CPSM Exam 2 key terms

A group with representatives from supply management, finance, operations, quality, and other functions who jointly make sourcing decisions, share information, and align objectives to reduce total cost and risk.

A method of calculating all costs associated with acquiring, using, and disposing of a good or service over its life, including purchase price, transportation, inventory, quality, and downtime.

The process of collecting, categorizing, and examining an organization's expenditure data to understand purchasing patterns, identify savings opportunities, and support strategic sourcing decisions.

A strategic approach that groups similar spend items into categories and manages them as business units, with dedicated resources developing sourcing strategies and supplier relationships to maximize value.

A structured, collaborative process for analyzing spend, evaluating suppliers, negotiating agreements, and managing relationships to achieve long-term value and align supply with organizational goals.

An estimate of what a product or service should cost to produce, built from component costs, labor, overhead, and profit, used to negotiate prices and identify cost reduction opportunities.

A detailed examination of a supplier's price into its constituent elements such as materials, labor, overhead, and margin, to understand cost drivers and support negotiation.

The practice of classifying suppliers into groups based on criteria such as spend, risk, and strategic importance, to allocate relationship management effort and resources appropriately.

A portfolio model that positions purchased items by profit impact and supply risk, yielding four quadrants (strategic, leverage, bottleneck, noncritical) to guide sourcing and supplier management strategies.

The process of identifying, evaluating, and prioritizing potential disruptions and vulnerabilities in the supply base, considering likelihood and impact to inform mitigation planning.

A documented set of actions, responsibilities, and timelines designed to reduce the probability or impact of identified supply chain risks, including contingency and recovery measures.

The process of developing procedures and arrangements to ensure that critical business functions can continue or be restored quickly after a disruption, including supply chain operations.

A strategy of purchasing a critical item from two independent suppliers to reduce dependency and ensure supply continuity if one source fails.

The practice of purchasing a particular item from only one supplier, which can strengthen partnership and simplify management but increases dependency and risk.

An assessment of a supplier's financial stability and viability, using financial statements and ratios, to predict the risk of disruption due to insolvency or cash flow problems.

The systematic process of ensuring that supply management activities and suppliers adhere to laws, regulations, internal policies, and contractual obligations, including monitoring and enforcement.

A formal statement of the ethical and behavioral standards expected of suppliers and employees, covering areas such as labor practices, environmental responsibility, and anti-corruption.

A structured on-site or remote evaluation of a supplier's processes, controls, and compliance with requirements, used to verify capability, quality, and conformance.

The process of systematically managing the creation, execution, and analysis of contracts to maximize operational and financial performance while reducing risk.

A contract between a buyer and a supplier that defines the expected level of service, including performance metrics, responsibilities, and remedies for non-performance.

The process of predicting future customer demand using historical data, market intelligence, and statistical models to guide production, procurement, and inventory decisions.

A cross-functional process that aligns sales forecasts with supply capabilities, production plans, and financial goals to balance demand and supply.

A business practice where supply chain partners share information and jointly develop forecasts and replenishment plans to improve accuracy and reduce inventory.

The practice of balancing inventory levels to meet service targets while minimizing carrying costs, using techniques such as safety stock calculation, economic order quantity, and ABC analysis.

Extra inventory held to protect against variability in demand or supply lead time, reducing the risk of stockouts.

A formula that calculates the optimal order size to minimize the total of ordering and holding costs.

A categorization technique that classifies inventory items based on value or importance, typically into A (high value), B (medium), and C (low) groups, to prioritize management attention.

A comprehensive approach to managing interactions with suppliers, from transactional to strategic partnerships, to maximize value and minimize risk.

A performance measurement tool that evaluates suppliers on key metrics such as quality, delivery, cost, and responsiveness, often using a weighted scoring system.

A quantifiable measure used to evaluate the success of an organization, supplier, or individual in meeting performance objectives.

An ongoing effort to improve products, services, or processes through incremental and breakthrough improvements, often using methodologies such as Lean, Six Sigma, or Kaizen.

A Japanese term for continuous improvement, referring to small, incremental changes made by all employees to improve efficiency and quality.

A set of concepts aimed at eliminating waste and improving flow in processes, including value stream mapping, just-in-time, and pull systems.

A data-driven methodology for reducing defects and variation in processes, using statistical tools and a structured DMAIC (Define, Measure, Analyze, Improve, Control) approach.

An arrangement where the supplier monitors inventory levels at the buyer's location and assumes responsibility for replenishing stock to agreed levels.

Adherence to laws, regulations, and standards set by government and industry bodies that apply to an organization's operations and supply chain.

A systematic method to improve the value of goods or services by analyzing function and cost, often involving cross-functional teams to reduce costs without sacrificing quality.

The clauses in a contract that specify the rights and obligations of the parties, including payment terms, delivery, warranties, and liability.