Chapter 15 Purchasing + Supply Mng Flashcards
What is the purpose of the Purchase and Supply function?
To:
- select suppliers
- purchase materials + arrange delivery thereof
- determine quality + quantity materials / service
- decide acceptable price
- expedite + receive materials
- control warehousing + inventory holding
- determine timing of purchase
What is the aim of inventory holding?
To keep inventory levels as low as possible
without risking an interruption in the ops process
What does the Profit leverage effect mean?
If purchasing costs constitute major portion of total costs
then
a saving in purchasing costs has greater purchasing potential than a similar increase in sales.
Purchasing and supply planning happens on 3 levels. Name them.
Strategic level
Tactical (or middle) Management level
Operational level
In purchasing and supply planning, what does the Strategic level entail?
Supplier alliances Supplier development Supply-chain integration Long term planning Availability forecast Policy formation In/outsourcing decisions
In purchasing and supply planning, what does the Tactical (middle) management level entail?
Systems integration Negotiation Interface development Total quality management Contracting Cost-reducing techniques
In purchasing and supply planning, what does the Operational level entail?
Communication with suppliers' ops staff Expediting File and system maintenance Enquiries and quotations Pricing Returns and recycling
What is meant with Cross-functional sourcing teams?
It consists of personnel from at least 3 functions brought together to execute a purchasing related assignment / solve purchase related problem
What are the 9 control points / criteria used to assess the purchasing and supply activities?
1) price proficiency
2) supplier performance
3) timelines
4) cost-saving
5) workload
6) purchasing costs
7) inventory holding
8) relationship performance with suppliers
9) relationship with other functional mng areas
What are the steps in the purchasing and supply cycle?
1) development and description of a need
2) choice of suppliers
3) research on prices and availability
4) issuing orders and concluding contract
5) follow-up and expediting
6) receipts, inspection and distribution
7) handling errors and discrepancies
8) paying for the order
9) closing the order
Name 2 stockless systems.
JIT - just in time
MRP - materials-requirements planning
What is the most general method of describing quality?
Specifications
Besides specifications, what is another way to describe quality?
Standardisation
What is used to control quality?
Inspection
What are inventory-carrying costs?
Costs involved in keeping inventory. Eg. Cost of storage Salaries of warehouse staff Insurance Property tax Obsolescence Wear and tear Theft Interest charges Opportunity costs
What does the Inventory-ordering costs involve?
These are costs involved in placing an order.
Eg.
Salaries of purchasing / expediting staff
Stationery
Telephone and fax costs
Online costs
Postage
What does total inventory costs entail?
Consist of the sum of total costs involved of inventory-carrying costs and inventory-ordering costs
Under inventory-control systems, what is EOQ about?
It is the Fixed Order quantity system.
Orders are placed as soon as a certain level is reached.
Not suitable to those where consumption or lead times are unreliable.
In inventory-control systems, what is the cyclical-order system about?
Inventory is checked and reviewed at fixed intervals
Inventory is supplemented to max levels
Unsuitable for seasonal materials or materials used on irregular basis
Mostly used in grocery stores
Under inventory-control systems, what is the MRP system about?
Materials-requirements planning system
Aim to keep minimum levels
Due consideration for lead times needed
Only work where suppliers are extremely reliable
Under Inventory-control systems, what is the JIT system about?
Attempting to eliminate inventory holding
Requires regular deliveries
Quantities correspond with needs
Purchasing and supply must work closely with operations
Suppliers must be extremely reliable
Under Inventory-control systems, what are the QR and AR systems about?
QR - quick response
AR - automatic-replenishment
QR : vertical strategy in supply chain.
strives to provide serv / products in exact quantities. Retail version of JIT
Merchandise is pulled by customer sales
AR : integral part of QR system. Defined as exchange relationship where supplier replenishes stock.
Goal is to manage inventory levels effectively
In inventory-control systems, what is ECR about?
Efficient consumer response
Developed for grocery industry
Same principals as QR
Relies heavily on electronic data interchange EDI
Goal is to eliminate costs such as inventory holding + ordering costs.
What are considered other methods of determining prices ?
Quotations
Tenders
Also called bids or bidding
Name the 3 aims of buying at the right time.
1) to avoid ops interruptions
2) reduce risk of price fluctuations
3) keep inventory levels optimum
What is the first external factor to determine the time of purchases?
Market conditions + government regulations
During recession there is a favourable buyers market. It is advisable to buy large quantities during these periods.
