Scope And Influence Of Procurement And Supply Flashcards

Question

Supply chains are integral to a well functioning procurement operation Supply chains must be managed in order to be effective; this takes skill and may involve several methods Supply chain maybe simple or extremely complex extremely complex

Answer 1

Stakeholders Are very important to all organisations, regardless of the sector or type of business Stakeholders maybe suppliers, customers, consumers (end users) or the local community Stakeholders are integral to procurement

Answer 2

Primary – acquisition/extraction of raw materials Secondary – transform is raw materials into finished goods (assembly, construction, manufacturing) Tertiary – provide a service and support to the other two sectors i.e. retail, education

Answer 3

All those involved in organising and converting materials through input, conversion and output phases. (Bailey et al) Christopher coined the term supply network. Primary sector – extract natural resources from the Earth i.e. mine in the coal/metals – Drilling for oil – agriculture – forestry– fishing Secondary sector – manufacturing and construction industries. Where materials are converted into finished products. Secondary sector not only changes products but also assembles them are even more materials required but primary sector can be assembled to build a house Tertiary sector – consist of service industries. Businesses that support the production and distribution process i.e. insurance, education and healthcare

Answer 4

Upstream –Produces extracts natural resources -Suppliers obtain raw materials from producers Both Upstream & Downstream -Materials are sent to the manufacture Manufacture processes materials Downstream - Distributor collect materials from the manufacturer and delivers them to the customer - Customer

Answer 5

Price (competitive) Delivery (right time/place avoid additional cost) Storage (make sure goods are stored properly/less waste) Ethics Environment Sustainability Communications (good relationship/responsive supplier) Quality (for for purpose)

Answer 6

An extension of a supply chain. Supply chain concert has evolved to include links between various organisations involved in the entire supply process rather than just one element. Supply networks are designed around five areas: External suppliers – who is going to provide materials to make the goods/services? Manufacturers – who is going to produce the end product? Distribution/wholesale centres – who is going to manage the storage and transportation of goods? Logistics – he was going to ensure that everything is where it should be at the required time? Consumer demand – do the intended individuals have a need or decide with the end product? Supply chain networks include margin flows. Physical flows – movement and storage materials and then products (tangible parts to supply chain network - goods flow one way) Information flows – include organisational strategies and the way that they are communicated, the control processes within the network and a standard to which to change should work. (Information flows two ways)

Answer 7

Procurement is about obtaining products and services in response to a need, while a supply chain Is the infrastructure involved in physically getting the products and services delivered. Key difference is the process of supply chain management continues after the contract award. SCM - aims to reduce costs, improve value and reduce risk. Also provides a competitive advantage over competition by adding value throughout the process.

Answer 8

Demand planning – what is required and when? Fleet management – fleet vehicles Inventory management – there in stock availability Warehousing and storage – efficient and correct storage Order fulfilment

Answer 9

Started in the automotive industry. Currently used across many manufacturing operations. OEM - Original equipment manufacturer. Accompanied his products are used in the manufacture of its own or another organisations products i.e. Sony, dell, Leonardo helicopters. Every supplier tear is managed and has to conform to the same ethical and sustainable standards. OEM – will conduct supply audits on the tires fighting their work from time to time but also rely on the tier 1 suppliers to ensure the low part of the chain is managed. Responsibility of the OEM to ensure each tier of its supply chain conforms to the organisational standards as well as any external regulation/legislation.

Answer 10

The control of the flow of goods or services between two points, making sure people or things are where they need to be at the right time. Logistics involved at every stage in the supply chain. Internal logistics – production, manufacturing, warehousing External logistics – distribution, transport, retail

Answer 11

Materials and production planning system used in manufacturing environment Aims – insure materials/parts available – establish when to place orders and schedule deliveries – keep inventory value low Based on demand of the end product Sales order generates demand Build materials is launched and MRP system calculates the inventory (order amount gain stock) Within this calculation MRP will work out the MOQ. Req is then released onto procurement Disadvantages Rely on correct information from the outset (I.E.bill of materials, MOQ, lead time) Product developments need to be updated Potential for incorrect demands to be placed

Answer 12

Enterprise requirements planning An extension of MRP which includes many more organisational functions such as accounting, HR, manufacturing et cetera Can be used as a more cost-effective/efficient procurement process and reduce costs for the organisation.

Answer 13

Any group or individual who can affect or is affected by the achievement of the organisation objectives. All parties who will be affected or will affect the organisation strategy.

Answer 14

``` Internal Stakeholders People/groups of people who are directly involved directly with the business. -Colleagues with a need Accounts department Company owner Manufacturing department Stores department Quality department Sales department Transport fleet ``` ``` External stakeholders People/groups of people who have an interest in organisation, and could either be impacted by it will have an impact on it. – Producers Shareholders Supplies and external manufacturers Thanks Local community Careers and haulage companies Media Governments and regulatory bodies CIPS ```

Answer 15

High power/low interest – keep satisfied – investors/shareholders High power/high interest – manage closely (all info they need, involved in decision-making et cetera) – senior managers or government. Low power/low interest – minimum effort – more customers/suppliers Low power/high interest – keep informed – stakeholders that do not have much power within the organisation but are potentially powerful outside of it. Local activists.

Answer 16

Stage 1: understanding the need and develop a high-level specification. Stage 2: market/commodity options Stage 3: develop strategy/plan Stage 4: Pre-procurement, market test and market engagement Stage 5: Develop documentation for distribution to potential suppliers Stage 6: Supplier selection to participate in ITT/RFQ negotiation Stage 7: Issue ITT/RFQ Stage 8: Bid/tender/quotation evaluation – consideration of TCO Stage 9: Contract award and implementation Stage 10: Warehouse, logistics and receipt – for products Stage 11: Contract performance review Stage 12: Supplier relationship management and supply contract management and development

Answer 17

Understanding need and developing a high-level specification – having knowledge of what customer requires – need can be tangible/intangible - description, quantity, delivery time and quality - performance vs conformance specification.

Answer 18

Market/commodity and options – researching/review market for best means to meet need – consider control of buying organisation and level of risk For example can it be made in house? (High control and low risk) or sourced externally? (Less control and increased risk) Would be in sourced externally open resource? Should consider: Economic situation (cheaper aboard?) Currency fluctuations (exchange rates) Supply and demand (price fluctuations)

Answer 19

– which Suppliers to approach? Local/global? – Evaluate competition (porters five forces) Does the supplier have a monopoly? ITT or RFQ

Answer 20

This means: engaging with market, suppliers and consider macro economic factors to determine how to develop specification, costs, terms and conditions, right time? Seeking information from internal and External stakeholders on proposed need. Market engagement – process to gain advantage, and understanding of market prices or trends. Seeing where a product is in its life cycle - demonstrated by amount of sales. 4 stages: Introduction, Growth, Maturity, Declines. If reaching maturity - qty of proposed need may need to increase. If product is in decline then demand is reducing and need may not need original qty stated.

Answer 21

Documentation to include: ``` Description and specification Quantity Delivery dates Service level agreements Terms and conditions ```

Answer 22

Supplier selection to participate in ITT/RFQ Optional step relating to decision about which supplies to receive IT/RFQ. Evaluating suppliers Site visits PQQ- company history, financial activity, insurance, membership to professional bodies, Quality accreditation’s, capabilities, health and safety, CSR policy, Code of ethics, Conflict of Interest. Audits, PPQs RFI’s - Carter’s 10 C’s

Answer 23

Issue to shortlisted suppliers, all docs to be sent at the same time, include deadline.

Answer 24

– tenders are usually evaluated against the criteria, structured and formal if tender – involvement of cross functional teams - quotation evaluation is usually more informal and quick decision-making - consideration of the TCO

Answer 25

– advise winning supplier – finalise T&C’s and signed contract – feedback to unsuccessful suppliers

Answer 26

– warehouse prep for receiving item, is there already a procedure in place for this item? –Location to store it? – Communicate logistics agreement to warehouse – receipt in process – does it need conformance track/and packing – does it have specific storage requirements

Answer 27

– periodically review supply to maintain required performance and standards – KPIs and review meetings

Answer 28

SRM and SCM and development ``` Kraljic Matrix Strategic supplier – close management Bottleneck supplier – relatively close management (often monopolies) Routine supplier – little management Leverage supplier– High value items ```

Answer 29

– review in contract in place, does it still needs? I.E new legislation/standards? – Contracts nearing end should be refused and feedback sought from stakeholders – Lewins change model Unfreeze, change, freeze

Answer 30

``` Competency Capacity Commitment Control Cash Cost Consistency Culture Clean Communication ```

Answer 31

``` Buyers power Suppliers power Substitutes? New entrants Existing rivals ```

Answer 32

``` Understanding the need Market commodity options Develop strategy/plan Pre-procurement market test Develop documentation Suppliers selection Issue ITT/RFQ Bid/tender/quotation evaluation ``` Consequences of incorrect pre-contract award Not understanding the need - not fit for purpose Not researching the market - porters 5 forces, product life cycle Ordering the incorrect quantity / incorrect location Suppliers not able to make Goods/meet needs Poor reputation due to suppliers CSR Conflicts of interest- legal action

Answer 33

Asset management SRM and SCM Contract performance Warehouse, logistics and receipt Consequences of incorrect post contract award Assets not managed correctly, maintained etc If no SCM/SRM no understanding of how the contract / supplier is performing. No lessons learnt for next time. Warehouse may not be able to store goods properly - damaged goods, loss of stock.

Answer 34

Defining needs Creation of contract terms – Developing documentation - PPQ or PQQs - Offer and acceptance Make an offer – response to an RFQ or ITT Acceptance of offer – Unconditional offer – counter offer ``` Suppliers offer Offer details – Price – delivery – packaging – frequency – leadtime – quality – MOQ – payment terms ``` Express and implied terms - Express– anything said or written, and agreed between two parties; specifically written in contract. - Implied – assumed to exist and linked to communal. Such terms do not have to be mentioned in contract. By law these are present even if not shown. Service level agreements ``` KPIs -SMART objectives Specific Measurable Achievable Relevant Time bound ``` Supplier selection

Answer 35

Many procurement cycle stages take place electronically Theory remains the same even when the delivery method has changed. e-procurement consists of e-sourcing: (Knowledge, specification, RFQ/tender, negotiation/evaluation, contract) e-purchasing: (Select/requisition, authorise, order, receive, payment)

Answer 36

Compliance is about adhering to regulations, following legislation and conforming to rules Processes form an important part of that Kim function to ensure compliance is carried out and the outcome is monitored.

Answer 37

e-requisitioning : raising/receipt of reqs e-catalogues : Researching product ranges e-ordering and e-sourcing e-payment

Answer 38

Simplify process Provide info about both the requisition and requirement Database contains record of all materials and parts, code numbers, descriptions, usage records and current stock balance – as well as prices of recent requisitions and supplier details. Stock levels are automatically updated. EPOS systems invoke using barcodes + RFDI to record sales at point of sale terminals. Can be linked to inventory management systems, to trigger automatic stock requisition and replenishment.

Answer 39

``` Advantages Quicker than manual process Traceability Consistent style More control Reduced risk Saves costing long-term ``` ``` Disadvantages large investment to install E system Less personal Individuals may resist change Reliant on technology Individuals need training (downtime from role) Affected by power failure ```

Answer 40

Often found on websites. Often contain more information on paper ones and are interactive so users can click through pages to see detailed diagrams and few dimensions. Some e-catalogues include videos of products in use.

Answer 41

``` Advantages Information is always available Information is always up-to-date In-depth details are readily available E–catalogues can be viewed at all times Environmentally friendly ``` Disadvantages If technology fails access is denied Lack of relationship building May be difficult for buy to navigate

Answer 42

Using an electronic system to place orders in response to the E – requisitions. Manual input – by inputs order requirement in response to information received through and E – requisition. Automated systems – commonly used in organisations that use MRP. Document professional receives a report that they can upload it automatically into an E – order that can be sent.

Answer 43

``` Advantages Saves time Relies on correct information being input Traceability Control Reduced risk ``` Disadvantages Personal If technology fails, the process stops Requires expensive investment

Answer 44

Includes the following: Developing the e-specification Sending E – RFQ/E – ITT E-negotiation (face 2 face quicker/strategic relationship) Preparing and sending an E – contract Supply evaluation (sending out electronic questionnaires and compiling results on the document which provides feedback to show the most suitable suppliers. ``` Supply evaluation criteria could include: Price, quality and delivery Financial stability Long-term relationship potential Total quality performance and philosophy E – commerce capability ```

Answer 45

E – auctions are an auction between a buyer and the seller on an electronic platform. Reverse auctions – supplies reduce on a bit until nobody will go lower and appoint the contract is made. Role of buyer and supplier is swapped in the reverse auction. The seller is bidding to sell their services rather than by a bid and buy their requirement. E – auctions do not involve a personal business transaction. Will not enhance long-term strategic relation. ``` Ideal when: Specification is a simple Launch and competitive supplier base you like relatively long lead times Stable prices on market forces Short-term contracts They cost from changing suppliers Regular and simple delivery schedule High purchase value ```

Answer 46

Advantages Quick and easy to compare bits Software and I was open communication between buyer and seller No geographical constraints The organisational site constraints Lower overheads for suppliers no need to visit buyers with offers Disadvantages Supplies can make low profit than through other negotiation methods Without samples being seen suppliers could be bidding to supply something that is not suitable.

Answer 47

E – payment can take place through the following means: Bank transfer Debit or credit cards Approved E – payment portals (PayPal) ``` Advantages Quick process Traceable Low risk of money go missing High level of control ``` Disadvantages possibility of hackers If technology fails, system stops No personal relationships Crypto currencies (Bitcoin block chain technology (digital ledger of all transactions)

Answer 48

Reduced waist (Lean – seven areas of waste) Automated processes Reduce costs Faster payments Continuous improvement – EDI (PO’s, delivery notes and invoices) Enhance relationships (Easier way of working. I.e. Received an email rather than having to wait for a paper document - more inclined to work with supplier) ``` Continuous improvement: Identify Plan Execute Review ``` As new technologies introduced into businesses CI is important and demonstrates an organisation is embracing change and move with the times as well as seeking to add value.