CFS Supply Chain & Procurement 3 — Questions and Answers
Question 1: Under the Uniform Commercial Code (UCC), when does title to a shipment of fasteners typically transfer from seller to buyer under FOB Origin terms?
- When the buyer's purchase order is accepted
- When the goods are delivered to the buyer's facility
- When the seller places the goods with the carrier at the origin point (Correct answer)
- When the invoice is paid
Correct answer: When the seller places the goods with the carrier at the origin point
Under FOB Origin (FOB Shipping Point), title and risk of loss transfer to the buyer when the seller delivers goods to the carrier at the point of origin.
Question 2: A fastener distributor maintaining a 'just-in-time' (JIT) supply agreement for an automotive OEM must above all ensure:
- The lowest possible unit price on every order
- Near-zero stockouts with precise delivery timing synchronized to production schedules (Correct answer)
- The widest possible product variety in local inventory
- Maximum lot sizes to reduce order processing costs
Correct answer: Near-zero stockouts with precise delivery timing synchronized to production schedules
JIT supply agreements require precise, synchronized delivery because the assembler holds minimal buffer stock and a missed delivery can halt an entire production line.
Question 3: Which document formally communicates a buyer's acceptance of a supplier's price, quantity, delivery, and terms for fasteners?
- Request for Quotation (RFQ)
- Purchase Order (PO) (Correct answer)
- Material Safety Data Sheet (MSDS)
- Certificate of Conformance (CoC)
Correct answer: Purchase Order (PO)
A Purchase Order is the legally binding commercial document that formally accepts the supplier's offer and establishes the terms of the transaction.
Question 4: A fastener buyer notices that annual spend on a particular bolt is $500,000 but only two qualified suppliers exist globally. According to supply risk analysis, this item falls into which procurement category?
- Leverage item — high spend, many suppliers
- Strategic item — high spend, high supply risk (Correct answer)
- Bottleneck item — low spend, high supply risk
- Non-critical item — low spend, low supply risk
Correct answer: Strategic item — high spend, high supply risk
The Kraljic Matrix classifies items with both high spend and high supply risk (few suppliers) as Strategic items requiring the deepest supplier relationship management.
Question 5: What is 'safety stock' in a fastener inventory system?
- Stock segregated because it failed incoming inspection
- Extra inventory held as a buffer against demand variability and supply disruptions (Correct answer)
- Inventory reserved for emergency warranty claims
- Minimum order quantity required by the supplier
Correct answer: Extra inventory held as a buffer against demand variability and supply disruptions
Safety stock is deliberately held above expected demand to protect against unexpected demand spikes or supplier delivery delays without causing stockouts.
Question 6: When a fastener specification references ASTM F593, which procurement action is required to verify compliance?
- Request a sample for visual inspection only
- Require mill certifications or test reports confirming mechanical properties meet ASTM F593 (Correct answer)
- Verify the supplier's ITAR registration
- Confirm the packaging meets MIL-STD-1916
Correct answer: Require mill certifications or test reports confirming mechanical properties meet ASTM F593
ASTM F593 covers stainless steel bolts; procurement compliance requires certified test data (mill certs) documenting that material and mechanical properties meet the standard.
Question 7: A company switches from purchasing fasteners from a distributor to buying directly from the manufacturer. The primary supply chain risk this creates is:
- Higher product quality due to direct oversight
- Reduced flexibility and higher minimum order quantities requiring more capital tied up in inventory (Correct answer)
- Faster lead times on all orders
- Lower administrative costs
Correct answer: Reduced flexibility and higher minimum order quantities requiring more capital tied up in inventory
Direct manufacturer purchasing typically requires higher MOQs and longer planning horizons, increasing inventory investment and reducing the flexibility that distributors provide.
CFS Supply Chain & Procurement 3
Under the Uniform Commercial Code (UCC), when does title to a shipment of fasteners typically transfer from seller to buyer under FOB Origin terms?