Lesson 11 - Supplier Management and Development Flashcards
(36 cards)
What is supplier management?
The strategic process of selecting, monitoring, and developing suppliers to ensure quality, cost efficiency, and alignment with organizational goals.
How does accounting support supplier cost management?
By tracking costs (prices, delivery fees, discounts) and supporting cost control and financial performance monitoring.
Why is supplier management important in financial reporting?
Supplier transactions (purchases, payments, adjustments) affect financial statements, and accurate reporting depends on effective supplier practices.
How does supplier management affect budgeting and forecasting?
Contract terms and pricing influence budget planning; accounting provides financial data for forecasting supply-related expenses.
What risks in supplier relationships does accounting assess?
Disruptions, price volatility, supplier solvency — impacting cost stability and financial resilience.
How can accounting help evaluate supplier performance?
By tracking KPIs like cost, quality, delivery time, and using data for strategic improvement.
How is supplier development typically viewed by managers?
As an expense, since ROI is often unclear.
When can supplier development be treated as an investment?
When evaluated using capital project techniques, framing it as value-generating rather than cost-incurring.
What are the 5 key aspects of capital project evaluation?
Cost-Benefit Analysis
Risk Assessment
Financial Analysis (NPV, IRR, PI, Payback)
Decision-Making
Post-Implementation Review
What does a cost-benefit analysis include?
Capital expenditures, operating costs, revenue/savings, and intangible benefits.
What is the purpose of a risk assessment in capital projects?
To identify and mitigate potential threats like market, tech, regulatory, or operational risks.
What is the Profitability Index (PI)?
PI = Present Value of Future Cash Flows / Initial Investment.
PI > 1 indicates a project’s inflows exceed costs.
What is a key benefit of the Profitability Index?
It prioritizes investments by return relative to cost and considers cash flow timing.
What is the simple payback period?
Time needed to recover initial investment.
Formula: Initial Investment / Annual Cash Flow
What is a limitation of simple payback?
It ignores the time value of money and post-payback cash flows.
What does NPV (Net Present Value) indicate?
Total value today of future cash flows minus initial investment.
NPV > 0 = acceptable; < 0 = reject.
NPV = sum of (Net cash flow during the period / (1+Discount Rate)^Number of periods)) - Initial investment for all periods
What does IRR (Internal Rate of Return) represent?
The discount rate at which NPV = 0.
It shows expected annual return from the project.
What is the difference between simple and dynamic payback period?
The Dynamic Payback Period includes the discount rate, resulting in discounted cash inflows being used.
Payback Period = Initial Investment / Annual Discounted Cash Inflow
What is cost management?
Planning, controlling, and optimizing costs to achieve financial and strategic goals.
What are cost drivers?
Factors that influence cost levels (e.g., labor hours, machine usage, transaction volume).
What is Total Cost Analysis (TCA)?
A full assessment of all supply chain-related costs to identify reduction opportunities.
Why implement Lean principles in SCM?
To remove waste, shorten lead times, and improve efficiency. Not just in production , but across the organization.
What is the goal of Supplier Relationship Management (SRM)?
To improve collaboration, negotiate better terms, and drive cost savings.
How does inventory management reduce costs?
By lowering carrying costs, reducing obsolescence risk, and improving cash flow.
