Chapter 2 Flashcards
What is the difference between RFQ and ITT
RFQ: Less formal, less complex, low-medium contract
ITT: more formal, detailed, medium-high contract
What is futures exchange
Future exchange is where the seller of a commodity agrees to sell or buy a certain amount of the commodity to the buyer at a set price for the future
What affects commodity pricing?
- supply and demand
- force majeure
- conflict and political situations
- porters 5 forces- substitutes and competitors
How can you detect if a supplier is financial unstable?
High staff turnover
Rumours
Change of bank
What is an income statement I.e. profit and loss account?
Profit, expenses, losses and revenue
What is a balance sheet?
This shows a companies assets, liabilities and equity
What is a cash flow statement
A cash flow statement is money coming in and out
Generation and utilisation of cash
Are credit scores weighted?
Yes they are weighted which means that areas are highlighted associated with importance to the organisation
What could also be considered when an organisation has a low credit score?
- May be a new organisation
- May have no loans
- No high value assets
If a business still wishes to engage with an organisation that has a low credit score what might they do?
May contract to pay the supplier in a shorter period of time- help the supplier with start up costs
The buyer may accept more regular smaller quantity of products
What is the difference between a RFI and RFQ
An RFI aims to collate information on the suppliers, when releasing a PPQ this is a form of RFI. It aims to access Carters 10Cs
RFQ aims to assess the 5 Rights of Procurement and RFQs are a request for quote, RFQs can be issued as a first resort on low level contracts without issuing an RFI
What is an economic indice?
Economic indices help organisations better understand the market and the economy before finalising on an decision.
An example: Stock Markets, Commodity Indices
What is offshoring?
Offshoring is the transferring of activities to a different country.
What is the difference between offshoring and outsourcing?
Offshoring refers to setting up business in another country. Outsourcing usually refers to hiring a company to do your work in your local country.
Examples of secondary data?
Government reports
Supplier websites
Contacting organisations that are promoting trade e.g. chamber of commerce
What is the definition of functional fit?
Be able to work with an organisation on the same technical level
What are import duties?
Payments made to customs to allow goods to enter into the country.
Import duties are a form of tax
What is a trade bloc?
A trace bloc is a group of nations that create preferential trade conditions amongst themselves
What happens when origin documents are lost?
Buyer can apply for a BOI- this only applies to EU
What is a cartel?
A cartel is a group of organisations working together to prevent competition, raise prices and control the market
What is the difference between Free Trade and Fair Trade
Free Trade relates to Trade Bloc
Fair Trade relates to promoting ethical practices
Aspects to consider when comparing price
Payment mechanism
Exchange rates
Tax
Advantages and Disadvantages of Dual Sourcing
Easy to drive down cost
Wide knowledge
Transactional
Lack of economies of scale
Considerations of currency?
Assess to the currency
General considerations
Ability to make/receive payments
What is the
OCED
OEM
OJEU
OECD- regulates international tax laws
OEM- 1 manufactuer sells goods to another for production and retail (no brand names)
OJEU- Public sector should advertise its tender opportunity- call for competition
What is offset?
Offset- industrial participation
Foreign organisation agrees to invest in the country in the country of the purchasing organisation. This can be a requirement to win the contract
What is transfer pricing?
The aim of transfer pricing is where you shift profits into nations where tax rates are most favourable to them.
What is a receivable and a payable ?
Receivable:
Amounts owed to the business
Payable:
Debts owed by a business I.e. liability
What is Inventory Days?
How long does it take for a business to generate enough sales equal to the value of its inventory
What is bid rigging ?
Bid rigging is common in markets with high start up costs and fewer bidders, secretly conspire to raise prices or lower quality of goods for purchasers.
