CPIM Supply Planning & Procurement Processes 3 — Questions and Answers
Question 1: When evaluating total cost of ownership (TCO) for a procurement decision, which of the following costs is most commonly overlooked?
- Unit purchase price
- Transportation and freight charges
- Post-purchase costs such as warranty claims, returns, and rework (Correct answer)
- Import duties and tariffs
Correct answer: Post-purchase costs such as warranty claims, returns, and rework
TCO includes all lifecycle costs; post-purchase costs like returns and rework are frequently underweighted compared to purchase price.
Question 2: A planner uses a fixed-period ordering system. Orders are placed every 4 weeks. Demand averages 50 units/week and lead time is 1 week. What is the target inventory level at each review?
- 200 units
- 250 units (Correct answer)
- 50 units
- 150 units
Correct answer: 250 units
Target = (review period + lead time) × demand = (4 + 1) × 50 = 250 units.
Question 3: Which type of supplier relationship is most appropriate for a commodity with low supply risk and low profit impact?
- Strategic partnership
- Preferred supplier agreement
- Leverage buying with competitive bidding
- Transactional spot purchasing (Correct answer)
Correct answer: Transactional spot purchasing
The Kraljic matrix places low-risk, low-impact items in the 'noncritical' quadrant, best managed through simple transactional purchasing.
Question 4: In supply planning, 'planned receipts' differ from 'scheduled receipts' in that planned receipts are:
- Already on open purchase orders with confirmed delivery dates
- System-generated replenishment orders not yet released to suppliers (Correct answer)
- Items physically received but not yet put away in the warehouse
- Orders that have been expedited by the purchasing team
Correct answer: System-generated replenishment orders not yet released to suppliers
Planned receipts are MRP-generated recommendations that haven't been released, while scheduled receipts are open orders already placed with suppliers.
Question 5: A company sources a critical component from a single overseas supplier. Which risk mitigation strategy best addresses supply continuity?
- Increasing safety stock only
- Qualifying a second source while maintaining the primary supplier relationship (Correct answer)
- Switching entirely to a domestic supplier regardless of cost
- Reducing order frequency to minimize exposure
Correct answer: Qualifying a second source while maintaining the primary supplier relationship
Dual sourcing qualifies an alternative supplier to provide continuity if the primary supplier fails, balancing risk and cost.
Question 6: Which procurement document formally communicates to a supplier that a purchase order has been authorized and accepted?
- Request for Quotation (RFQ)
- Purchase Order Acknowledgment (Correct answer)
- Material Safety Data Sheet (MSDS)
- Advanced Shipping Notice (ASN)
Correct answer: Purchase Order Acknowledgment
A purchase order acknowledgment is the supplier's confirmation that they have received and accepted the PO terms.
Question 7: Which metric measures the percentage of purchase orders delivered on the promised date?
- Fill rate
- On-time delivery (OTD) (Correct answer)
- Perfect order rate
- Lead time variability
Correct answer: On-time delivery (OTD)
On-time delivery measures how often suppliers deliver by the agreed due date, reflecting schedule reliability.
CPIM Supply Planning & Procurement Processes 3
When evaluating total cost of ownership (TCO) for a procurement decision, which of the following costs is most commonly overlooked?