Business Functions: Purchasing Flashcards
What is the purchasing function?
The management of a company’s external resources in a way that all supply is secured at the most favourable conditions
What does a value chain analysis do?
Evaluates the activities that occur within and around an organisation in light of the organisation’s competitive strength
What does a DuPont measure?
Assets ander their performance
What is corporate coherence?
The extent that parts of an organisation are managed as a single entity
What is purchasing maturity?
The professionalism involved in purchasing at business unit level
What does centralised purchasing involve?
Having a central location for coordinating all purchasing activities
What does decentralised purchasing involve?
Each business unit operating autonomously in its purchasing activities
What is the local statutory body responsible for industrial standardisation?
The South African Bureau of Standards (SABS)
What is the international body for standardisation?
The International Organization for Standardization (ISO)
What are the factors of consideration of inventory levels?
Carrying costs
Ordering costs
Stock-out costs
Setup costs
Variations in delivered costs
What are the 2 basic inventory management systems?
Fixed order quantity system (quantity-based)
Fixed period system (time-based)
What inventory model does the fixed order quantity system make use of?
Probabilistic inventory model (Q model)
How does the basic fixed order quantity model work?
A ‘reorder level’ is set which, when reached, triggers actual ordering of stock in the economic order quantity (ideal order quantity). This reorder point should leave enough stock on hand to make it through the lead time.
What is the formula for EOQ?
square ( 2 × annual demand × order cost ÷ annual inventory holding cost per unit)
What is the formula for ROL?
unit consumption × lead time
How do fixed period inventory systems work?
Each inventory item stock level is reviewed after a predetermined time and reorders are placed.
What is MRP?
Materials requirement planning is an inventory management system designed for production planning, scheduling and inventory control
What should be considered before deciding on quantity to be purchased?
Availability of funds
Safety stock
Quantities already ordered
What are the 3 major inputs of an MRP system?
Master production schedule
Bill of materials
Inventory records
What is a just-in-time IMS?
Making only what is needed, when it is needed, in the amount needed.
What is a quick response system?
A set of actions that take place throughout a supply chain in order to reduce replenishment lead time
What are the elementd of a QR system?
Point of sale tracking
JIT production and logistics
Electronic data interchange
Partnership
Value-added networks
What is an automatic replenishment system?
An ARS determines ‘what’, ‘how much’ and ‘when’ a particular item should be ordered
What is an efficient consumer response system?
ECR is a consumer-driven distribution system where production is managed in accordance with consumers’ point of sale activities
What is supplier development?
The process of improving supplier performance
Who should the ‘right price’ be fair and reasonable for?
Both seller and buyer
What are the 5 rights of purchasing?
Right quality
Right quantity
Right time
Right place / source
Right price
What is outsourcing?
The act of transferring work to an external party
What is insourcing?
Internal production
What are the two classifications of insourcing?
Onshore
Offshore
What is onshore insourcing?
Production done within an organisation and domestic borders
What Is offshore insourcing?
Production done within an organisation but outside domestic borders
What is a request for information?
An RFI is a means of collecting information from different suppliers
What is a request for proposal?
An RFP is an invitation to suppliers who, through a bidding process, can then submit a relevant proposal
What is a request for quote?
An RFQ is an invitation to suppliers to submit a bid on projects
