Supply Chain Management Procurement 5

Question 1

Which payment term gives the buyer the longest time to pay while still incentivizing early settlement?

Accepted Answer

2/10 Net 60

Answer

2/10 Net 60 allows up to 60 days to pay but offers a 2% discount if paid within 10 days, incentivizing early payment while extending the deadline.

Question 2

In supply chain risk management, what is 'supply base rationalization'?

Accepted Answer

Deliberately reducing the number of suppliers to simplify management and increase leverage

Answer

Supply base rationalization strategically reduces the number of active suppliers to lower management complexity and increase bargaining power with remaining vendors.

Question 3

What is a 'framework agreement' in public sector procurement?

Accepted Answer

A pre-competed agreement allowing multiple call-offs without re-tendering

Answer

Framework agreements establish terms with one or more suppliers in advance, allowing agencies to issue call-off orders quickly without a full new tender each time.

Question 4

Which metric measures how efficiently a company converts its purchased inventory into sales revenue?

Accepted Answer

Inventory turnover ratio

Answer

Inventory turnover ratio (COGS ÷ average inventory) shows how many times inventory is sold and replaced in a period, reflecting procurement efficiency.

Question 5

What is 'supplier development' in the context of strategic procurement?

Accepted Answer

Actively working with existing suppliers to improve their capabilities and performance

Answer

Supplier development involves investing time and resources to help suppliers improve quality, delivery, technology, or processes to better serve the buyer's needs.

Supply Chain Management Practice Test

Supply Chain Management Practice Test

Supply Chain Management Procurement 5