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Supply Chain > Chapter 5 > Flashcards

Chapter 5 Flashcards

1
Q

What is procurement

A

The process of selecting and vetting suppliers, negotiating contracts, establishing payment terms, and the actual purchasing of goods and services

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2
Q

What is purchasing

A

the action of obtaining merchandise, capital equipment, raw materials, services, or MRO supplies in exchange for money or equivalent
- the process of how goods and services are ordered from an external third party

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3
Q

Supply Management

A

Encompasses all acquisition activities beyond the simple purchase transaction
- Identification, acquisition, access, positioning, and management of resources an organization needs, or potentially needs, in the attainment of its strategic objectives

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4
Q

Purchase Requisition

A

An internal document that defines the need for goods and/or services

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5
Q

Purchase order

A

External commercial document, the official offer issued by a buyer to a seller to acquire goods or services

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6
Q

Blanket contract

A

external commercial document, agreement issued by a buyer to a seller to acquire goods or services over a longer horizon (12 months)

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7
Q

E procurement

A

the automation, through web-enabled tools, of the non-strategic and transactional activities that would otherwise consume the majority of a buyers time
- automates RFI, RFP, RFQ, execution and analysis, reverse auction capabilites, invoice processing and payment

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8
Q

Merchants

A

wholesalers and retailers who purchase for resale to end customer

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9
Q

Industrial buyers

A

Individuals within an organization who purchase raw materials for conversion into products, and/or purchase components, packaging, services, capital equipment, and MRO supplies

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10
Q

Contracting

A

A term often used for the acquisition of services

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11
Q

Request for Information (RFI)

A

A standard business process whose purpose is to collect written information about the capabilities of various suppliers

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12
Q

Request for Proposal

A

A detailed capabilities document used to determine a supplier’s capability and interest in the production of a product or service

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13
Q

Request for Quote

A

A document used to solicit bids from interested and qualified suppliers for goods or services that the organization needs to obtain

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14
Q

Master Services Agreement

A

A legally binding umbrella contract between a company and its service provider that states broad commercial terms including rate cards, liability, intellectual property rights, etc, mainly used for services

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15
Q

Statement of Work

A

A specific legally binding document that details the specific arrangement with a supplier with respect to resources, deliverables, timeline, costs, etc. This is normally used for projects or other ongoing engagements

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16
Q

Primary objectives of purchasing

A
  1. Ensure an uninterrupted flow of materials and services at the lowest total cost
  2. Improve the quality of the finished goods produced
  3. Optimize customer satisfaction
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17
Q

Purchasing contributes to these objectives by

A
  1. Actively seeking reliable suppliers
  2. Working with the expertise of strategic suppliers to improve quality and timely delivery of materials
  3. Involving suppliers and purchasing personnel in new product design and development efforts
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18
Q

Purchasing Process Steps

A
  1. A need is identified and a purchase requisition is issued
  2. Obtain authorization as necessary
  3. Identify and evaluate potential suppliers
  4. Make supplier Selection
  5. Purchase Order is created and sent to the supplier
  6. Supplier confirmation of the Purchase Order
  7. Fulfillment
  8. Receipt of goods
  9. Invoice and Reconciliation
  10. Payment
  11. Close out the Purchase Order
  12. Analysis
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19
Q

Supplier selection process

A

If supplier not yet chosen, competitive bidding process may be initiated by use of an RFP or an RFQ
- RFP when they have not purchased items before or purchased from that supplier
- RFQ for routine or repeat purchased items

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20
Q

3-way-match

A

Invoice reconciled to the purchase order and goods receipt before payment is made (must match)

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21
Q

e-Procurement process

A
  1. An electronic product catalog or punchout to use the vendor’s site
  2. An electronic purchase requisition and/or purchase order
  3. An invoice
  4. A payment
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22
Q

Advantages of e Procurement

A

time savings, cost savings, accuracy, real time, management, mobility, trackability, benefits to the suppliers

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23
Q

Inventory Turnover Effect

A

Inventory turnover represents the number of times the company sold through inventory in a given time period (COGS/Average inventory)
- High turnover ratio is beneficial
- Low turnover ratio is unfavorable

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24
Q

Total Cost of Ownership

A

sum of all the costs associated with every activity in the supply stream of a product

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25
Profit-Leverage Effect
A decrease in purchasing expenditures directly increases profits before taxes
26
Return on Assets Effect
A high ROA indicates managerial prowess in generating profits with lower spending
27
Cost of Goods Sold
refers to the direct costs of producing the goods sold by a company, this amount includes the cost of the materials and labor directly used to create the good
28
The four elements of cost are
Quality, Service, Delivery, and price
29
The Make vs. Buy Decision is based on three key pillars:
Business strategy, risks, economic factors
30
What is business Strategy
the strategic importance to the company of the product or service that is being considered for manufacturing as well as the process, technologies or skills required to make the product or deliver the service
31
It is desirable to choose ______ capabilities when a product or function is _________ to a company's performance
in-house, mission-critical Ex. drug for a pharma company, engine for mercedes
32
What are Risks (make v buy)
lower quality, higher tariff/cost, reilability, and predictability of outsourced solutions as compared with in-house manufacturing or services, as well as risks inherent in the process of identifying and selecting the right supplier and structuring a workable ongoing relationship
33
What are economic factors (make v buy)
the impact of outsourcing on capital expenditures, return on invested capital, and return on assets, as well as the possible savings in operating cost achieved through outsourcing
34
Key quantitative and qualitative factors to be considered in make v buy
Qualitative: control over quality, reliability and reputation of potential suppliers, impact on customers and suppliers Quantitative: incremental costs of either making or purchasing the item, such as the availability of manufacturing facilities, needed resources, and the manufacturing capacity
35
Qualitative Reasons for Making
Protect proprietary technology, no competent supplier, control of lead-time, use existing idle capacity, better quality control
36
Quantitative Reasons for making
overall lower cost, control of transportation and warehousing costs
37
Qualitative Reasons for Buying/Outsourcing
Non-strategic (good isnt critical), Seasonality, Insufficient capacity, Temporary Capacity Constraints, Lack of Expertise, Quality, Multi sourcing strategy, brand strategy
38
Extended workbench
short term supplementing internal capacity with external capacity during time of constraint or overloaded work centers
39
Quantitative Reasons for Buying or outsourcing
Cost advantage, inventory considerations, investment savings, R&D savings
40
Cost factors for the buy analysis
Unit price of purchased item, transportation expenses, incremental purchasing expenses, recieving and inspection expenses, any follow-on expenses associated w/ service or quality, loss of sale if the vendor doesn't deliver
41
Risks of Outsourcing
Potential loss of control, increased reliance on suppliers, increased need for supplier management, changes to tariffs/regulations
42
Benefits of Outsourcing
Concentrate on core capabilities, reduce staffing levels, accelerate reengineering efforts, reduce internal management problems, improve manufacturing flexibility, ability to scale up/down quickly
43
In Sourcing
Reverting to in-house production when external quality, delivery, and services do not meet expectations
44
Co-sourcing
1. the sharing of process or function between internal staff and an external provider 2. using dedicated staff at an external provider that works exclusively under your control and direction
45
Backward vertical integration
company acquires one or more suppliers
46
Forward vertical integration
company acquires one of their customers
47
Centralized Purchasing
Purchasing department located at the firm's corporate office which makes all the purchasing decisions
48
Decentralized purchasing
individual, local purchasing departments, such as at the plant level, making their own purchasing decisions
49
Hybrid Approach
Centralized purchasing for products and services used throughout the organization. Decentralized purchasing for products and services used only locally at each facility
50
Advantages of centralization
Concentrated volume, leveraging purchase volume, avoiding duplication, specialization, lower transportation costs, no competition within units, common supply base
51
Advantages of Decentralization
knowledge of local requirements, local sourcing, less bureaucracy, speed
52
Reasons for Global sourcing
Opportunity to improve quality, cost, and delivery performance To exploit global efficiences: low cost labor/materials, take advantage of tax breaks and low trade tariffs,
53
Specialized knowledge required for International purchasing
Tariffs, non-tariff barriers, countertrade
54
Import Brokers
agents licensed by the governmental regulatory authority to conduct business on behalf of importers, for a service fee
55
Import merchants
a person or company engaged in the purchase and sale of imported commodities for profit
56
Trading companies
buy products in one country and sell them in different countries where they have their own distribution network
56
Benchmarking
A process of measuring the performance of a company's products, services, or processes against those of other business considered to be the best in the industry, aka "best in class"
57
Bid
A proposal or quotation submitted in response to a solicitation from a contracting authority
58
Competitive bidding
a procurement process in which bids from competing suppliers, for the right to supply specified materials or services, are requested
59
Bid bond
a debt secured by a bidder for the purpose of providing a guarantee that the successful bidder will accept the contract once awarded, if not the bond would be forfeited
60
Performance Bond
a debt secured by a bidder for the purpose of providing a guarantee that the work will be on time and meet specifications
61
Payment Bond
A debt secured by a bidder for the purpose of providing protection against 3rd party liens not fulfilled by bidder

Supply Chain (11 decks)

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