chapter 1 purchasing management

Question 1

What is the the role of supply chain management and why does it have a strategic impact on an organizations competitive advantage

Answer 1

The role of supply chain management is to create uninterrupted flow of materials through a supply chain at the lowest possible cost. it is to add value to a product and improve the quality of finished products which will maximize customer satisfaction.

Question 2

traditional purchasing process, e-procurement,

Answer 2

Electronic procurement is when business is conducted electronically via traditional
electronic data interchange (EDI) technologies, or online via the internet.

Question 3

what is the difference between public procurement and green procurement

Question 4

how do you handle small value purchase orders

Answer 4

1.by using a company card or credit card.
2. by using a blanket order
3. stock less buying where the supplier holds inventory until required by the organisation.
4. petty cash
5.accumulate small orders to create a large order.

Question 5

what factors affect supplier selection

Answer 5

Process and product technologies – the supplier should have component process technologies to produce superior products at a reasonable cost to enhance the buyers’ competitive edge,
* Willingness to share technologies and information,
* Quality – the supplier must provide a quality product to meet the specifications as laid out,
* Cost – the supplier must be price competitive (not necessarily the cheapest) and total cost of ownership must be considered,
* Reliability – You must be able to rely on the supplier to perform as committed,
* Order system and cycle time – it must be easy to place orders and the delivery should be quick and effective,
* Capacity – to fill orders,
* Communication capability – the supplier must be able to facilitate communication between the parties,
* Location – the lead time, transportation and logistical costs are influenced by the geographical location.
* Service – the supplier must be able to back up the products by providing timely, good service when needed.

Question 6

pros and cons of single sourcing versus multiple sourcing;

Answer 6

Reasons favoring single suppliers:
* To establish a good relationship
* Less quality variability
* Lower cost
* Transportation economies
* Proprietary product or process purchase
* Volume too small to split
Reasons favoring multiple suppliers:
* Need capacity
* Spread the risk of supply interruptions
* Create competition
* Information
* Dealing with special kind of business

Question 7

define centralised, decentralised and hybrid purchasing organisations

Answer 7

centralized organizations is one where strategic decisions are made at corporate level. each department does not operate on its owns.decentralized approach unit managers are responsible for meeting their own targets.
A hybrid purchasing organization combines elements of centralized and decentralized procurement models to leverage the strengths of both.

Question 8

what are the reasons for global procurement

Answer 8

reasons for global procurement.
1. lower price
2.better quality
3.parents held by overseas suppliers
4. access to better technology.
5. counter trading.

Question 9

how does purchasing affect the profitability of an organization

Answer 9

1. profit leveraging affect: The profit leverage effect is used to show that if less is spent on purchasing, it directly increases the profit before taxes by the same amount
2. return on assets.Return on assets is a financial measure calculated by dividing profit by assets. This
   is often referred to as the return on investment.it is used to show if management is using total assets effectively to generate a greater profit.
3. inventory turnover rate.The inventory turnover indicates the number of times the inventory is used and
   replaced over an accounting period.low inventory turnover indicates poor sales, overstocking and/or obsolete inventories

Question 10

what are the benefits of e procurement

Answer 10

saving of time
cost saving
accurate
real time data
traceable.

Question 11

what are the reasons for outsourcing and what are the reasons for making a product

Answer 11

reasons for outsourcing
1. less expensive than to make.
2. insufficient capacity to make.
3. lack of expertise.
4. quality
reasons for making
1. better quality control
2. to protect the product or certain technology.
3. no competent supplier.
4. lower cost
5. control of the lead times , transportation cost and warehouse cost.

Question 12

why is procurement more important than before

Answer 12

Globalisation of the world trade
Businesses becoming more internationally orientated
Development in information technology
Increase in supply risk and the growth in Asian economies
Shortened lifespan of products
Stringent quality specifications
Constant rises in inventory costs

Question 13

explain profit leverage effect , return on asset affect and inventory turnover effect

Answer 13

1.The profit leverage effect measures the impact of a change in purchase spend
on an organisation’s profit before taxes, assuming gross sales and other expenses
remain unchanged.
2.Return on assets is a financial measure calculated by dividing profit by assets. This
is often referred to as the return on investment
3. The inventory turnover indicates the number of times the inventory is used and
replaced over an accounting period