Key Words Flashcards
Purchasing
- Function of an organisation involving the acquisition of supplies or inputs.
- Some organisations have departments for this function.
- Aim to buy right quality, quantity, place, time, price.
Procurement
Wider than purchasing includes acquiring though hiring, leasing and borrowing.
- More proactive than purchasing, relational, strategic and integrated for wider organisations.
- Procurment is the process undertaken by the organisational unit that, either as a function or as part of an intergrated supply chain, is responsible for procuring or assisting user to procure, in most efficient manner, required supplies at the right time, quality, quantity, and price, and management of suppliers.
Direct Procurement / Indirect Procurement
Similar to direct and indirect costs.
- Direct - for primary revenue-earning activities.
- Indirect- for support activities.
Porters Value Chain
Distinguishes between primary and support activities.
-Primary: Bringing in resources, transforming them by means of production, moving finished products to customers, and marketing them.
-Secondary: supporting primary functions.
Types of Materials
- Raw Materials
- Components or assemblies
- Work in Progress
Maintenance, repair and operating (MRO) supplies
All goods and services necessary to transform raw materials and components into end products. Their absence will cause costly impact on production - Inventory management is important.
Non-stock procurement
Made in direct response to customer orders (i.e construction)
-JIT
Stock to order - Ordered only to fulfill orders from customers
Stock forecast - Based on forecasts and estimates of demand
Stock for inventory - Bought to be placed in storage in advance of future need or demand
Perishable goods - Things that deteriorate over time.
Segmentation
Kraljic: Square box matrix - Identify importance of item being purchase to organisation + Complexity of the Supply market.
- Low / Low: Non-Critical
- Low/ High: Bottleneck
- High/ Low: Leverage items
- High/High: Strategic Items
Pareto: 80% of value comes from 20%, while 80% of items only give 20% of value.
Right Price
Lowest price available - Considering other 4 values
- Price market will accept
- Price the seller will win business
- Price that will cover sellers costs
- Price the buyer can afford
- Price that appears reasonable and fair
- Price that gives cost or quality advantage over competitors.
Factors: -Buying Power/ number of suppliers -Types of purchase -Value offered / cost analysis Price paid by competitors
Total Cost of Ownership
Pre-acquisition costs Acquisition costs Operating Costs Maintenance costs Downtime costs End of life costs.
Right Quality
Degree in which customer requirements are met. The total features and characteristics of a product or service that bear on the ability to satisfy a need.
Cost of Quality - Quality Control.
- Cost of appraisal & prevention designed to minimise poor quality.
- Cost of Failure.
Quality assurance - systems to prevent defects
Quality management processes used to ensure right quality of inputs and outputs.
Total Quality Management
Quality values and aspirations are applied to management of all resources and relationships throughout the supply chain in order to seek continuous improvement in all aspects.
- Third party accredited quality management systems
- Appraising quality management systems and track record of suppliers
- preferred or approved supplier lists
- Developing goods inwards procedures for quality inspection.
- Managing relationships with suppliers, and tracking performance over time.
Right Quantity
Factors:
- Demand for final product
- Inventory levels
- Service level required
- Market conditions
- Supply-side factors
- Economic order quantity (EOQ)
Holding stock:
- Safety/Buffer Stocks
- Reduce risk of disruption to production
- Bulk discounts
- Completed stock prepare for unexpected peaks.
Push & Pull Inventory
Push (Independent): Regular system for monitoring levels of stock and planning to replenish them in time to meet forecast demand. Economic order quantity.
Pull (Dependent): Based on producing goods in response to actual demand. - Low inventory
MRP
Material Requirements Planning
