CGM Supply Chain & Vendor Management 3

Question 1

The ABC inventory classification system categorizes items based on:

Accepted Answer

Annual consumption value to prioritize management attention

Answer

ABC analysis ranks inventory by annual consumption value (A = high value, C = low value) so managers focus tightest controls on items with the greatest financial impact.

Question 2

Which clause in a vendor contract specifies the standards a supplier must meet and the remedies available if those standards are not achieved?

Accepted Answer

Service level agreement (SLA)

Answer

A service level agreement defines measurable performance standards (e.g., 99% on-time delivery) and outlines penalties or remedies if the supplier fails to meet them.

Question 3

A general manager notices inventory turnover has dropped from 12 to 6 times per year. This most likely indicates:

Accepted Answer

Excess inventory is accumulating, tying up working capital

Answer

Lower inventory turnover means goods are sitting in stock longer, which ties up working capital, increases holding costs, and may signal demand slowdown or over-purchasing.

Question 4

In a vendor risk assessment, which factor represents a supply chain resilience strategy?

Accepted Answer

Dual-sourcing critical components from geographically diverse suppliers

Answer

Dual-sourcing from geographically dispersed suppliers reduces single-point-of-failure risk and ensures supply continuity during regional disruptions.

Question 5

Consignment inventory arrangements benefit the buyer primarily by:

Accepted Answer

Delaying payment until goods are sold, reducing the buyer's carrying costs

Answer

Under consignment, the supplier retains ownership of goods until the buyer sells or uses them, so the buyer holds no inventory cost until the product is consumed.

CGM - Certified General Manager Practice Test

CGM - Certified General Manager Practice Test

CGM Supply Chain & Vendor Management 3