CPSM Blog

Back to Contracting and Negotiation Task 1-A-1

This is the start of the second round of the topics of the CPSM exam. See the first post on this section from February 2008. While negotiation is huge in supply management remember that the Internet has become big in the last fifteen years. So although my version of the study guide does not talk a whole lot of the role of the Internet in contracting and negotiation, I would encourage you to think about the role of the Internet in contracting and negotiation. Do you seriously believe that you or your negotiating suppliers will not check out each other and competitors before contracting? So you need to think about the Internet when dealing with this section. But please check the language of the question, if the Internet is not mentioned at all- do not assume the role of Internet in contract and negotiation. Perhaps the question is written several years ago.

So what are the bridge topics of this section?

• Electronic solicitations (RFx) : these include the ones (perhaps all in the US) sent out by e-mail  that the supplier  needs to access via the e-sourcing platform of the client. 
• Pricing models  and market structure: refers to types of markets that you need to recognize because in some markets there may be many suppliers and this would allow you to send out RFx to all the players. Obviously when say a hundred suppliers learn that they are all bidding then you can expect to come down to the perfect competition state.  In the real world things are not perfect and you need to think about imperfect competition that is a mixed state.

Strategy and analysis : to insource or outsource?

This section is the second last section (whew!) of Exam 3 and extremely interesting and topical when you think of the current election season and employment problems in the US. How do you decide to outsource a product or service?  Should you outsource or insource?

The difficulty in these sections of Exam 3 is that more than one answer appears right. So please go by the answer that appears the best. Also do not assume that the question was framed yesterday and is considering all the political discussions around outsourcing (lose US jobs) or insourcing (gain US jobs).Also this section is about outsourcing and insourcing first from the organisation's viewpoint and then from a  global outsourcing (or offshoring)point of view. Naturally if you are say in the high cost East or West coast US and outsource work to relatively low cost states in the South or Mid-West US you probably do not lose too many jobs. But if you outsource globally, there is a problem of losing jobs unless you can speed up innovation while protecting intellectual property.This because innovation creates jobs.But without digressing too much from the core topic of the section...

Your role as a supply manager is to be able to weigh multiple issues (including the very real jobs problem, talk about taxation benefits of insourcing) and be able to carefully weigh all angles and take a considered point of view that is the better options of all. So here goes some key points of this section with the assumption that all the discussion is not about offshoring, but merely moving the task out of the organization:

1. What can you outsource? You can technically outsource some task that you can split. Let's say your organization does engineering drawings at a high cost location in North East US. You can get part of the drawings done from a lower cost location in the US where Engineers might have lower pay. You can think of the outsourced task as a "module" that is done outside the organization by a contractor's employees and brought back for integration. So you must have the right type of  engineers who are able to receive and integrate the work.
2.  Core Competence:  The other question is how close to the core competence of your organization is this task? As a  supply management leader you are expected to have clear thinking about how to manage outsourcing if it is close to your organisation's core competence  and then the supplier or other competitors pick up all your skills and secrets.The latter problem can be huge in offshoring or global outsourcing.
3. Types of Control: You need to figure out what types of control are needed. When the suppliers are well developed you can just work out supply level agreements (SLA)  in the contract. Where suppliers have to be developed you need to be able to hand-hold and bring suppliers and your internal users on the same page.

This topic is a vast topic on which you must have had some experience, do talk to colleagues and get a better sense of what steps organizations take in these matters. In the exam just stay within the boundaries of the case situation i.e. don't imagine or assume additional stuff that you know or have experienced and you should be fine.

Legal issues in supply management processes

This section is generally some legal things you already know about from your experience in the profession. Legal issues in supply management are ageless (read continuing from the CPM exam) and there are 5 questions to deal with in the exam-and pretty straightforward if you go through the material.

When you deal with a vendor you are representing your company as an agent and everything you say,do,imply or fail to do puts your organization at legal risk. This puts a huge responsibility in figuring out exactly what is involved in ingredients (see BP example,Toys and Tires) and making things explicit. As the contract is executed you need to be on top of the situation with users who requested the product or service till supplies stabilize. Even then there is no harm in keeping track of commodities being managed by you with the users.

Do go through the Anti-Trust section and the Sherman Act , Federal Procurement guidelines and International regulation laws GATT and NAFTA. This section requires some reading of 14 pages in the study guide but once you go through the material the section is easy.

Succession Planning - training your people to succeed you in supply management

" Hey who said I was leaving ?" you might ask and resolutely micro-manage and not let your people grow. While this section in the Study Guide does not spell this dilemma out - you need to really take this to heart if you want to be a true supply management leader. Unless you allow people under you to grow - how are you going to grow and move on - hopefully beyond and above supply management.

Included as a bridge exam topic this section urges the supply manager to undertake a series of succession planning activities that apply to all functions be Marketing,Accounting,Finance,Production and even to the Board of Directors and CEO. The ones I like are the ones relating to cross-training and job rotation. This is HR stuff and if you get a chance talk to your knowledgeable  HR colleague about the general concept of "succession planning" and how the HR field looks at it. (Clarify to your HR person that this is an exam topic for you in supply management- and that you do not immediately want to succeed your boss !!). HR uses concepts of mentoring,job enrichment/ enlargement, education and training etc. If you think about it- why does your company spend money on your training ? Well it's to help you do your present job better and sure,allow you to grow and develop for higher responsibilities ie succession.

An example of such cross-training/job rotation is when you move from say buying spare parts to buying say professional services. Before you grumble and complain - remember that this really does expand your skill set and makes you fitter to move up not only in your organization but elsewhere.

PS: Please note that this is Section 3-A-18 Succession Planning

You will pass the CPSM - Happy New Year !

 

 

If you are reading this post - you got here because you searched the Internet and were motivated enough to do so. Wonderful- you are a supply management leader !

I am pretty sure that you have very little competition because less than 10% of the world's supply managers - that are qualified to take the CPSM- are really trying to even find out about the certification let alone try and take the exam. How do I know ? - from the statistics of this blog which is the top blog on the CPSM. 

So if you are motivated enough to investigate the CPSM - you are going to make it. Just stay with it.

Best of Luck and Happy 2022.

 

How much time should I spend studying Task 3-A-8 ?

"Careful in spending" is the hallmark of the professional supply manager! Yet I find that CPSM candidates seem to get mixed up in "spending"  time for their study efforts.

I believe you should spend time in proportion to the number of questions that will come up from a particular section.So if you look at 3-A-8 which is about "cross-functional teams" for process improvement,international etc. you should give a lot of time to this section.

Why? because as the Study Guide 3 tells you (see page xii) this section has 8 questions compared to only 3 questions in  say Topic 3-B-2. In other words, you should be spending double (if not triple)  the time with 3-A-8 than with 3-B-2.

While taking the exam though you should have an "equal time" principle to every question - you should not be spending extra time on any question. Pace yourself during the test.

Take the CPSM Diagnostic test before the exam

I owe it to my CAPM friends who told me to take the diagnostic exam before the CPSM. At that time the CPSM diagnostic test was not ready so Bruce Caldwell (then CPM now also CPSM ) was so kind as to drop off his old copy of the CPM diagnostic test. Thanks Bruce !

Before I got hold of the CPM diagnostic I was really going through the 3 books - reading a section and putting out a blog post in this blog (at least this blog was more regular). Once I took the CPM diagnostic - I immediately got to know exam topics where I needed to strengthen my studies.

The only problem was that the CPM syllabus and approach was limited and the CPSM was more like an MBA or GRE (Advanced)/GMAT  type of test in the broader supply management domain. In any case, the CPM diagnostic kit was invaluable.

Today, even if you have spent years in supply management and have read all the material I would strongly advise you to take the CPSM diagnostic test which is now available. Take the diagnostic test exactly as per the time allowed so that you get a real feel of the exam and take it ahead of the real thing so that you have time to review stuff that you need to strengthen. Check the ISM Website for more details here.