CPSL flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Total Cost of Ownership

A decision method summing all lifecycle costs of a purchase - price, freight, inspection, inventory carrying, defects, downtime, and disposal - rather than comparing unit prices alone.

Economic Order Quantity

The order quantity minimizing the sum of ordering and holding costs, computed as the square root of twice annual demand times order cost divided by annual holding cost per unit.

Reorder point

The inventory level that triggers a replenishment order; equals average daily demand multiplied by lead time plus safety stock sized to the target service level.

ABC classification

Ranking inventory or spend by annual dollar volume so that the small share of items driving most spend receives tighter control, forecasting, and supplier management.

Kraljic portfolio matrix

A 2x2 segmentation of purchased items by profit impact and supply risk, producing non-critical, leverage, bottleneck, and strategic quadrants with distinct sourcing approaches.

Leverage item strategy

For high-spend, low-risk items with many capable suppliers, use competitive bidding, volume consolidation, reverse auctions, and price-focused negotiation to capture savings.

Bottleneck item strategy

For low-spend, high-risk items with few suppliers, prioritize supply assurance through qualifying alternates, buffer stock, longer contracts, and active supplier monitoring.

Should-cost analysis

Building an independent estimate of a supplier's cost from material, labor, overhead, and margin elements to test quoted prices and set negotiation targets.

Price versus cost analysis

Price analysis compares competing bids without examining cost buildup; cost analysis decomposes the supplier's inputs and is used when competition is weak or specs are unclear.

Learning curve

The observed pattern that unit labor hours fall by a fixed percentage with each doubling of cumulative production, used to forecast future supplier prices.

Supplier financial health screening

Reviewing ratios such as current ratio, debt-to-equity, and receivables days to detect distress in key suppliers before it disrupts delivery.

Specification levers

Cost-reduction actions taken before price negotiation: standardizing parts, relaxing unnecessary tolerances, substituting materials, and consolidating part numbers across sites.

Procure-to-pay cycle

The end-to-end process from requisition through sourcing, purchase order, receipt, invoice matching, and payment, with controls at each handoff.

Three-way match

A control comparing purchase order, receiving record, and supplier invoice for quantity and price before payment release; variances outside tolerance block payment.

Spend under management

The portion of total addressable spend governed by active contracts or sourcing processes; the remainder is maverick spend and represents leakage.

Firm-fixed-price contract

An agreement where the supplier commits to a set price regardless of incurred costs, placing cost risk on the supplier and suiting well-defined requirements.

Cost-reimbursable contract

An agreement paying allowable incurred costs plus a fee, placing cost risk on the buyer; used when scope or technology is uncertain at award.

Early supplier involvement

Bringing selected suppliers into design at concept or prototype stage so their process knowledge reduces cost and change orders before design freeze.

Reverse auction suitability

Best applied to leverage items with clear specifications, several qualified bidders, and low switching costs; unsuitable for strategic or highly customized work.

Supplier scorecard

A periodic rating of suppliers on quality, delivery, cost, responsiveness, and compliance, shared with the supplier to drive improvement and award decisions.

Bullwhip effect

Amplification of demand variability moving upstream in a supply chain, dampened by shared point-of-sale data, shorter lead times, and stable ordering policies.

Make-or-buy analysis

Comparing fully loaded internal production cost, including allocated fixed costs and capacity limits, against outsourcing total cost plus transaction and risk costs.

Blanket purchase order

An agreement setting price and terms for repeated purchases over a period, with quantities drawn through call-off releases rather than a single delivery.

Supplier onboarding controls

Verifying legal entity, tax status, certifications, and banking details before first payment, with callback validation for any banking change to prevent fraud.

Push-pull boundary

The decoupling point where forecast-driven upstream flow meets demand-driven downstream flow; its position sets inventory and responsiveness trade-offs.

Kotter change sequence

Eight ordered steps from creating urgency and a coalition through vision, communication, empowerment, short-term wins, consolidation, and anchoring changes in culture.

Stakeholder power-interest grid

A mapping that assigns engagement intensity by stakeholder power and interest, so high-power high-interest parties are managed closely and low-interest parties kept satisfied.

Center of Excellence role

A team owning methods, standards, analytics, and capability building across categories, distinct from shared services that execute high-volume transactional work.

RACI matrix

A responsibility assignment listing who is responsible, accountable, consulted, and informed per deliverable, with exactly one accountable owner to prevent gaps.

BATNA

The best alternative to a negotiated agreement; a stronger alternative raises negotiating power, so improving it before talks is a preparation step.

Supply management maturity model

A staged progression from transactional purchasing through strategic sourcing and integrated supply management to chain orchestration, each stage adding scope and analytics.

Transformation business case

A document stating baseline and target metrics, investment, benefit timing, risks, and dependencies, used to secure funding and later verify realized benefits.