CPIM Practice Exam

What element is typically covered under the 'terms' of a supplier agreement?

1. Specifications of items

2. Allowable defects

3. Payment dates and discounts

4. Package sizes

The correct answer is: Payment dates and discounts

The correct answer focuses on payment dates and discounts, which are indeed key elements usually outlined in the terms of a supplier agreement. This aspect of supplier agreements is critical because it delineates the financial obligations between the buyer and the supplier. It specifies when payments are expected, any early payment discounts that may be offered, and establishes clear expectations regarding cash flow management for both parties. While other elements such as specifications of items, allowable defects, and package sizes are important components of supplier agreements, they typically fall under the product or service details, rather than the financial or payment terms. These elements usually detail what is being supplied and the quality standards expected, but they do not govern the financial transactions that occur as part of the agreement. Thus, payment terms stands out as the most relevant aspect of the question regarding the 'terms' of a supplier agreement.