Chapter 2

Question 1

What is the difference between RFQ and ITT

Answer 1

RFQ: Less formal, less complex, low-medium contract
ITT: more formal, detailed, medium-high contract

Question 2

What is futures exchange

Answer 2

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

Question 3

What affects commodity pricing?

Answer 3

• supply and demand
• force majeure
• conflict and political situations
• porters 5 forces- substitutes and competitors

Question 4

How can you detect if a supplier is financial unstable?

Answer 4

High staff turnover
Rumours
Change of bank

Question 5

What is an income statement I.e. profit and loss account?

Answer 5

Profit, expenses, losses and revenue

Question 6

What is a balance sheet?

Answer 6

This shows a companies assets, liabilities and equity

Question 7

What is a cash flow statement

Answer 7

A cash flow statement is money coming in and out
Generation and utilisation of cash

Question 8

Are credit scores weighted?

Answer 8

Yes they are weighted which means that areas are highlighted associated with importance to the organisation

Question 9

What could also be considered when an organisation has a low credit score?

Answer 9

• May be a new organisation
• May have no loans
• No high value assets

Question 10

If a business still wishes to engage with an organisation that has a low credit score what might they do?

Answer 10

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

Question 11

What is the difference between a RFI and RFQ

Answer 11

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

Question 12

What is an economic indice?

Answer 12

Economic indices help organisations better understand the market and the economy before finalising on an decision.
An example: Stock Markets, Commodity Indices

Question 13

What is offshoring?

Answer 13

Offshoring is the transferring of activities to a different country.

Question 14

What is the difference between offshoring and outsourcing?

Answer 14

Offshoring refers to setting up business in another country. Outsourcing usually refers to hiring a company to do your work in your local country.

Question 15

Examples of secondary data?

Answer 15

Government reports
Supplier websites
Contacting organisations that are promoting trade e.g. chamber of commerce

Question 16

What is the definition of functional fit?

Answer 16

Be able to work with an organisation on the same technical level

Question 17

What are import duties?

Answer 17

Payments made to customs to allow goods to enter into the country.
Import duties are a form of tax

Question 18

What is a trade bloc?

Answer 18

A trace bloc is a group of nations that create preferential trade conditions amongst themselves

Question 19

What happens when origin documents are lost?

Answer 19

Buyer can apply for a BOI- this only applies to EU

Question 20

What is a cartel?

Answer 20

A cartel is a group of organisations working together to prevent competition, raise prices and control the market

Question 21

What is the difference between Free Trade and Fair Trade

Answer 21

Free Trade relates to Trade Bloc
Fair Trade relates to promoting ethical practices

Question 22

Aspects to consider when comparing price

Answer 22

Payment mechanism
Exchange rates
Tax

Question 23

Advantages and Disadvantages of Dual Sourcing

Answer 23

Easy to drive down cost
Wide knowledge

Transactional
Lack of economies of scale

Question 24

Considerations of currency?

Answer 24

Assess to the currency
General considerations
Ability to make/receive payments

Question 25

What is the
OCED
OEM
OJEU

Answer 25

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

Question 26

What is offset?

Answer 26

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

Question 27

What is transfer pricing?

Answer 27

The aim of transfer pricing is where you shift profits into nations where tax rates are most favourable to them.

Question 28

What is a receivable and a payable ?

Answer 28

Receivable:
Amounts owed to the business

Payable:
Debts owed by a business I.e. liability

Question 29

What is Inventory Days?

Answer 29

How long does it take for a business to generate enough sales equal to the value of its inventory

Question 30

What is bid rigging ?

Answer 30

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.