Procurement

Question 1

Procurement/ Purchasing

Answer 1

deals with demand-oriented and
efficient provision of goods for
the value chain

Question 2

Goals of procurement

Answer 2

1. Cost Target - Procurement costs; Material costs

2. Result targets - Quality of goods; security of supply

Question 3

Strategic Procurement

Answer 3

• Outsourcing decisions

- Number of suppliers and their locations

Question 4

Strategic Options in Procurement

Answer 4

Producer of the goods : Insourcing, Outsourcing;

Complexity of sourced goods: System sourcing, component sourcing;

Number of suppliers: Single sourcing, Multiple sourcing;

Location of suppliers: global sourcing, domestic sourcing

Question 5

Structure of Supplier and Bid Comparison

Answer 5

60/30/10 formula:

• 60% Main supplier
• 30% Second source (competition!)
• 10% Fall-back supplier (cost-intensive)
• Formula realistic for large supply quantities

Criteria for bid comparison:

• Quality
• Purchasing price
• Recurring costs, e.g. due to licenses
• Terms and conditions, e.g. delivery times, payment target/ credit period, contract penalty,
  indemnity clauses
• General supplier assessment (company itself)

Question 6

Operational Procurement

Answer 6

• Planning of demand;
• Planning of inventory;
• Order policies;
• Supplier policies;

Question 7

Lorenz Curve - Classification of Insourced Goods Based on Need and Value: ABC Analysis

Answer 7

X- Share of quantity;
Y - Share of value;

A - the most essential goods;
B - medium;
C - not worth to keep attention;

For analysis is needed: Procurement volume,
decreasing; Cumulated
procurement volume;Cumulated
share of procurement volume

Question 8

Inventory Classification Based on Steadiness

of Demand: XYZ Analysis

Answer 8

Checking the intensity of product 
Axes: time and Material consumption;
X goods - used constantly;
Y goods - sloping trend (increasing), or seasonal trend;
Z goods - irregular course

Question 9

Consumption-based Reorders And Course

of Stock Level

Answer 9

➢Stockouts are costly
➢Holding inventory (storage, insurance, investment, pilferage) is costly
➢Orders & deliveries are costly
➢Optimization problem!
➢Order policy

Question 10

Assessment of suppliers

Answer 10

Products: Product portfolio, quality, customer support, R&D competence

• Prices and conditions: Price Level, Payment terms, Warranties
• Production: Capacity, Flexibility, Quality Mgmt, Adherence to schedule;
• Company: Reliability, Location, Market position, Competitor relations, Financial situation, Management, Shareholders;

Question 11

Bid Comparisons

Answer 11

• Product costs;
• Follow-up costs;
• Terms of purchase;
• Quality;
• General assessment suppliers;