QUESTION: 65

A procurement professional is sourcing low value items. He conducts market analysis and realise that these items can be provided by many suppliers and switching cost between suppliers is relatively low. He also assume that the relationship between buyer and supplier will be transactional rather than long-term. According to Thomas-Kilmann conflict model instrument, which of the following is the most appropriate style that the procurement professional should adopt when negotiating with these suppliers?

Avoiding
Compromising
Competing
Collaborating

Answer(s): C

Explanation:

According to Thomas-Kilmann conflict model instrument, there are 5 conflict management styles:

In this scenario, the buyer's bargaining power is stronger than suppliers', and the relationship is transactional. Therefore, to get the most preferable outcome, the procurement professional can take an assertive approach, while he doesn't need to co-operate closely with these suppliers. Competing will be the most appropriate approach to negotiation in this scenario so that the buying organisation can get a better deal.

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QUESTION: 66

Which of the following is a disadvantage of absorption costing method?

Fixed cost allocated to products on the basis of the cost of activities used in producing them
Variable costs are not taken into product final costs
Using marginal cost of producing addition units
Limited understanding of true costs incurred

Answer(s): D

Explanation:

Absorption costing is an approach to allocating overheads in which indirect costs are loaded or absorbed into direct costs related to specific jobs, processes or outputs, using an estimated basis of allocation.

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QUESTION: 67

A negotiation is coming to the end. Both parties haven't had any official commitments. Right before leaving the room, the buyer strongly disagrees with supplier's set up prices and requests a discount. The supplier doesn't reply but nods and smiles. Can the buyer consider these actions as an acceptance?

Yes, because smiling shows supplier's readiness in signing the deal off
No, because nodding and smiling are etiquette of polite rejection
No, because nodding and smiling are not clear signs of neither acceptance nor rejection
Yes, because negotiator should rely on non-verbal communications only

Answer(s): C

Explanation:

Good negotiators are attuned to all stimuli and not just the verbal and written information exchanged. Tone of voice, body language, facial expressions and other clues from TOP are noticed, and with experience and knowledge, interpreted correctly. This interpretation may also involve knowledge of culture norms and values. A smile, a 'yes' and the type of hospitality received, (in the business context), can mean very different things in different international business cultures. Trained negotiators will consider non-verbal communication (such as nodding and smiling) and body language as one source of signal from TOP, but will rarely rely wholly on this as a guide to what TOP is thinking or feeling. Furthermore, international and regional cultural considerations must be included here to avoid errors in interpretation. Emotional intelligence also has an important role in forming a more holistic perspective of what TOP may be thinking or feeling.

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QUESTION: 68

Buying organisation may increase its leverage with suppliers by concentrating spend.
Which of the following are most likely to be forms of supplier spend consolidation? Select THREE that apply.

Forming purchasing consortia
Volume consolidation across categories
Volume separation
Paying supplier on time
Volume redistribution
Simplify procurement process

Answer(s): A,B,E

Explanation:

Buying organisation may increase its leverage with suppliers by concentrating spend. Supplier spend consolidation can take many forms as outlined below:
Vendor base reduction: straightforward reduction of number of suppliers in any category Volume pooling: pooling cross organisational requirement until your order volume is high enough to attract new bidders/additional discounts
Volume redistribution: making recommendations following spend analysis to move from one supplier to another
Volume consolidation across categories: certain purchase requirements may be common across a number of categories

Standardisation and harmonisation of specifications: analysis of specifications and standards for a high spend purchased input, may show that there is a little difference between them and that the specification can be standardised or at least harmonised across the group or across national, regional or global operations.
Forming purchasing consortia: buyers may decide to come together and combine their purchase volumes to attract better deals.

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