CH5: Production/Operations, Purchasing and Logistics Management Flashcards
(59 cards)
What is the purchasing function in a business context?
The purchasing function involves the procurement of goods and services from external sources to ensure the business has the materials needed for operations.
Define purchasing management.
Purchasing management is the process of overseeing and managing the acquisition of goods and services necessary for the company’s operations, ensuring efficiency, cost-effectiveness, and compliance with policies.
List four key activities of the purchasing function.
- Procuring raw materials and other resources
- Achieving the best possible price
- Managing paperwork and accounting
- Ensuring compliance with business protocols
Why is purchasing important for business operations?
- It ensures timely supply of materials for production
- Cost savings in purchasing improve profitability
- It controls a significant portion of company spending
- Supports timely project execution and import substitution
Describe the first step in the purchasing process.
Needs Analysis – Identifying and documenting the need for goods or services and determining the best way to fulfill that need.
What is a purchase requisition?
A document submitted by departments to request goods/services, detailing requirements before it is converted into a purchase order.
What is three-way matching in procurement?
A process comparing the purchase order, supplier invoice, and receiving report to ensure all transaction details match before payment.
What are the final steps in the purchasing process?
- Invoice approval and payment
- Updating accounting records
What is the role of production and operations management?
It involves planning, organizing, leading, coordinating, and controlling the production activities to convert inputs into outputs efficiently.
Differentiate between long-, medium-, and short-term production planning.
- Long-term: Factory location, layout, capacity decisions (>5 years)
- Medium-term: Sales forecasts, scheduling, inventory (1-5 years)
- Short-term: Daily work plans, quality control, maintenance (<1 year)
What are key requirements for an effective production layout?
- Smooth flow from input to output
- Minimal travel distance
- Adequate lighting, temperature control, and waste removal
- Employee comfort and safety
- Efficient internal and external transport
- Space optimization and future adaptability
Why must the layout accommodate future changes?
Technology and product demands evolve, so the layout should support quick adaptation to maintain competitiveness.
What is the significance of aligning layout with employee needs?
Comfortable, safe environments enhance employee productivity and morale.
What are the strategic contributions of purchasing to a firm?
- Drives cost efficiency
- Supports production continuity
- Influences profitability directly
- Reduces dependency on imports
How does purchasing contribute to project timelines?
Ensures timely procurement of necessary materials, avoiding production delays and helping meet deadlines.
How does purchasing interact with other departments?
Collaborates with accounting, receiving, and user departments to ensure orders are within budget, accurately delivered, and meet company policies.
What factors influence vendor selection in the purchasing process?
- Performance history
- Compliance records
- Lead times
- Price and reputation
How does production management support the value chain?
It transforms procured inputs into finished goods, bridging inbound supply and outbound distribution to the market.
What is the ultimate objective of production/operations management?
To deliver finished goods efficiently, meeting quality standards, customer expectations, and business profitability goals.
What are some indirect roles of purchasing departments?
- Contributing to strategic planning
- Maintaining vendor relationships
- Monitoring market trends for cost optimization
What are the four main types of production layouts?
Fixed product layout, Horizontal grouping of machinery (process/functional layout), Vertical grouping of machinery (product/flow layout), Combination of the above three types.
What is a fixed product layout?
It’s a layout where the product remains stationary, and workers, machines, tools, and materials are brought to the product.
Why can’t the product be moved in a fixed product layout?
Due to its size, shape, or fixed location.
Give an example of a fixed product layout.
The production of large aircraft like Boeing planes.
