Chapter 5

Question 1

Q: What is purchasing?

Answer 1

A: Purchasing refers to the management of an organization’s acquisition procedures and standards. It involves buying products and services through the placement and processing of a purchase order, usually following a formal sourcing process.

Question 2

Q: What is procurement?

Answer 2

Procurement involves managing a broad range of processes associated with an organization’s need to procure goods and services throughout the supply chain and the overall organization. Examples of activities within the procurement process include product/service sourcing, supplier selection, price negotiation, contract management, transaction management, and supplier performance management.

Question 3

What is strategic sourcing?

Answer 3

A: Strategic sourcing is a significantly broader process than procurement, aimed at ensuring that procurement priorities are well-aligned with the goals and objectives of the supply chain and the overall organization. It facilitates achieving alignment and collaboration among the supply chain and other areas of the organization, such as marketing, manufacturing, and R&D.

Question 4

Q: How are purchasing, procurement, and strategic sourcing different?

Answer 4

A: Purchasing is a largely transactional activity, while procurement and strategic sourcing are best described as processes. Procurement involves managing a broad range of processes associated with an organization’s need to procure goods and services, while strategic sourcing is a more comprehensive concept that emphasizes the consolidation and leveraging of purchasing power, the emphasis on value rather than acquisition cost alone, more meaningful supplier relationships, attention directed to process improvement, and enhanced teamwork and professionalism.

Question 5

Q: What is the strategic evolution of the sourcing process?

Answer 5

The strategic evolution of the sourcing process involves a trend from traditional/tactical sourcing to strategic sourcing, and ultimately to e-enabled procurement and integration of sourcing and supply chain. This trend reflects the high priority placed on developing and enhancing approaches to procurement and sourcing that create additional value for organizations, their customers, and their suppliers.

Question 5

Q: What is the strategic evolution of the sourcing process?

Answer 5

The strategic evolution of the sourcing process involves a trend from traditional/tactical sourcing to strategic sourcing, and ultimately to e-enabled procurement and integration of sourcing and supply chain. This trend reflects the high priority placed on developing and enhancing approaches to procurement and sourcing that create additional value for organizations, their customers, and their suppliers.

Question 6

Q: What is the strategic evolution of the sourcing process?

Answer 6

The strategic evolution of the sourcing process involves a trend from traditional/tactical sourcing to strategic sourcing, and ultimately to e-enabled procurement and integration of sourcing and supply chain. This trend reflects the high priority placed on developing and enhancing approaches to procurement and sourcing that create additional value for organizations, their customers, and their suppliers.

Question 7

1. Consolidation and Leveraging of Purchasing Power:

Answer 7

If every department or division in an organization were to make independent purchasing decisions, the end result would be more costly than if the purchases were coordinated. Looking broadly at everything purchased by an organization, signiἀcant savings may be achieved through the consolidation of purchasing power and leveraging larger volumes of purchases with fewer total suppliers.

Question 8

2. Emphasis on Value:

Answer 8

Far too frequently, organizations place the highest priority on trying to procure needed items at the lowest possible cost. In so doing, opportunities may be missed to achieve greater value, for example, through reduced costs over the life cycle of the product. Buying a copier/fax/scan machine on the basis of acquisition cost alone, would effectively neglect the long-term costs that may be associated with toner, repairs, etc.

Question 9

3. More Meaningful Supplier Relationships:

Answer 9

S trategic s ourcing b eneἀts f rom d eveloping s ound b usiness relationships w ith m any t ypes o f s uppliers. D epending o n t he t ype o f p urchase b eing c onsidered, t he development of truly “collaborative” relationships can be very effective.

Question 10

4. Attention Directed to Process Improvement:

Answer 10

S trategic s ourcing l ooks b eyond t he n eed f or e ffective purchasing practices, and f ocuses attention on the business processes t hat a re related to the particular purchase being considered. Additionally, reformulation and streamlining of purchasing processes are a key element of strategic sourcing.

Question 11

Enhanced Teamwork and Professionalism:

Answer 11

The concept of teamwork is essential to the success of strategic sourcing. Through t he u se o f cr oss-functional t eams, t hat m ay in clude r epresentatives o f s upplier a nd customer organizations, the beneἀts of strategic sourcing may be realized.

Question 12

What is the value criterion?

Answer 12

The value criterion examines product or service features that enhance profits for the final product and the firm’s ability to maintain a competitive advantage in the marketplace.

Question 13

Can you give an example of the value criterion?

Answer 13

A computer chip that is faster or an operating system that is more user friendly will make the computer more desirable, thereby increasing demand for the product and, consequently, increasing profits.

Question 14

What is risk?

Answer 14

Risk reflects the chance of failure, nonacceptance in the marketplace, delivery failures, and source nonavailability.

Question 15

What are generics?

Answer 15

Generics are low-risk, low-value items and services that typically do not enter the final product. Items such as office supplies and maintenance, repair, and operating items (MRO) are examples of generics.

Question 16

What is the strategic procurement thrust for generics?

Answer 16

The strategic procurement thrust for generics is to streamline the procurement process to reduce the cost associated with purchasing generics. For example, the use of purchasing cards (corporate credit cards) reduces the number of checks written and the administrative costs associated with check payment, bank verification, and so on.

Question 17

To help guide the strategic sourcing process, ἀve core principles are recognized

Answer 17

• Assess the total value—Emphasis must go beyond acquisition cost and evaluate total cost of ownership and the value of the supplier relationship.
• Develop individual sourcing strategies—Individual spend categories need customized sourcing strategies.
• Evaluate internal requirements—Requirements and speciἀcations must be thoroughly assessed and rationalized as part of the sourcing process.
• Focus on supplier economics—Suppliers’ economics must be understood before identifying buying tactics such as volume leveraging, price unbundling, or price adjustment mechanisms.
• Drive continuous improvement—Strategic sourcing initiatives should be a subset of the continuous improvement process for the procurement and sourcing organizations.

Question 18

What are commodities in procurement and supply chain management?

Answer 18

Answer: Commodities are items or services that are low in risk but high in value. They are not unique and have many sources of supply. Basic production materials, basic packaging, and transportation services are examples of commodities. Price is a significant distinguishing factor for commodities, and procurement strategies for these items include volume purchasing to reduce price and just-in-time systems to lower inventory costs.

Question 19

Question: What are distinctives in procurement and supply chain management?

Answer 19

Answer: Distinctives are high-risk, low-value items and services, such as engineered items, parts available from only a limited number of suppliers, or items that have a long lead time. The company’s customers are unaware of or do not care about the uniqueness of distinctives, but these products pose a threat to continued operation and/or high procurement cost. A stockout of distinctives results in stopping the production line or changing the production schedule to work around a stocked-out item, both tactics increase production costs. The strategic focus for distinctives is developing a standardization program to eliminate or reduce the uniqueness of the distinctives, thereby changing these items to generics.

Question 20

Question: What are criticals in procurement and supply chain management?

Answer 20

Answer: Criticals are high-risk, high-value items that give the final product a competitive advantage in the marketplace. These items determine the customer’s ultimate cost of using the finished product and can lead to customer dissatisfaction and reduced sales if not available. Procurement strategies for criticals include strengthening their value through the use of new technologies, simplification, close supplier relations, and/or value-added alterations. The focus of critical procurement is on innovation to make the critical item provide greater market value to the finished product.

Question 21

Question: What is the most effective way to initiate a MSSP process?

Answer 21

Answer: The most effective way to initiate a MSSP (Managed Strategic Sourcing Process) is to map out a formal plan for the design and implementation of the process itself. This should include creating a cross-functional planning group to guide and oversee the overall strategic sourcing process and identifying key members of the strategic sourcing team. Additionally, there should be consensus on the scope and design of the MSSP process, which must include a preliminary understanding of what types of products and services may be within the responsibility of this initiative.

Question 22

Question: What is the first step in initiating an MSSP process?

Answer 22

Answer: The first step in initiating an MSSP process is to develop a formal plan for the design and implementation of the process. This includes creating a cross-functional planning group to guide and oversee the overall strategic sourcing process, identifying key members of the strategic sourcing team, and achieving consensus on the scope and design of the MSSP process.

Question 23

Question: What is the purpose of a spend analysis in the MSSP process?

Answer 23

Answer: The purpose of a spend analysis in the MSSP process is to develop a baseline understanding of what products and services are being procured, what purposes they serve, and the financial implications of these purchases. The spend analysis is designed to understand spend by supplier, category, and internal user and to profile current sourcing approaches and areas for improvement

Question 24

Question: How are sourcing needs determined in the MSSP process?

Answer 24

Answer: Sourcing needs are determined in the MSSP process by refining understanding of the sourcing needs, particularly with the needs and requirements of process owners throughout the supply chain and the broader organization. Once these needs have been determined, the nature of the requirement must be represented by some type of measurable criteria. Using these criteria, the sourcing professional can communicate the user’s needs to potential suppliers.

Question 25

Question: What is the importance of the "make vs. buy" decision in the MSSP process

Answer 25

Answer: The "make vs. buy" decision is critical to the direction of the MSSP process. Even with a "make" decision, however, the buying arm will usually have to purchase some types of inputs from outside suppliers. This step has become much more important today, when more companies are outsourcing in order to focus upon their core activities. The end result should include recommendations for improvement of the overall sourcing process and likely financial benefits

Question 26

Q: Why is identifying potential sources of supply critical in the strategic sourcing process?

Answer 26

A: It is critical because it ensures that all potential sources of supply are identified and that useful mechanisms are in place for meaningful comparisons of alternative supply sources.

Question 27

Q: What is the first step in the evaluation of supply sources?

Answer 27

A: The first step is a comprehensive market analysis to determine the type of market, the number of suppliers in the market, where the power/dependence balance lies, and which method of buying might be most effective.

Question 28

Q: Why is it important to identify all possible suppliers that might be able to satisfy the user’s needs?

Answer 28

A: It is important to identify all possible suppliers to ensure that the pool of potential suppliers is large enough to satisfy the user’s demands.

Question 29

Q: What is pre-qualifying potential suppliers?

Answer 29

A: Pre-qualifying potential suppliers is the process of identifying the pool of possible suppliers that can satisfy the users’ demands.

Question 30

Q: What other factors should be considered in this step?

Answer 30

A: Other factors that should be considered include simplifying purchasing complexity, rationalizing products, developing a detailed understanding and analysis of pricing, identifying opportunities to consolidate buying and create leverage, and redefining and modernizing supplier relationships.

Question 31

Q: Why is it important to fully develop a sourcing strategy prior to supplier selection?

Answer 31

A: It is important to fully develop a sourcing strategy prior to supplier selection in order to define the parameters of the process and the steps to be followed. This ensures that the sourcing process is conducted in a structured and organized manner and helps to ensure that all potential sources of supply are identified and that useful mechanisms are in place for meaningful comparisons of alternative supply sources.

Question 32

Q: What is the purpose of a request for information (RFI) in the supplier portfolio screening process?

Answer 32

A: The purpose of a request for information (RFI) is to establish whether a supplier has the capabilities and interest to be considered further in the sourcing process and is potentially able to meet the customer’s business requirements. The RFI generally focuses attention on non-price information that may be of interest and relevance to the buying organization, such as company background, financial stability, markets covered, manufacturing and distribution facilities, research and development, and quality systems.

Question 33

Q: What is the purpose of a request for proposal (RFP) in the supplier portfolio screening process?

Answer 33

A: The purpose of a request for proposal (RFP) is to provide specific information as to what the buying company would like to source and ask potential suppliers for details as to how they would respond to the request. This includes substantive information as to the specific products and services to be provided, as well as pricing information. The RFP is an important tool in the supplier portfolio screening process as it helps to determine which potential suppliers are best suited to meet the buying company's needs.

Question 34

Q: What types of investments are required in the strategic sourcing process?

Answer 34

A: The strategic sourcing process requires two major types of investments by the firm: time and information. Time is expended by the individuals involved in making the purchase; the more complex and important the purchase, the more time must be spent on it, especially if it is a new buy. Information can be both internal and external to the firm. Internal information is gathered concerning user requirements and the implications that the purchase will have for the firm, while external information concerning the input to be purchased may be gathered from supply chain members, potential suppliers, and others. The level of investment needed in time and information to adequately meet a user’s requirements is a firm-specific process.

Question 35

What should be included in a sourcing strategy?

Answer 35

A sourcing strategy should include supplier selection criteria and a process for evaluating submissions from multiple suppliers. The selection criteria should relate directly to the previously established objectives to be met by the formal strategic sourcing process.

Question 36

What are examples of supplier selection criteria?

Answer 36

Examples of supplier selection criteria include quality, reliability, risk, capability, financial stability, desirable qualities, and sustainability.

Question 37

Why is quality an important factor in supplier selection?

Answer 37

Quality is typically the most important factor in supplier selection because in today's business environments, quality standards are very high, and suppliers are counted upon to take major responsibility for quality.

Question 38

What are some well-recognized approaches to ensuring quality in supplier selection?

Answer 38

Well-recognized approaches to ensuring quality in supplier selection include Total Quality Management (TQM), Six Sigma, and ISO 9000.

Question 39

What is reliability in supplier selection?

Answer 39

Reliability in supplier selection refers to time-definite and on-time deliveries, which are among the top-ranked factors relating to reliability. The importance of reliability relates to avoiding production line shutdowns, unavailability of finished products due to lack of materials, and ultimately to successfully fulfill customers' orders in the marketplace.

Question 40

What is risk in supplier selection?

Answer 40

Risk in supplier selection refers to many types of risks, including service reliability, potentials for supply uncertainty, lead time uncertainty, and cost uncertainty. To minimize exposure to risks, the supplier selection process should exhibit great diligence in identifying types of potential risk, their likelihoods, and potential consequences.

Question 41

What is capability in supplier selection?

Answer 41

Capability in supplier selection considers potential suppliers' production facilities and capacity, technical capability, management and organizational capabilities, and operating controls. These factors indicate the supplier's ability to provide a needed quality and quantity of material in a timely manner.

Question 42

Why is financial stability an important factor in supplier selection?

Answer 42

Financially unstable suppliers pose possible disruptions in a long-run continued supply of material. By declaring bankruptcy, a supplier providing materials critical to a final product could impair the functioning of a customer's manufacturing operations.

Question 43

What is sustainability in supplier selection?

Answer 43

Sustainability in supplier selection is a factor that is regarded as essential in many leading supply chains. Given the priority that businesses and society in general have placed on initiatives relating to sustainability, supply chains are well-positioned to make significant contributions to progress in this area.

Question 44

Q: What is the first step in the management of procurement processes?

Answer 44

A: The first step is to evaluate the suppliers that remain following the RFI (Request for Information) and RFP (Request for Proposal) processes.

Question 45

Q: What is the final step in the management of procurement processes?

Answer 45

A: The final step is to award a contract to the chosen supplier or suppliers.

Question 46

Q: How is the choice of supplier determined?

Answer 46

A: The choice of supplier is determined based on the objectives of the sourcing decision. The choice of supplier also determines the relationship that will exist between the buying and supplying firms and how the mechanics of this relationship will be structured and implemented.

Question 47

What are the methods for selecting a supplier in the management of procurement processes?

Answer 47

A: The methods for selecting a supplier include competitive bidding and negotiation processes. The choice of method may depend on the complexity of the procurement item or items and the number of potential suppliers.

Question 48

Q: How are potential suppliers evaluated in the selection process?

Answer 48

A: Potential suppliers are evaluated using selection criteria that weigh the importance of each factor. The process may be supplemented with additional relevant factors that may be identified. The business is awarded to the suppliers that best meet the full range of selection criteria.

Question 49

Q: What are the important elements of the step in the strategic sourcing process that commences with the first attempt by the supplier to satisfy the user's needs?

Answer 49

A: The important elements of this step include the analysis of the contractual agreement, planning the transition process, and receipt or delivery of the product or service. Other key elements include creating and communicating management processes for new suppliers and conducting transition and onboarding processes. This step is also important for generating performance data to be used for the next step in the strategic sourcing process.

Question 50

What is an important step in the MSSP process?

Answer 50

A: An important step in the MSSP (Managed Strategic Sourcing Process) process is to establish procedures for regular feedback and communication between suppliers and customers.

Question 51

Q: What happens once the product or service is delivered?

Answer 51

A: Once the product or service is delivered, the supplier's performance must be evaluated to determine whether it has truly satisfied the user's needs.

Question 52

Q: Why is it important to analyze net savings and compare them with goals and objectives?

Answer 52

A: It is important to analyze net savings and compare them with goals and objectives to evaluate the overall benefits to the customer organization from the overall MSSP process.

Question 53

Q: What are some factors that may influence the strategic sourcing process?

Answer 53

A: Factors that may influence the strategic sourcing process include intra- and inter-organizational factors and external factors such as governmental influences. These influences can determine how effectively each activity is performed.

Question 54

Q: Why do successful companies recognize the key role of sourcing and procurement in supply chain management?

Answer 54

A: Successful companies recognize the key role of sourcing and procurement in supply chain management because they understand that supplier relationships are a vital part of successful procurement strategies. In today's global marketplace, developing strong supplier relationships is necessary to create and sustain a competitive advantage. Companies like NCR and Motorola refer to their suppliers as partners and/or stakeholders in their company.

Question 55

Q: Why is the evaluation of suppliers important?

Answer 55

A: The evaluation of suppliers is important to determine whether the supplier succeeded in meeting the customer's needs, and to identify elements of the relationship that may benefit from modification and improvement. Evaluating the investments by both the customer and supplier can also determine if the relationship produced measurable benefits that justified the time and effort invested. If the strategic sourcing process is less effective than desired, the cause(s) must be identified, and corrective actions taken to make sure future sourcing strategies will be effective.

Question 56

Q: How can the customer-supplier relationship contribute to a company's competitive advantage?

Answer 56

A: The extent to which the customer-supplier relationship contributes to a company's competitive advantage depends on the overall goals of the strategic sourcing process, which must be consistent with the overall competitive advantage that a company is seeking to attain in the marketplace. For example, L Brands considers its supply chain capabilities to be a key differentiator of the entire organization in the marketplace, and their partnerships with their suppliers of all types focus on achieving the overall goals of the organization.

Question 57

* Industry Analysis and Supplier Identification:

Answer 57

Provides useful information on supplier industries and facilitates development of candidate supplier lists for speciἀc commodities, geographies, and product types.

Question 58

* Analytical Tools:

Answer 58

Supplier selection, bid, spend, and performance management analytics.

Question 59

* Management of RFI/RFP Processes:

Answer 59

Electronic support for the preparation, submission, and evaluation of these repetitive processes.

Question 60

* Process Automation:

Answer 60

Provides needed automation of purchase order and of item selection from central resources such as online catalogs.

Question 61

* Online Negotiations

Answer 61

Supports real-time sourcing, e.g., through online bidding or reverse auction.

Question 62

* Collaboration Tools:

Answer 62

: Used to support collaborative sourcing with other functions and divisions in same organization, with other organizations, and interaction and electronic connections with suppliers.

Question 63

* Logistics Procurement:

Answer 63

Responsibility for e-procurement of logistics services such as transportation, forwarding, etc. Utilizes a growing number of tools and technologies, e.g., online bidding, to facilitate and improve efficiency of logistics procurement processes.

Question 64

* Project Management:

Answer 64

Standardization and improvements in cost, quality, and time.

Question 65

* Knowledge Management:

Answer 65

Provides centralized, computerized availability of past, current, and future information relating to purchasing and sourcing activities. Serves as knowledge resource for those who are involved in e-sourcing and e-procurement.

Question 66

* Contract Management:

Answer 66

Fulἀlling needs relating to legal contracts or agreements with suppliers.

Question 67

Q: What is the concept of Total Landed Cost (TLC)?

Answer 67

A: Total Landed Cost (TLC) represents the sum of all costs associated with making and delivering products to the point where they are needed, and it goes beyond the purchase or acquisition cost. This concept is essential to consider in sourcing and purchasing decisions as it includes several factors such as life cycle costs, inventory costs, strategic sourcing costs, transaction costs, quality costs, technology costs, and management costs.

Question 68

Q: Why is it important to consider types of costs other than the purchase price when making a sourcing decision?

Answer 68

A: It is important to consider types of costs other than the purchase price when making a sourcing decision because the purchase price is only the tip of the iceberg. For instance, transportation, customs, and VAT costs are essential factors to consider in addition to the product price itself. As illustrated in Figure 5.9, the lowest product prices were in Vietnam, but after considering transportation, customs, and VAT costs, sourcing from the EU was the least expensive, while sourcing from Vietnam was the most expensive.

Question 69

Q: What are the implications of the computer and internet revolution in the business world?

Answer 69

A: The computer and internet revolution has brought significant changes to the business world and the everyday activities of consumers. For example, consumers can research products and services, locate retail and e-retail suppliers, purchase goods and services, and track the delivery of shipments electronically and from the convenience of their homes. Additionally, companies have utilized electronic data interchange (EDI) technology to process purchase orders, send notifications of shipment, and transfer funds. The internet has also gained significant traction for e-commerce techniques in the areas of procurement and sourcing.

Question 70

Q: What is e-procurement and e-sourcing?

Answer 70

A: E-procurement and e-sourcing refer to the use of electronic capabilities to conduct activities and processes relating to procurement and sourcing. Common functionalities that relate to e-procurement and e-sourcing include electronic requests for quotation (RFQs), online bidding, e-catalogs, electronic purchase orders (POs), and invoice automation.

Question 71

Q: According to Norek and Favre, which entities should consider strategic sourcing solutions?

Answer 71

A: Norek and Favre suggest that any entity that has a significant amount of spending with outside suppliers (over $50 million total) should consider strategic sourcing solutions. The spend should also be segmented into categories, and only the top dollar spend categories should be candidates for a strategic sourcing solution.

Question 72

Q: What type of solution is recommended for smaller companies in terms of strategic sourcing?

Answer 72

A: Norek and Favre suggest that for smaller companies, a hosted solution (software run by the software company, behind their firewall) is less expensive and more manageable.

Question 73

Q: When should companies consider transactional procurement systems?

Answer 73

A: Companies with 10,000 purchase transactions or more per year should consider transactional procurement solutions to reduce the time and effort associated with the tactical aspects of procurement, such as requisition and purchase order creation, as well as the approval and payment processes.

Question 74

Q: How can companies with fewer transactions take advantage of supplier internet sites for business-to-business transactions?

Answer 74

A: Companies with fewer transactions who don’t purchase a solution outright can take advantage of supplier Internet sites for business-to-business transactions—for example, ordering office supplies or work gloves directly from a supplier’s Web site using a purchasing card.

Question 75

Q: Why are data management and analytics valuable for medium to large companies?

Answer 75

A: Data management and analytics are valuable for medium to large companies with a large number of part numbers and supplier information. They are especially valuable for companies with multiple locations and/or divisions where data are not currently managed centrally. With data standardization, companies can align and consolidate common suppliers and items across divisions and locations, allowing them to aggregate spend volumes and achieve discounts.

Question 76

What are some advantages of e-commerce procurement?

Answer 76

Lowering procurement operating costs, such as reducing paperwork and associated costs of paper processing, filing, and storing

Question 77

What are some advantages of e-commerce procurement?

Answer 77

Electronic funds transfer (ETF) can eliminate the cost of preparing, mailing, filing, and storing checks, which is typically more cost-effective than writing checks

Question 78

What are some advantages of e-commerce procurement?

Answer 78

Reduced sourcing time leads to increased productivity, as procurement specialists can spend less time per order and place more orders in a given time period

Question 79

What are some advantages of e-commerce procurement?

Answer 79

Real-time information enables both buyers and sellers to adjust production/purchases to meet current demand levels and establish controls that coordinate purchase quantities with requirement quantities and monitor spending levels

Question 80

What are some advantages of e-commerce procurement?

Answer 80

Electronic procurement affords efficiency in the process by utilizing fewer resources to produce a given level of purchases, such as searching for alternative supply sources of a product or service without the need for additional personnel or outside sources Improved communications between buyers and sellers, such as obtaining information regarding product lines, prices, and product availability, and communicating the status of the order or any delays in order fulfillment Better use of procurement personnel by relieving them of clerical tasks associated with processing the order, allowing them to focus on long-term strategic procurement issues Reduced procurement prices due to the ability of buyers to gain access to pricing information from more potential suppliers, resulting in increased competition and lower prices.

Question 81

Q: What is the most frequently voiced concern about using the Internet for sourcing and procurement activities?

Answer 81

A: The most frequently voiced concern is cybersecurity, which refers to the increasing threat of the use of electronic technologies to hack into databases and information depositories of all types.

Question 82

Q: What are some of the risks associated with cybersecurity in e-commerce?

Answer 82

A: Cybersecurity risks include cyber attacks that result in the electronic theft of personal information, disruptions to manufacturing or other supply chain activities, and other forms of electronic theft or interference.

Question 83

Q: How can the lack of face-to-face contact between the buyer and seller in e-commerce be overcome?

Answer 83

A: The lack of face-to-face contact can be overcome by making a concerted effort to develop and enhance personal communications with the supplier.

Question 84

Q: What are some other concerns associated with e-commerce?

Answer 84

A: Other concerns associated with e-commerce include technology issues such as the lack of standard protocols, system reliability, and technology problems. Some people are also reluctant to invest the time and money to learn the new technology.

Question 85

Q: Are these concerns diminishing or increasing?

Answer 85

A: These concerns are diminishing daily as new and improved technology is developed and the business community demands the use of e-commerce capabilities.

Question 86

What are the four basic types of e-commerce business models used in procurement and sourcing?

Answer 86

The four basic types of e-commerce business models used in procurement and sourcing are sell-side system, electronic marketplace, buy-side system, and online trading community.

Question 87

What is a sell-side system in e-commerce?

Answer 87

A sell-side system is an online business that sells products to individual companies or consumers. Examples of sell-side systems include Office Depot, Staples, and Walmart. These websites often provide buyer login capabilities that allow for storing information concerning buying preferences and history.

Question 88

What is an electronic marketplace in e-commerce?

Answer 88

An electronic marketplace is a seller-operated service that consists of a number of electronic catalogs from suppliers within a market. The electronic marketplace provides a one-stop sourcing site for buyers who can examine the offerings of multiple suppliers at one internet location. Examples of electronic marketplaces include Amazon and eBay.

Question 89

What is a buy-side system in e-commerce?

Answer 89

A buy-side system is a buyer-controlled e-procurement or e-commerce service that is housed on the buyer’s system and is administered by the buyer. These systems permit tracking and controlling procurement spending and help to reduce unauthorized purchases. An example of a buy-side system is Elemica, which provides integrated messaging, applications, and analytics across a network of trading partners.

Question 90

What is an online trading community in e-commerce?

Answer 90

An online trading community is a system maintained by a third-party technology supplier where multiple buyers and multiple sellers in a given market can conduct business. The online trading community also may be viewed as an electronic auction. Examples of online trading communities include eBay and Priceline.