46 True/False questions
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JIT delivery → ...
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High level of supply risk → Routine and Leverage purchase
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Supplier Certification → "An organization's process for evaluating the quality systems of key suppliers in an effort to eliminate incoming inspections."
Institute for Supply Management -
High value → Routine and Bottle neck
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ISO (International Organization for Standardization) → An 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, Switzerland.
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Critical purchases - → items that involve a low percentage of the firms' total spend and involve very little supply risk.
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Spend analysis - → identifies how much is being spent on each type of product or service across all locations in the firm
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Is make or buy strategic? → Yes
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Describe some examples of Supplier Performance Metrics... → Bottleneck and Critical
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Internet-based communications offer → 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 -
Purchasing was historically → -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 -
Backward Vertical Integration → - Refers to acquiring sources of supply
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Pretransaction components → 1.) Line fallout
2.)Defective finished goods rejected before sale
3.)Field failures
4.)Repair/replacement in field
5.) Customer goodwill/reputation of firm
6.)Cost of repair costs
7.) Cost of maitnence and repairs -
Procurement is an organizational capability that → An 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, Switzerland.
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Routine purchases → items that involve a low percentage of the firms' total spend and involve very little supply risk.
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Supplier Selection and Assessment → Supplier audits
Supplier development
Monitoring performance
Supplier certification
E-commerce and procurement
-Electronic data interchange (EDI)
-Internet -
Transaction components → 1.) Line fallout
2.)Defective finished goods rejected before sale
3.)Field failures
4.)Repair/replacement in field
5.) Customer goodwill/reputation of firm
6.)Cost of repair costs
7.) Cost of maitnence and repairs -
High value → Critical and Leverage purchase
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Procurement Focuses on Several Issues related to the Firms' Supply Base → 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 -
Operational Integration → Refers to acquiring customer's operations.
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Operational Integration → Primary objective of operational integration is to cut waste, reduce cost, and develop a relationship that allows both buyer and seller to achieve mutual improvements
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 -
Electronic Data Interchange (EDI) → 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 -
Low value → ...
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Volume Consolidations → Increasing procurement leverage by reducing the total number of suppliers while continuing to minimize risk
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Leverage purchases → Commodity items where many alternatives of supply exist and supply risk is low. Spend is high and there are potential procurement savings
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Supplier Evaluation: → "An organization's process for evaluating the quality systems of key suppliers in an effort to eliminate incoming inspections."
Institute for Supply Management -
Alternative procurement strategies → User buy
Volume consolidations
Operational integration
Value management -
Value Management → Routine and Bottle neck
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User Buy → Allow users in the organization to doing the routine buying of items considered to be too insignificant to warrant further consideration.
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Several factors have elevated the importance of procurement to the firm → User buy
Volume consolidations
Operational integration
Value management -
Bottleneck purchases → unique procurement problems. Supply risk is high and availability is low. Small number of alternative suppliers.
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Forward Vertical Integration - → Refers to acquiring customer's operations.
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Where does procurement look → Procurement looks up and down the entire supply chain for impacts and opportunities
Goods and service account for 55 cents of every sales dollar -
Supplier selection considerations → Supplier audits
Supplier development
Monitoring performance
Supplier certification
E-commerce and procurement
-Electronic data interchange (EDI)
-Internet -
Postransaction components → 1.) Identifying need
2.) Investigating sources
3.)Qualifying sources
4.) Adding supplier to internal systems
5.) Educating -
Leverage purchases → - commodity items where many alternatives of supply exist and supply risk is low. Spend is high and there are potential procurement savings.
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ISO 9000 → 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. -
Low level of supply risk → Routine and Leverage purchase
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Pareto Principle: → Buying materials and components from suppliers instead of making them in-house. The trend has moved toward outsourcing.
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Implications to decisions made in the following dimensions of procurement strategy → 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 -
Total cost of ownership → 1.) Pretransaction components
2.) Transaction components
3.) Posttransaction components -
ISO 14000 → 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. -
A buyer's activities to improve a supplier's performance and/or capabilities based on the following approach: → What types of metrics might I use to rate my suppliers?
What about metrics for transportation providers? -
Supplier Recognition Programs → 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 -
Outsourcing - → Buying materials and components from suppliers instead of making them in-house. The trend has moved toward outsourcing.
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A segmented approach is used to → prioritize resources for purchasing
The most procurement effort goes to the most critical supplies/suppliers