Certified Supply Chain Professional (CSCP) Practice Exam

What direction does primary cash flow take in a supply chain?

1. Supplier to Customer

2. Customer back to Supplier

3. Distributor to Supplier

4. Supplier to Distributor

The correct answer is: Customer back to Supplier

Primary cash flow in a supply chain refers to the movement of funds that occurs as a result of transactions between various entities involved in the supply chain. The correct answer indicates that cash flow moves from the customer back to the supplier. This reflects the fundamental principle that customers pay for the goods and services they receive, which generates revenue that flows back to the supplier. When a customer places an order, they typically make a payment either upfront or upon receiving the goods, which serves as the primary source of cash inflow for the supplier. This cash flow is vital for suppliers as it enables them to cover their operating expenses, invest in inventory, and sustain their business operations. In contrast, other directions of cash flow, such as from supplier to customer or from distributor to supplier, do not accurately represent the primary cash flow dynamics where the payment originates from the customer side. The flow of funds in the supply chain primarily tracks how revenue is generated from customers and subsequently supports the supply chain ecosystem, ensuring that suppliers can maintain their role in fulfilling customer demands.