CIM CIM Procurement & Purchasing Management 1 — Questions and Answers
Question 1: What is a blanket purchase order?
- A single large shipment order
- A long-term agreement to purchase goods at set prices over a period (Correct answer)
- An emergency order for critical stock replenishment
- An order placed without prior price negotiation
Correct answer: A long-term agreement to purchase goods at set prices over a period
A blanket purchase order is a pre-negotiated framework agreement that allows multiple delivery releases over a defined period at agreed prices and terms.
Question 2: In procurement, 'lead time' refers to:
- The cost incurred when placing a purchase order
- The elapsed time from placing an order until goods are received (Correct answer)
- The time required to process a supplier invoice
- The duration of an active supplier contract
Correct answer: The elapsed time from placing an order until goods are received
Lead time encompasses all elapsed time from purchase order placement through supplier fulfillment and physical receipt at the buyer's facility.
Question 3: The primary purpose of a Request for Quotation (RFQ) is to:
- Notify suppliers of an upcoming payment
- Invite suppliers to submit competitive pricing for specified goods (Correct answer)
- Cancel an existing purchase order
- Confirm that received goods match specifications
Correct answer: Invite suppliers to submit competitive pricing for specified goods
An RFQ is a formal solicitation document sent to potential suppliers requesting pricing, terms, and delivery details for specified items or services.
Question 4: What is 'single sourcing' as a procurement strategy?
- Using one supplier because no alternatives exist in the market
- Deliberately choosing one preferred supplier to build a strategic partnership (Correct answer)
- Purchasing all items from the cheapest available supplier
- Buying all product categories from one distributor
Correct answer: Deliberately choosing one preferred supplier to build a strategic partnership
Single sourcing is a deliberate choice to use one supplier for an item to develop deeper collaboration, volume leverage, and partnership benefits.
Question 5: Total Cost of Ownership (TCO) in supplier evaluation considers:
- Only the unit purchase price quoted by the supplier
- Purchase price plus all associated lifecycle costs (Correct answer)
- Only inbound transportation and freight charges
- Only the supplier's quality inspection pass rates
Correct answer: Purchase price plus all associated lifecycle costs
TCO captures the full cost of acquiring and using goods, including price, freight, inspection, quality failures, warranty, and disposal costs.
Question 6: A purchase order (PO) is best described as:
- A request asking the supplier for a price quote
- A legally binding document authorizing a supplier to deliver specified goods at agreed terms (Correct answer)
- A supplier-issued invoice requesting payment
- A document confirming goods have been received and inspected
Correct answer: A legally binding document authorizing a supplier to deliver specified goods at agreed terms
A purchase order is a formal commercial document issued by the buyer that creates a binding contract once accepted by the supplier.
CIM CIM Procurement & Purchasing Management 1
What is a blanket purchase order?