CIM Procurement & Purchasing Management Flashcards

A contract manufacturer in procurement is a third party that:

Answer: Produces finished or semi-finished goods to the buyer's specifications

A contract manufacturer produces goods according to the buyer's design, specifications, and quality standards, allowing buyers to outsource production without owning manufacturing assets.

Spend analysis in procurement is used to:

Answer: Review purchasing data to identify savings opportunities and compliance gaps

Spend analysis mines historical purchasing data by category, supplier, and business unit to uncover consolidation opportunities, off-contract buying, and cost reduction targets.

What is 'dual sourcing' as a procurement strategy?

Answer: Maintaining two or more suppliers for the same item to reduce risk

Dual sourcing intentionally uses at least two suppliers for a component to reduce supply disruption risk, maintain competitive pressure, and ensure continuity.

Incoterms in international procurement are:

Answer: Standardized trade terms defining shipping cost, risk, and insurance responsibilities

Incoterms are globally recognized ICC rules that define exactly where risk and cost transfer from seller to buyer at each stage of an international shipment.

The procurement cycle is best described as:

Answer: The end-to-end process from identifying a need through receiving and paying for goods

The procurement cycle covers every step from need identification, requisition, sourcing, and ordering through receipt, inspection, and invoice payment.

Under a consignment inventory arrangement:

Answer: The supplier retains ownership of goods at the buyer's site until consumed or sold

In a consignment agreement, the supplier holds title to inventory stored at the buyer's facility, and payment is only triggered when the buyer uses or sells the goods.