46 Multiple choice questions
- -Purchasing was historically perceived as just a buying function for manufacturing, repair materials, and supplies
-Purchasing agents tried to get the lowest price possible for the most acceptable quality
-Transactional focus led to getting the best possible "deal" today
Did not focus on future transactions
No concept of supply chain
Purchasing seldom looked beyond the first-tier supplier
Purchasing simply responded to the demands of the production group
- 1.) Pretransaction components
2.) Transaction components
3.) Posttransaction components
- Volume consolidation
Importance and implications of supplier selection, supplier qualification, and supplier management
- Supplier audits
E-commerce and procurement
-Electronic data interchange (EDI)
- Procurement looks up and down the entire supply chain for impacts and opportunities
Goods and service account for 55 cents of every sales dollar
- 1.) Line fallout
2.)Defective finished goods rejected before sale
4.)Repair/replacement in field
5.) Customer goodwill/reputation of firm
6.)Cost of repair costs
7.) Cost of maitnence and repairs
- prioritize resources for purchasing
The most procurement effort goes to the most critical supplies/suppliers
- Identify critical products & services
Identify critical suppliers
Form a cross-functional team (usually lead by Procurement)
Meet with top management of selected supplier(s)
Identify key projects to drive performance improvements
Develop and define details of a formal agreement
Monitor status & modify strategies
- JIT delivery
More frequent delivery of smaller quantities
Close cooperation and communication
Integration of suppliers into manufacturing processes
Procurement of logistics services
- Extends beyond buyer-seller operations
Involving the supplier early in product design
- -Building partnerships
-Sharing information and knowledge
-Identifying linked processes and shared opportunities for improvement
users in the organization to doing the routine buying of items
considered to be too insignificant to warrant further consideration.
- - Refers to acquiring sources of supply
- Refers to acquiring customer's operations.
- 1.) Identifying need
2.) Investigating sources
4.) Adding supplier to internal systems
- Product & process technologies
Willingness to share technologies and information
Early supplier involvement (ESI)
Concurrent engineering (CE)
Cost - Total cost of ownership or acquisition
Order system & cycle time
- Increasing procurement leverage by reducing the total number of suppliers while continuing to minimize risk
- identifies how much is being spent on each type of product or service across all locations in the firm
- items that involve a low percentage of the firms' total spend and involve very little supply risk.
- 1.) Price
7.)Return of parts
- Bottleneck and Critical
- strategic items and services that involve a high level of expenditure and are vital to the firm's success.
- Routine and Leverage purchase
items where many alternatives of supply exist and supply risk is low.
Spend is high and there are potential procurement savings
- "An organization's process for evaluating the quality systems of key suppliers in an effort to eliminate incoming inspections."
Institute for Supply Management
- Purchased goods and services are among the largest cost elements for most firms: 55 cents of every sales dollar
The growing emphasis of outsourcing has expanded the supply base of organizations
This added complexity requires more management attention on the organizational interfaces with suppliers
objective of operational integration is to cut waste, reduce cost, and
develop a relationship that allows both buyer and seller to achieve
Integration can take many forms
-Buyer providing detailed sales information to supplier
-Buyers and suppliers working together to redesign linked processes
-Eliminating duplicated activities performed by both the buyer and supplier
-Can provide incremental savings of 5% to 25% over the benefits of volume consolidation
- unique procurement problems. Supply risk is high and availability is low. Small number of alternative suppliers.
- User buy
- What types of metrics might I use to rate my suppliers?
What about metrics for transportation providers?
independent, non-governmental membership organization and the world's
largest developer of voluntary International Standards. Made up of 162
member countries, with a Central Secretariat based in Geneva,
- several opportunities for making product information available while overcoming compatibility issues between computer systems
Electronic catalogs allow rapid access to product info, specifications, pricing and ordering
Buying exchanges allow sellers or buyers of specific goods or services to find each other on a common web site
- Critical and Leverage purchase
- A series of standards for environmental management measuring a firm's environmental impact.
The benefits include reduced energy consumption, environmental liability, reduced waste & pollution, and improved community goodwill.
- Ensuring Continuous Supply
Minimizing Inventory Investment
Quality Improvement of Supply
-Building supplier relationships
-Supplier continuous improvement
Lowest Total Cost of Ownership
- A series of quality standards that provide basic definitions for quality assurance and quality management .
Companies wanting to sell in the global market seek ISO 9000 certification.
- Routine and Bottle neck
commodity items where many alternatives of supply exist and supply risk
is low. Spend is high and there are potential procurement savings.
- ensures the firm is positioned to implement its strategies with support from its supply base
-Focuses on building relationships with suppliers (Tier 1 and beyond)
-Involvement with outsourcing includes more than just purchasing raw materials and parts
-Also includes finding alternate sources for manufactured products or services to help manage demand
- is the electronic transmission of data between a firm and its suppliers
Shares information and knowledge such as order entry, planning/scheduling, tracking, delivery, billing and payment
- Buying materials and components from suppliers instead of making them in-house. The trend has moved toward outsourcing.
- Three Attributes:
1.)Companies should recognize & celebrate the achievements of their best suppliers.
2.)Award winners exemplify true partnerships continuous improvement, organizational commitment, & excellence.
3.)Award-winning suppliers serve as role models for other suppliers.
- A process to identify the best & most reliable suppliers
Sourcing decisions are made on facts and not on perception
Frequent feedback can help avoid surprises & maintain good relationships.
Suppliers should also be allowed to provide constructive feedback to (you) the customer
- a small percentage of items account for a large percentage of the dollars spent
For example, "A" items in an ABC inventory classification system
Purchasing processes should be tailored to the value and/or criticality of the materials needed