Reading lecture 1

Question 1

Purchasing

Answer 1

everything a company gets an invoice for

Question 2

direct purchasing

Answer 2

all components bought that will be part of the final product

Question 3

indirect purchasing

Answer 3

all components bought for support activities

Question 4

ordering

Answer 4

placing an order with a supplier and accepting his sales terms and conditions

Question 5

buying

Answer 5

comparing different bids from suppliers and accepting the most attractive one

Question 6

purchasing

Answer 6

asking for different quotations

challenges the specifications of the customer

Question 7

procurement

Answer 7

looks at the acquisition price and total cost of ownership

Question 8

sourcing

Answer 8

choose the best possible supplier for our requirements on a global scale

Question 9

supply chain management

Answer 9

the management of the different parties involved in order to be efficient

Question 10

value chain management

Answer 10

generate and mobilize the expertise of our suppliers to help us deliver better products

Question 11

how to achieve purchasing excellence

Answer 11

• strategic management processes
• enabling processes
  they have to be performed in a balance

Question 12

strategic management processes

Answer 12

• insourcing/outsourcing
• develop commodity strategies
• establish a world class supply base
• supplier relationships
• integrate suppliers in new product development processes
• integrate suppliers in order fulfillment processes
• supplier development and quality management
• manage costs across the SC

Question 13

enabling processes

Answer 13

• establish globally integrated supply chain strategies
• develop organization and teaming strategies
• deploy globalization
• develop purchasing and supply chain measurements
• develop and implement enabling IT systems
• establish HR development and training

Question 14

procurement maturity

Answer 14

• it broadly refers to achieving the organizations goals

Question 15

objectives of PSM

Answer 15

• rationalization
• development
• structure

Question 16

rationalization

Answer 16

• related to efficiency

- optimal price for the products and services that you require

Question 17

development

Answer 17

• has to do with innovation

- how to work together with suppliers in order to innovate processes and final products

Question 18

structure

Answer 18

balancing dependence with suppliers

Question 19

purchasing strategy

Answer 19

the goals, objectives, and strategies of the PSM function

Question 20

two key drivers of PSM

Answer 20

• purchasing importance

- complexity of supply market

Question 21

Kraljic elaborated purchasing maturity development model

Answer 21

• organizations have to develop from left to right because it increases the maturity and cumulative savings and overall value contribution to the organization
• if you want to change the organization you need to go to the back stages of the maturity

Question 22

drivers of PSM maturity

Answer 22

• competition in end user markets
• economic financial crises
• changes in supply market structure
• speed of technology developments
• corporate strategic intent-
• changes in management and organizations

Question 23

importance of purchasing

Answer 23

• cost of materials
• value added profile
• profitability profile

Question 24

complexity of the supply market

Answer 24

• monopoly/oligopoly
• pace of technological advance
• entry barriers
• logistics costs

Question 25

shaping the supply strategy: the four stage approach

Answer 25

- classification - market analysis - strategic positioning - action plans

Question 26

classification

Answer 26

sorting items on different categories: - strategic items - bottleneck items - leverage items - noncritical items

Question 27

strategic items

Answer 27

high profit impact, high supply risk

Question 28

bottleneck items

Answer 28

low profit impact, high supply risk

Question 29

leverage items

Answer 29

high profit impact, low supply risk

Question 30

noncritical items

Answer 30

low profit impact, low supply risk

Question 31

market analysis

Answer 31

- companies weight the bargaining power of suppliers with its own strength - supplier capacity utilization indicates the risk of bottlenecks

Question 32

strategic positioning

Answer 32

- high company strength, low supply market strength --> exploit - medium company strength, medium supply strength --> balance - low company strength, and high supply market strength --> diversify

Question 33

action plans

Answer 33

see photo in notes

Question 34

strengthening the organization

Answer 34

- effective relations - systems support - staff and skills requirement

Question 35

effective relations

Answer 35

- purchasing function must reflect the corporate setup - centralization increases the purchasing clout but it decreases flexibility -

Question 36

systems support

Answer 36

- purchasing departments need proper data on business plans and objective for prices, rescheduling supply quantities, and balancing raw materials inventory - improve systems support allow to focus on long term analytic work and planning

Question 37

staff and skills requirements

Answer 37

companies must upgrade the skills and experience it requires from key purchasing people

Question 38

the 6 step purchasing process

Answer 38

- define specifications - select supplier - contract supplier - order - expedite and monitor - follow up and evaluate