Cost, Insurance, Freight (CIF) - Carrying Cost, Commodity Freight Rate


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Carrying Cost
It is the per unit cost of holding inventory for a certain period of time. Usually, it is expressed in terms of percentage of the average inventory

An association , formal or otherwise of producers of the same commodity to control the market. 

Cash On Delivery
Prior to release of the goods by the carrier , payment through cash mode for goods and transportation cost (total invoiced amount) asked by the seller from the buyer

Categorical Method
A method of rating supplier performance usually on a scale of plus, minus and neutral w.r.t. a list of evaluation factors.

Caveat Emptor
Any purchase is done at the buyer's risk who has to beware ("Let the buyer beware"--Latin)

Centralised Purchasing
When Purchasing for the most of the organisational  requirement  is done by one agency, often called Purchasing department.

Certificate of origin
A document required by customs officials ,identifying the country of origin of imported materials 

Certified Purchasing Supply Manager
A world wide recognised certification program for the purchasing and supply professional conducted by the ISM, USA 

Certified Supplier
A supplier whose Quality assurance system producing reliable product / service are accepted by the buyer. Inspection may not be done for this supplier's product 

Change  Order
A written authorization from the purchaser to the supplier on an existing order to change it. It is also called amendment to order

Class Freight Rate
Commodity rates are available only on selected commodities, a class rate can be found for all items shipped. It helps in simplifying the process of providing a specific rate for each commodity being shipped. It's thus a rate resulting from classification rating of the freight.

Commodity Council
Cross-functional teams and/or multi-division teams are responsible for selecting suppliers, negotiating contracts and monitoring supplier performance including quality and delivery performance

Commodity Freight Rate
It's a transportation rate for a specific commodity, moving between specified points, in a certain direction and for a specific minimum quantity.
The purpose of the commodity rate is to provide a lower rate to reflect the economic benefits to the carrier resulting from more predictable and larger quantity movements over certain routes.

Commodity Segmentation
It refers to dividing a firm's total spending into categories of goods and services in order to leverage spending and increase purchasing efficiency. Common practice involves using a matrix to divide the commodities into four quadrants : Acquisition - low risk, low value items, Critical - high risk, low value, Leverage- low risk, high value and Strategic-high risk, high value items

Common Carrier
A carrier that serves all kinds of customers but carries only the types of freight for which it holds itself out to carry. It helps in enabling transportation to the needy, knowledge of rates, provision of service on a schedule, service availability in a designated area and most importantly service for a given class of commodity and movement

Competent Parties
Parties entering into a contract must be in a position to enter into contract and execute it

Competitive Bidding
It's a method of awarding a contract in which bids are invited from competing vendors through a notice inviting bids. Usually , the award is made on the lowest price offering bidder.

Competitive proposals
A proposal , in response to the bidding invitation by a vendor in the face of other bidders proposal out of which one or more may enter into contract is a competitive proposal

Concealed Damage
Damage to the contents of a package that seems to in good condition externally

Consequential Damages
Loss of profit / earning incurred by purchaser as a result of a seller's breach

An exchange of value for value, required to form a valid contract

The person or organisation to whom a shipper directs the carrier to deliver the goods, generally the purchaser of the goods

Consignment Buying
A method of procurement in which a supplier maintains inventory on the premises of the purchaser. The purchaser pays for the goods only when goods are used or issued from the stock

The shipper of a specified quantity of goods

Combining less than truck load shipments from various facilities at a centrally located point and transporting them as a large shipment, generally at a lower freight rate

A small group of businesses that join forces in purchasing selected products

Prevalence of utilizing sealed, standard size containers for safe keeping of materials during transportation. Containers can be used for rail, motor and water transportation with efficiency.

A written or oral between two or more competent parties that defines a job or service to be performed and which is legally enforceable

Contract Administration
The management and overall monitoring of  all the facets of a contract to ensure that the performance of the contract is in accordance with the contractual commitments

Contract Career
A carrier that provides transportation and/or related services to selected shippers according to a contractual agreement.

Contract Type
Determined by the pricing term the types can include Fixed price contracts, cost based contracts, Incentive contracts.

Cooperative Buying
An approach in which several organisations jointly buy selected items. They may utilize a centralised buying service

Cost & Freight
Usually done in international trade where a supplier quotes a price that includes the cost of the goods and the cost of transportation to the indicated point of destination

Cost containment
A detailed plan to restrict costs and purchased prices within certain target limits over a period of time

Cost reduction
An effort to trim the costs associated with acquiring a certain product or service

Cost, Insurance, Freight (CIF)
Also referred as Landed price, the CIF value is an international shipping term that obligates a seller to transport the goods to the destination country, insure them to the benefit of the buyer, pay the freight charges and provide documents necessary to clear the import of the goods.

Cost -Ratio method
A method of supplier performance evaluation that measures the cost of quality, delivery, and service separately for each supplier

Cost Reimbursement Contracts
A type of contract that allows for payment of permissible , allocable and reasonable costs incurred in the execution of a contract in a way that such costs are permissible under the contract These contracts establish an estimate of total cost for the purpose of obligating funds and establishing a ceiling that the contractor may not exceed without the approval of the purchaser. The contracts include i) cost without fee ii) cost sharing iii) cost plus incentive fee iv) cost plus award fee and v) cost plus fixed fee

Council of Logistics Management (CLM)
A professional body engaged in promoting the understanding and development of the logistics concepts

Counter Offer
An offer to enter into a transaction on terms other than those originally proposed





The incoterm CIF is when the supplier pays the costs, insurance, and freight to deliver the goods to the port of discharge. The buyer then assumes the costs for customs clearance. CIF applies to sea-freight only.

You may find that the supplier has either factored the cost into price of the goods, or will have the charges separately on their invoice.

In short, they have identical meanings in practice, only differing in their usage...

CIP (Carriage, Insurance Paid To) Its appropriate usage is for all other modes of transport except seafreight.

CIF (Cost, Insurance, Freight) its appropriate usage is for sea-freight only.

In contract formation, Capacity could almost be considered the 5th element, following the other elements of Offer, Acceptance, Consideration, and Intention to Create a Legal Relationship.

Capacity is a person/company's ability or power to enter into a contract.  For example, a person under the age of 18 does not have the legal capacity to enter into a contract.  Officers and directors of a company would be assumed to have the capacity to enter into contracts on behalf of their company, but the capacity would diminish as you went further down the chain of authority.  For example, it is unlikely a storeman or receptionist would have the legal capacity or power to enter into a multi-million dollar contract on behalf of their company.

capital expenditure

Capital Expenditure (CAPEX) is the money spent in the acquisition of a long-term (more than one accounting period) capital asset.

For example, a fibre-optic cable company buys a machine for their warehouse for reeling and de-reeling the cable.

category management

When a business' spend is broken down into categories, and these categories are managed as their own strategic business unit, this is known as Category Management.

Category Managers perform activities within their unit such as implementing commercial arrangements, data and demand analysis, strategic sourcing, reducing total cost of ownership, and more.

Categories vary from industry to industry, but if we look at the mining industry for example, categories could include:

Underground Equipment, Plant Equipment, Mining Services, Mining Projects, Materials Handling, Transport, IT, Facilities...

certificate of origin

In importing/exporting terms, the Certificate of Origin is a document approved by certain authorities (eg: Chamber of Commerce) to certify that the goods contained within a shipment are of the declared origin.

cloud procurement

Cloud Computing allows a company to have all of their Procurement applications (eg: ERP system, Desktop Applications) and other data (contracts, tenders, emails, folders) provided as an online service from anywhere with an internet connection (computers, phones, tablets etc), through off-site dedicated servers (known as a cloud).

For example, a Procurement Officer starts a new job at a company that uses cloud computing. To use the ERP System, the officer is simply given a login/password to the 'cloud', and is up and running. There is no need for time/cost wasters such as software installations, software upgrades, license requests, on-site servers etc, as it is all delivered as a service (usually subscription) from a cloud computing provider, through an internet protocol.

Upgrades to computer speed and technology is also required less due to the majority of burden being bared by the cloud servers. Current concerns with cloud computing include privacy and security of information.

co-destiny relationship

A Co-Destiny supplier relationship is where two companies align their destinies for mutual benefit, to the point where they will both succeed or fail together.

is a vital ingredient in the formation of a contract, and is essential for it to be binding. If another party makes a Offer/Promise (eg: to supply a service), the Consideration is the price at which you buy the Offer/Promise, which is in most cases a dollar value.

As a silly and basic way of explaining, here is a story to highlight consideration.

John promised his neighbor Frank that he would clean his car on the weekend, and Frank accepted this offer. A week passed and John still hadn't cleaned the car. Angrily, Frank knocked on John's door and yelled "You promised to clean my car and you didn't! I'm taking you to court!" John replied, "By law of contract formation I didn't have to, because there was no consideration (eg: money) coming from you to bind the verbal contract, (not to mention there was no intention to create a legal relationship)". 


Consumables items are goods that are 'used up', and in the process lose their identity and/or are 'destroyed' in the process.

Examples of consumables include workshop rags, printer cartridges, nuts and bolts, paper etc.

Cost Avoidance

Cost Avoidance is the actions taken by a Procurement professional to avoid future costs. It is less tangible than direct cost savings.

An example of Cost Avoidance is locking in material rates with a supplier to avoid a future price increase. Another example is negotiating free freight with a supplier to avoid future freight costs.

contra proferentem
In contract law, the rule of 'Contra Proferentum' asserts that when a contract term is ambiguous, a court will interpret it to the disadvantage of the party attempting to rely on it.

contract management main stages

Contract Management can be split into two stages.

Upstream: the activities that occur leading up to the awarding of the contract, and Downstream: the activities that take place after the contract is awarded.

Corporate Governance
Corporate Governance is the systems, policies, structures, and processes that inform a business day-to-day direction and administration.

cost reimbursement fixed price
In Construction Procurement, there are two main payment methods utilized in contracts. These are Cost Reimbursement and Fixed Price. Cost Reimbursement is charging the client for the true costs as they incur on the project, and Fixed Price is a cost worked out before starting a job, and is based on an estimation.

cubic weight vs dead weight

When you are freighting a package, remember that transport companies can charge you on either the dead weight of the package, or the cubic weight, whatever is the greatest.  The dead weight is how much the item weighs if you were to put it on the scales, whereas the cubic weight takes into account the size of the package.  

For example, if you were freighting a small pallet of cable that weighed 60kgs, and the dimensions were 1.1m (length) x 1.1m (width) x 0.5m (height), and the freight company's multiplier rate was 250.

Dead Weight = 60kgs

Cubic Weight = 1.1m x 1.1m x .5m = 0.605.   
                           0.605 x 250 = 151.25kg

Therefore you would be charged based on 151.25kg, which is a big difference!

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