Plan and Manage External Supply Sources

Supplier management, procurement processes, strategic sourcing, contract management, and product life cycle considerations.

5 minutes 5 Questions

Plan and Manage External Supply Sources is a critical component of supply chain management within the Certified in Planning and Inventory Management (CPIM) framework. It focuses on effectively selecting, developing, and managing suppliers and external partners to ensure a reliable, cost-effective, …

Concepts covered
Supplier Selection and Evaluation CriteriaPurchasing and Procurement ProcessesSupplier Relationship Management (SRM)Strategic Sourcing and Category ManagementContracts, Negotiations, and TermsProduct Life Cycle ManagementEngineering Change ManagementOutsourcing and Third-Party Logistics (3PL)Supplier Performance Metrics and ScorecardsGlobal Sourcing and Trade Considerations
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CPIM - Plan and Manage External Supply Sources Example Questions

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Question 1

What is the primary function of a goods receipt in the procurement process?

Correct Answer: To confirm that ordered items have been delivered and record their arrival

The primary function of a goods receipt is to formally confirm that ordered items have been physically delivered and to record their arrival into the receiving location, updating inventory records accordingly.

Authorizing payment release is a function of the accounts payable or invoice verification process, not the goods receipt itself. Verifying invoice pricing against contract terms is part of invoice matching or three-way matching. Initiating a new purchase requisition for replenishment is a demand planning or inventory management function triggered by consumption or reorder points, not by receiving goods.

The key concept tested is understanding the role of the goods receipt transaction within the procure-to-pay cycle and its distinction from downstream financial and planning activities.

Question 2

What does the term 'request for quotation' (RFQ) refer to in procurement?

Correct Answer: A document sent to suppliers asking them to submit pricing for specified goods or services

A Request for Quotation (RFQ) is a procurement document sent to potential suppliers asking them to provide pricing for clearly specified goods or services, typically when the buyer already knows exactly what is needed and the specifications are well defined.

One option describes a Request for Proposal (RFP), which seeks creative solutions and methodologies rather than just pricing. Another option describes a purchase order or contract award, which comes after the quotation process. Another option describes a Request for Qualifications (RFQ/RFI), which focuses on supplier capability and experience rather than pricing.

The key concept tested is distinguishing among standard procurement solicitation documents used in the purchasing process.

Question 3

A small e-commerce company experiences rapid growth and can no longer handle its own shipping and warehousing. The company wants to focus on marketing and product development. Which action best applies outsourcing principles to address this situation?

Correct Answer: Contract a 3PL provider to manage warehousing and shipping operations

Contracting a 3PL provider to manage warehousing and shipping is correct because outsourcing principles dictate that non-core activities should be handed to specialized external providers, allowing the company to focus on its core competencies of marketing and product development.

Outsourcing product development along with logistics contradicts the company's stated goal of retaining that as a core function. Hiring additional internal staff is insourcing, not outsourcing, and does not leverage external expertise. Outsourcing marketing to a 3PL contradicts the company's desire to keep marketing in-house as a core competency, and 3PL providers specialize in logistics, not marketing.

Key concept tested: outsourcing non-core competencies to third-party logistics providers.

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