensation and Liability Act (CERCLA)

Under CERCLA, all in the chain of creation, distribution and

use of toxic or hazardous waste are responsible for cleanup

costs after a violation, even if they did not actually commit

the violation. There are three areas of concern

– At the source

• Cradle-to-grave liability attaches to a toxic substance

• Refers to taking responsibility for disposal of goods it produces

– In transit

• Must ensure that the transportation method is appropriate

• A “closed-loop” manifest system is employed

– At the destination

• Methods of processing, storing and treating must satisfy the law


Exam 3

399

Environmental Laws and Regulations – Cont.

Two primary EU environmental directives are – Restriction of Hazardous Substance Directive (RoHS): a directive,

the purpose of which is to place restrictions on the use of certain

hazardous substances in electrical or electronic equipment sold or

used in the European Union after July 1, 2006

– Waste Electrical and Electronic Equipment Directive (WEEE): a

directive, the purpose of which is to prevent the emergence of

electrical and electronic equipment waste, and to promote the

reuse, recycling and other forms of recovery of such waste

Pollutant Release and Transfer Register (PRTR): systems

established by various countries to collect and make public

information on environmental releases and transfers of

toxic chemicals from industrial and other facilities.

Countries having PRTRs include the European Union,

Norway, Australia, Mexico and Canada


Exam 3

400

Risk Transfer

Efforts to limit or eliminate risk associated with environmental laws fall into three categories – Contractual

• The original generator of a hazardous waste cannot escape liability, even if the contract with transporters and disposers contains disclaimers. There is cradle-to-grave liability

• CERCLA holds generators responsible for their service suppliers

• What was once a legal means of disposal, may not be in the future

– Insurance • Commercial general liability insurance does not cover an environmental

cleanup. A special rider is required

• “Indemnity” clauses will not eliminate responsibility to the EPA

– Legal • Insurance may mitigate, and a hold-harmless clause may offer potential

of recovery, but there are no legal guarantees that a buying organization will escape environmental cleanup liability


Exam 3

401

Ethical Issues

ISO 14000, initiated in 1996, required creation and maintenance of an environmental management system

ISO 14001 and 14004, added in 2004, requires an organization to document, update and continually improve the environmental management system. Further, they require visibility to employees, suppliers and customers

A new part is an annual “Evaluation of Compliance” with law and environmental regulations. It includes – An update on legal compliance with a focus on the future

– Corrective action and systematic record keeping

Renewable resources – Investment in and use of renewable resources is a best practice


Exam 3

402

Audits

An audit seeks to determine accuracy of transactions, whether or not procedures are followed, and if those procedures actually work – Internal audit

• Performed by employees who have no stake in the outcome

• Self inspection – those involved in the work audit themselves

– Supply chain audit

• Objective is to measure compliance (policies, procedures, contracts, law, etc.)

Before initiating any audit, answer the following questions – Who will see the results?

– What will be done with the results?

– Who will have authority to make changes based on audit results?


Exam 3

403


Organizational values and policies – Statements should address

• Compliance with all laws and regulations

• Preventing harm to the environment

• Preserving the environment (recycling, renewable resources, etc.)

• Commitment to goals and metrics related to compliance

• Commitment to implementing changes where necessary

ISM Principles of Social Responsibility and Audit – ISO standards require an ongoing internal audit

– ISM further suggests a corrective action process, to include • Timeframes for improvement

• Prioritization of corrective actions

• Cost/benefit analysis of expectations from improvements


Exam 3

404


Buy-recycled programs

– Refers to an internal program with goals of

• Reuse of materials

• Purchasing recycled, environmentally friendly, products

– May further implement these expectations at the supplier level

Minimization of waste (three considerations)

– Reduce waste in all forms

– Reuse existing products and materials

– Recycle

End of life cycle

– Seek disposal options in advance

– Use elsewhere in the organization, sell, scrap, convert into energy


Exam 3

405


The concept of creating production techniques that are

not just efficient but are essentially waste-free is called:

(A) Cradle to grave

(B) Cradle to cradle

(C) Risk mitigation

(D) Simplification


Exam 3

406


Which of the following describes the process of

reclaiming materials from used products and using them

in the manufacturing of new products?

(A) Reduce

(B) Reuse

(C) Recycle

(D) Dematerialization


Exam 3

407


During a supplier visit, the supplier has disclosed that he is very conscious of issues associated with environmental waste and hazards. The prospective supplier learned a lesson about a dozen years ago when a leak from an underground tank cost them huge fines and cleanup associated with this violation. Today they have an active program of internal self-audits and external audits by their supply chain to monitor all operations and ensure immediate reports to the EPA and other regulatory agencies when an event is discovered. The MOST likely reason the supplier shared this information with you is that:

(A) You have adequate information to determine that the supplier has visible safety and environmental procedures in place to be an environmentally compliant supplier.

(B) The supplier’s disclosure of proactive internal self-audits and external audits suggests that measures are in place to prohibit any type of future problems.

(C) The manager is unsure about his company’s ability to be environmentally compliant.

(D) The manager is confident that the internal self audits and external audits will aid in preventing future safety and environmental problems.


Exam 3

408


An organization’s supply manager recently attended a new seminar on Environmentally Preferred Purchasing (EPP) and sees the need and value for his organization to support and embrace the aspect of minimization of waste and associated hazards for materials. However, the organization is very focused on the bottom-line and cost containment. Which of the methods listed below should the supply manager suggest implementing FIRST to senior management?

(A) Reduce the quantity of these items used.

(B) Reuse the existing product where able.

(C) Recycle the products used within the company.

(D) Renovate the structure to be more environmentally friendly.


Exam 3

409


What is the intent of the Comprehensive Environmental

Response, Compensation, and Liability Act?

Outline environmental responsibility and compliance

including

– Legislation

– Risk transfer

– Auditing

– Waste minimization

– Renewable resources

Identify three ways to minimize waste

Discuss the legal implications of insulating against risk


Exam 3

TASK 3-F-4

410


Exam 3


1) Laws and regulations

2) Policies and procedures

3) Supplier and subcontractor safety (e.g., safety, history)


Implement, monitor, and Promote organizational and supply chain health and safety

policies and procedures.


Full 4Q; Bridge 1Q 411


Exam 3

412

Laws and Regulations

Applicable laws and regulations

– In the U.S. – safety and health, environmental, anti-trust, etc.

– Other countries have equivalent laws and regulations

– Understand the intent of the law or regulation

Personal liability

– An individual may be liable if, while violating law, regulation or policy, another is injured

Organizational liability

– Employers are responsible for ensuring a safe, healthy workplace

– Failure could result in criminal and/or civil prosecution


Exam 3

413

Laws and Regulations – Cont.

Department of Transportation or other country’s equivalent

– DOT has counterparts in nearly all countries

– Responsible for rules/regulations for air, water and ground transport

Department of Homeland Security (DHS) or other country’s equivalent

– Created to prevent/deter terrorist attacks, and protect/respond to threats and hazards to the nation.

– DHS includes Coast Guard, Customs Service, Immigration and Naturalization Service, and the Transportation Security Administration

– When studying: understand DHS’s 6-point agenda


Exam 3

414

U. S. Department of Homeland Security

Six Point Agenda

Increase overall preparedness, particularly for catastrophic events

Create better transportation security systems for people and cargo

Strengthen border security, interior enforcement and reform immigration processes

Enhance information sharing with DHS’s partners

Improve DHS financial management, human resource development, procurement and information technology

Realign the DHS organization to maximize mission performance


Exam 3

415

Policies and Procedures

Organizations develop policies and procedures

related to – Employee safety

• Training requirements

• Sourcing Occupational Safety and Health Administration (OSHA)

approved products

• Wearing appropriate protective equipment

• Material Safety Data Sheets (MSDS) posting

requirements……..etc.


Exam 3

416

Policies and Procedures – Cont.

Records retention. Considerations include

– What kind of records?

– The cost of retention

– Who should have custody of the records?

– How will records be organized?

– Who will have access to the records?

– What is the objective of retaining specific records?

– How long should the records be retained?

– Storage requirements and ease of access

– Authorization requirements for records access

– Destruction of aged records as appropriate

– Industry best practices


Exam 3

417

Policies and Procedures – Cont.

Supplier and subcontractor safety

– To be effective, policy must be practiced as written

• A simple contract clause isn’t sufficient to ensure supplier safety

• Must also enforce safety policies

– Review the supplier’s safety record

– Becomes more critical, and important, when sourcing

globally

Training

– Many organizations require supplier participation in

safety training

– Should occur before work begins


Exam 3

418


In 1958, the International Labour Organization

implemented the principles embodied in the United

Nations’ Declaration on the Elimination of All

Forms of Racial Discrimination

Certain customers, such as the U.S. federal

government, may require compliance with these

and similar requirements


Exam 3

419


Individuals or corporations in the U.S. may be held liable

for injuries to persons injured while on a plant tour under

which of these laws?

(A) Criminal law

(B) Occupational Safety and Health Act

(C) Personal liability

(D) Organizational liability


Exam 3

420


Today, in a global environment, safety and health issues

not only apply to safety of the work environment,

employees and supplier personnel but also apply to:

(A) Intellectual property rights.

(B) Product regulations.

(C) Environmental hazards.

(D) Ethical conduct in foreign countries.


Exam 3

421


OSHA (Occupational Safety and Health Act) was enacted

in 1970 to establish standards for safety in the workplace.

States have also developed their own standards. What

level of government controls these standards in the U.S.?

(A) The federal government always has the highest level of control over

all state standards.

(B) The state government always has the highest level of control.

(C) The state government has the highest level of control in cases where

state standards are higher than federal standards.

(D) The United Nations’ World Health Organization has the highest level

of control.


Exam 3

422


In the new records retention policy established by an organization, Joni Grenwald was assigned the task of developing an effective program. While she told managers she would need a few days to prepare for the new task, one of the managers stated that it was not necessary. She should apply her best effort to the task as the type of document determines the category of classification, and then both the legal and internal and external audit departments create the time requirements for retention. Grenwald still did not feel comfortable with the task assigned by the manager, but felt she had the greatest amount of influence on the front end of the process. She focused on the foundational aspects of program use and development. As such, Grenwald’s greatest impact could be applied to:

(A) Designing the security and entry processes associated with records retention and

procedures.

(B) Creating the log for notifying the owners of the records of destruction activity for the organization.

(C) Developing a process to both withdraw and copy logged files.

(D) Assessing risk management factors to the records management program over the life of the retention period.


Exam 3

423


Articulate supply management’s role in the

execution of supply chain safety policies and

procedures by examining

– Ethical responsibilities

– Legal responsibilities

What is the Department of Homeland Security’s

six-point agenda?

What are the requirements related to Material

Safety Data Sheets (MSDS)?


Exam 3

TASK 3-F-5

424


Exam 3

TASK 3-F-6

425


Exam 3


1) Federal/state/local laws and regulations

2) Organizational policies and procedures

3) Court rulings pertaining to employment discrimination

4) Other country equivalent laws and regulations

5) Diversity training

Implement policies to prevent discrimination and harassment.



426


Exam 3

Federal/State/Local Laws and Regulations

Protected classes: race, color, religion, sex, national origin, disability or age – U.S. laws related to employment include

• Equal Pay Act of 1963

• Federal Civil Rights Act of 1964 (specifically Title VII)

• Executive Order 11246 of 1965

• Age Discrimination in Employment Act of 1967

• Equal Employment Opportunity Act of 1972

• National Labor Relations Act (Taft-Hartley Act)

• Occupational Safety and Health Act

• Americans with Disabilities Act

Sexual harassment is prohibited by Title VII of the Civil Rights Act

427


Exam 3

Organizational Policies and Procedures

Effective discrimination-related organizational policies and procedures require senior management support

Policies should reflect that an organization will adhere to all applicable federal, state and local laws related to fair and equal treatment in the workplace

Internationally, organizational policies should exceed (or at least respect and reflect) the laws of the country in which the organization is doing business

428


Exam 3

Court Rulings Pertaining to Employment

Discrimination

Different U.S. state and municipal governments

have court rulings that reflect their specific region

These rulings may be stricter than U.S. federal or

international laws

Organizations must be aware of local laws where

they do business

429


Exam 3

Other Country Equivalent Laws and

Regulations

The United Nations adopted the International Covenant on

Civil and Political Rights 16 December 1966; as amended

– Similar to the U.S. Civil Rights Act

– Not all countries have signed on to this Covenant

Examples of laws that govern other countries

– Mexico: Federal Labor Law

– United Kingdom: Employment Relations Act

– European Union: Treaty of Amsterdam

– Canada: Employment Equity Act

430


Exam 3

Diversity Training

As more organizations become multinational, awareness of

other cultures and practices is essential

Diversity and cultural sensitivity training is effective in

creating awareness and improving team interaction

Training should focus on

– Organizational and performance goals

– Behaviors to increase an organization’s effectiveness

To increase achievement of success factors, attach

diversity training to performance metrics

431


Exam 3


The U.S. Act that covers intentional offenses including

sexual harassment providing monetary damages is the:

(A) Equal Pay Act of 1963.

(B) Federal Civil Rights Act of 1964.

(C) Equal Employment Opportunity Act of 1972.

(D) National Labor Relations Act.

432


Exam 3


The U.S. Taft-Hartley Act is also known as:

(A) The American with Disabilities Act.

(B) The Occupational Safety and Health Act.

(C) The Age Discrimination Act of 1967.

(D) The National Labor Relations Act.

433


Exam 3


The management job you have been waiting for has finally come available and you are well qualified. It will require some international travel, working with people in a variety of plant environments and managing employees globally. Overall, it represents a considerable increase in authority and responsibility, but you believe you are up to the task. Prior to your interview, you had a chance to visit with the manager who is retiring from this position. You tell him most areas of the job description are well within your scope of knowledge and experience. However, you are less familiar with issues related to managing international employees and customers. Thus, you ask for his suggestions on complying with worker and human rights laws within the countries involved until you have time to learn more about them. His comments were surprising based upon your training in global sourcing, international laws and treaties. He said, “Just don’t sweat it! If they want a job, they will work for us under our laws and standards despite the location of the plant. Just treat them as anyone here and you are cool.” This did not sound reasonable and, in fact, contradicted what you had been taught about managing employees internationally. Before the job interview, you want to check out the top five countries in which the organization has manufacturing plants and large workforces.

Cont.

434


Exam 3

Task 3-F-6 Application Question #1 – Cont.

You should consider counsel from:

(A) Human Resources about personnel issues and concerns in these

countries to determine whether they are the same or have different

laws and standards.

(B) Other people who work in your local plant as they might have a

different perspective from your own and could share light on the

issues.

(C) The plant managers in the specific countries in question.

(D) The retiring manager for a more detailed discussion on the specific

country’s laws.

435


Exam 3


Identify the primary purpose of the following U.S. laws

– Equal Pay Act of 1963

– Federal Civil Rights Act of 1964 (specifically Title VII)

– Executive Order 11246 of 1965

– Age Discrimination in Employment Act of 1967

– Equal Employment Opportunity Act of 1972

– National Labor Relations Act (Taft-Hartley Act)

– Occupational Safety and Health Act

– Americans with Disabilities Act

Describe diversity training

436

Documents

CPSM COURSEWARE · 2020-06-10 · Task 3-C-5 Application Question #1 Nada Riyadh, the global director of supply management for Sunburst Hotels located in Saudi Arabia, was dreading