CPIM Part 1 Module 4 Summary notes
supplier *** 1) provider of goods or services 2) seller with whom the buyer does business, as
opposed to vendor, which is a generic term referring to all sellers in the marketplace
purchasing *** The term used in industry and management to denote the function of and the
responsibility for procuring materials, supplies, and services.
procurement *** The business functions of procurement planning, purchasing, inventory
control, traffic, receiving, incoming inspection, and salvage operations.
physical supply *** The movement and storage of goods from suppliers to manufacturing. The
cost of physical supply is ultimately passed on to the customer.
landed cost *** This cost includes the product cost plus the costs of logistics, such as
warehousing, transportation, and handling fees.
Total Cost of Ownership (TCO) *** In supply chain management, the total cost of ownership
of the supply delivery system is the sum of all the costs associated with every activity of the
supply stream. The main insight that _____ offers to the supply chain manager is the
understanding that the acquisition cost is often a very small portion of the total cost of
ownership.
dock-to-stock *** A program through which specific quality and packaging requirements are
met before the product is released. Prequalified product is shipped directly into the customer's
inventory. ______ eliminates the costly handling of components, specifically in receiving and
inspection, and enables product to move directly into production. sometimes referred to as ship-
to-stock
supplier relationship management (SRM) *** A comprehensive approach to managing an
enterprise's interactions with the organizations that supply the goods and services the enterprise
uses. The goal of SRM is to streamline and make more effective the processes between an
enterprise and its suppliers. SRM is often associated with automating procure-to-pay business
processes, evaluating supplier performance, and exchanging information with suppliers. An e-
procurement system is often an example of an SRM family of applications
supplier certification *** Certification procedures verifying that a supplier operates, maintains,
improves, and documents effective procedures that relate to the customer's requirements. Such
requirements can include cost, quality, delivery, flexibility, maintenance, safety, and ISO quality
and environmental standards.
certified supplier *** A status awarded to a supplier that consistently meets predetermined
quality, cost, delivery, financial, and count objectives. Incoming inspection may not be required.
quality *** fitness for use. value-based quality is the degree of excellence at an acceptable
price. conformance to requirements.
, Sole-source supplier *** The only supplier capable of meeting (usually technical) requirements
for an item.
single-source supplier *** A company that is selected to have 100 percent of the business for a
part although alternate suppliers are available.
Multisourcing *** Procurement of a good or service from more than one independent supplier.
request for quote (RFQ) *** A document used to solicit vendor responses when a product has
been selected and price quotations are needed from several vendors.
vendor-managed inventory (VMI) *** A means of optimizing supply chain performance in
which the supplier has access to the customer's inventory data and is responsible for maintaining
the inventory level required by the customer. Accomplished by a process in which resupply is
performed by the vendor through regularly scheduled reviews of the on-site inventory. The on-
site inventory is counted, damaged or outdated goods are removed, and the inventory is
restocked to predefined levels. The vendor obtains a receipt for the restocked inventory and
accordingly invoices the customer.
consignment *** the process of a supplier placing goods at a customer location without
receiving payment until after the goods are used or sold.
continuous replenishment *** Process by which supplier is notified daily of actual sales or
warehouse shipments and commits to replenishing these sales (for example, by size or color)
without stock outs and without receiving replenishment orders; the result is a lowering of
associated costs and an improvement in inventory turnover
terms and conditions *** All the provisions and agreements of a contract.
purchase requisition *** An authorization to the purchasing department to purchase specified
materials in specified quantities within a specified time.
purchase order (PO) *** The purchaser's authorization used to formalize a purchase transaction
with a supplier. When given to a supplier, should contain statements of the name, part number,
quantity, description, and price of the goods of services ordered; agreed-to terms as to payment,
discounts, date of performance, and transportation; and all other agreements pertinent to the
purchase and its execution by the supplier.
reverse auction *** An internet auction in which suppliers attempt to underbid their
competitors. Company identities are known only by the buyer.
order processing *** The activity required to administratively process a customer's order and
make it ready for shipment or production.
supplier *** 1) provider of goods or services 2) seller with whom the buyer does business, as
opposed to vendor, which is a generic term referring to all sellers in the marketplace
purchasing *** The term used in industry and management to denote the function of and the
responsibility for procuring materials, supplies, and services.
procurement *** The business functions of procurement planning, purchasing, inventory
control, traffic, receiving, incoming inspection, and salvage operations.
physical supply *** The movement and storage of goods from suppliers to manufacturing. The
cost of physical supply is ultimately passed on to the customer.
landed cost *** This cost includes the product cost plus the costs of logistics, such as
warehousing, transportation, and handling fees.
Total Cost of Ownership (TCO) *** In supply chain management, the total cost of ownership
of the supply delivery system is the sum of all the costs associated with every activity of the
supply stream. The main insight that _____ offers to the supply chain manager is the
understanding that the acquisition cost is often a very small portion of the total cost of
ownership.
dock-to-stock *** A program through which specific quality and packaging requirements are
met before the product is released. Prequalified product is shipped directly into the customer's
inventory. ______ eliminates the costly handling of components, specifically in receiving and
inspection, and enables product to move directly into production. sometimes referred to as ship-
to-stock
supplier relationship management (SRM) *** A comprehensive approach to managing an
enterprise's interactions with the organizations that supply the goods and services the enterprise
uses. The goal of SRM is to streamline and make more effective the processes between an
enterprise and its suppliers. SRM is often associated with automating procure-to-pay business
processes, evaluating supplier performance, and exchanging information with suppliers. An e-
procurement system is often an example of an SRM family of applications
supplier certification *** Certification procedures verifying that a supplier operates, maintains,
improves, and documents effective procedures that relate to the customer's requirements. Such
requirements can include cost, quality, delivery, flexibility, maintenance, safety, and ISO quality
and environmental standards.
certified supplier *** A status awarded to a supplier that consistently meets predetermined
quality, cost, delivery, financial, and count objectives. Incoming inspection may not be required.
quality *** fitness for use. value-based quality is the degree of excellence at an acceptable
price. conformance to requirements.
, Sole-source supplier *** The only supplier capable of meeting (usually technical) requirements
for an item.
single-source supplier *** A company that is selected to have 100 percent of the business for a
part although alternate suppliers are available.
Multisourcing *** Procurement of a good or service from more than one independent supplier.
request for quote (RFQ) *** A document used to solicit vendor responses when a product has
been selected and price quotations are needed from several vendors.
vendor-managed inventory (VMI) *** A means of optimizing supply chain performance in
which the supplier has access to the customer's inventory data and is responsible for maintaining
the inventory level required by the customer. Accomplished by a process in which resupply is
performed by the vendor through regularly scheduled reviews of the on-site inventory. The on-
site inventory is counted, damaged or outdated goods are removed, and the inventory is
restocked to predefined levels. The vendor obtains a receipt for the restocked inventory and
accordingly invoices the customer.
consignment *** the process of a supplier placing goods at a customer location without
receiving payment until after the goods are used or sold.
continuous replenishment *** Process by which supplier is notified daily of actual sales or
warehouse shipments and commits to replenishing these sales (for example, by size or color)
without stock outs and without receiving replenishment orders; the result is a lowering of
associated costs and an improvement in inventory turnover
terms and conditions *** All the provisions and agreements of a contract.
purchase requisition *** An authorization to the purchasing department to purchase specified
materials in specified quantities within a specified time.
purchase order (PO) *** The purchaser's authorization used to formalize a purchase transaction
with a supplier. When given to a supplier, should contain statements of the name, part number,
quantity, description, and price of the goods of services ordered; agreed-to terms as to payment,
discounts, date of performance, and transportation; and all other agreements pertinent to the
purchase and its execution by the supplier.
reverse auction *** An internet auction in which suppliers attempt to underbid their
competitors. Company identities are known only by the buyer.
order processing *** The activity required to administratively process a customer's order and
make it ready for shipment or production.
