7 Handout 1

Question 1

The process of managing a broad range of procedures associated with a firm’s need to acquire goods and services required to manufacture a product (direct) or to operate the organization (indirect).

Answer 1

Procurement

Question 2

The process which takes the procurement process further by focusing more on supply chain impacts of procurement and purchasing decisions, and works cross-functionally within the business firm to help achieve the organization’s overall business goals.

Answer 2

Strategic sourcing

Question 3

It represents the choice between internal production and external sources.

Answer 3

Make or buy decision

Question 4

It involves hiring a third-party external service provider to perform a business function that is traditionally performed in-house by the company’s own employees.

Answer 4

Outsourcing

Question 5

Outsourcing non-core activities helps the business to concentrate on its core functions like sales and marketing.

Answer 5

Focus

Question 6

Outsourcing is usually less expensive than keeping a business function in-house.

Answer 6

Cost savings

Question 7

Outsourcing frees an organization from investments in technology, infrastructure, and people that make up the bulk of capital expenditure.

Answer 7

Reduced capital expenditures

Question 8

Outsourcing can improve an organization’s reaction to fluctuations in customer demand and technological changes.

Answer 8

Increased flexibility

Question 9

This involves losing sensitive data and confidentiality.

Answer 9

Security risk

Question 10

This involves lesser to no control over operations and deliverables of activities that an organization outsources.

Answer 10

Loss of control

Question 11

This involves unmatched capacities and inexperienced capabilities of outsourcing providers to perform outsourced tasks.

Answer 11

Quality problems

Question 12

This involves delays and inaccuracies in the work output due to insufficient time or attention given by the outsourcing provider.

Answer 12

Loss of focus

Question 13

This occurs when the outsourcing terms and conditions are not clearly defined.

Answer 13

Hidden costs

Question 14

This occurs when the philosophy of the outsourcing provider and the location where a business outsources lead to poor communication and lower productivity.

Answer 14

Incompatible culture

Question 15

This is the opposite of outsourcing. Insourcing involves performing previously outsourced functions, in-house.

Answer 15

In-Sourcing

Question 16

This is used to develop the ability to take the function of a supplier or a distributor. The integration can be forward, toward the customer.

Answer 16

Vertical Integration

Question 17

This involves a strategic placement of business functions or activities close to the location where products and services are sold to improve efficiency and reduce costs.

Answer 17

Nearshoring

Question 18

This strategy involves establishing a long-term relationship with a small number of suppliers.

Answer 18

Few Suppliers

Question 19

This strategy is used for commodity products in many cases where price is the driving decision factor and suppliers compete with one another.

Answer 19

Many Suppliers

Question 20

These are formal collaborations between two (2) companies.

Answer 20

Joint Ventures

Question 21

They use computer and telecommunications technologies to extend their capabilities by working routinely with employees or contractors located in several geographic regions.

Answer 21

Virtual Companies

Question 22

This step involves classifying the procurement activities based on two (2) categories (direct and indirect) depending on the consumption purposes of the acquired goods and services.

Answer 22

Identify and review requirements

Question 23

This is applicable to manufacturing activities only.

Answer 23

Direct procurement

Question 24

This concerns operating resources that a company purchases to enable its operations.

Answer 24

Indirect procurement

Question 25

This step involves enforcing particular provisions or standards according to quantity, price, and functionality.

Answer 25

Establish specifications

Question 26

In the case of small-volume requirements, purchasers need to find a standard item.

Answer 26

Quantity

Question 27

This relates to the use of the item and the worth of the product.

Answer 27

Price

Question 28

This relates to the users' perceived value from using an item.

Answer 28

Functionality

Question 29

This step involves searching for potential suppliers or contractors from a variety of sources, including the Internet, catalogs, salespeople, trade magazines, and directories.

Answer 29

Identify and select suppliers

Question 30

This shall be issued to let the identified vendors know that the company is interested in some trade agreement.

Answer 30

Request for information (RFI)

Question 31

This is issued to selected suppliers to bid or quote on delivering specific products or services and will include the specifications of the items/service.

Answer 31

Request for quotation (RFQ) or request for proposal (RFP)

Question 32

This involves the capabilities of the potential vendor to help in developing and improving products or services of the interested party.

Answer 32

Technical ability

Question 33

This involves the consistency of the potential vendor in meeting standard quality and specifications.

Answer 33

Manufacturing capability

Question 34

This involves the market reputation and financial stability of the potential vendor.

Answer 34

Reliability

Question 35

This involves unsolicited support of the potential vendor in terms of technicalities.

Answer 35

After-sales service

Question 36

This involves the proximity of the potential vendor to the interested party to address efficiently the cases where support service is needed.

Answer 36

Location

Question 37

This involves setting a basis for pricing and negotiation to arrive at the optimum deal.

Answer 37

Determine the right price.

Question 38

The value of the commodity is based on the expenses of the supplier to create the item or raw material.

Answer 38

Cost-based

Question 39

The value of the commodity is based on published, auction, or indexed price. Index price is the average price of goods relevant to its given class or category.

Answer 39

Market-based

Question 40

The value of the commodity is based on a public proposal with the intent that companies will put together their best proposal and compete for a specific project.

Answer 40

Competitive bidding

Question 41

This step involves the delivery of proper documentation required to buy materials between a buyer and seller.

Answer 41

Issue Purchase Orders

Question 42

Is specifically defines the price, specifications, and terms and conditions of the product or service and any additional obligations for either party.

Answer 42

Purchase orders

Question 43

This is used for a single transaction with a supplier, with no assumption that further transactions will occur.

Answer 43

Discrete

Question 44

This is used for orders containing multiple delivery dates over a period of time, usually with predetermined pricing, which often has lower costs as a result of greater volumes on a longer-term contract.

Answer 44

Pre-negotiated blanket

Question 45

This requires suppliers to maintain an inventory of items at the customer's plant and the customer pays for the inventory when it is actually consumed.

Answer 45

Pre-negotiated vendor-managed inventory (VMI)

Question 46

This involves the use of online catalogs, exchanges, and auctions to speed up purchasing, reduce costs, and integrate the supply chain.

Answer 46

Bid and auction (e-procurement)

Question 47

This involves a company charge card that allows goods and services to be procured without using a traditional purchasing process, sometimes referred to as procurement cards or pCards.

Answer 47

Corporate purchase card (pCard)

Question 48

This step involves monitoring and managing scheduled delivery dates to avoid possible missed dates in advance where possible.

Answer 48

Follow up to assure correct delivery

Question 49

This step ensures that proper physical condition, quantity, documentation, and quality parameters are met.

Answer 49

Receive and accept the goods

Question 50

Approve invoices for payment. This step involves the approval of invoice for payment according to the terms and conditions of the purchase order (PO).