Chapter 2

Question 1

Reasons for Making

Pg.76

Answer 1

Protect proprietary technology
No competent supplier
Better quality control
Use existing idle capacity
Control of lead-time, transportation and warehousing cost
Lower cost

Question 2

Roles of Supply Base

Answer 2

list of suppliers that a firm uses to acquire its materials, services, supplies, and equipment
Firms emphasize long-term strategic supplier alliances consolidating volume into one or fewer suppliers, resulting in a smaller supply base.

Question 3

Preferred Suppliers Provide

Answer 3

• Early supplier involvement- Information on the latest trends in materials, processes, or designs
• Information on the supply market
• Capacity for meeting unexpected demand
• Cost efficiency due to economies of scale

Question 4

Supplier Selection

Answer 4

• Product / process technologies
• Willingness to share technologies & information
• Quality
• Service
• Location
• Reliability
• Order System & cycle time
• Capacity
• Communication capability
• Cost

Question 5

Centralized vs.. Decentralized

Answer 5

Centralized Purchasing- purchasing department located at the firm’s corporate office makes all the purchasing decisions.
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Decentralized Purchasing- individual, local purchasing departments, such as plant level, make their own purchasing decisions.
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Quality Testing

Question 6

World Trade Organization(WTO)

Answer 6

Create legal ground rules for trading
Have to follow rules
153 members
Intellectual human rights and intellectual rights

Question 7

International Purchasing/global sourcing

Answer 7

Challenges - a lot of skill that are required/communication barriers
Political - Government regulation issues
Broker - specializes in steps of importing
Merchant - Go buy goods for you, importer and sells it to you
Tariffs - Taxes
Quotas - regulated on imports
Regulations - Safety regulations, gas emissions

Question 8

North American Free Trade Agreements(NAFTA)

Answer 8

Mexico, USA & Canada - Allowed more free trade to be more competitive agains Europe and Asia

Question 9

Procurement for Gov & Non-Profit Agencies

Answer 9

Bidding off Gov. Contracts
Competitive bidding - Fairness
Performance Bonds
Make sure work will be completed on time and done

Question 10

Buy American Act

Answer 10

US buys 3rd party goods from domestically produced goods if its not more than a differential $ above the foreign good.

Question 11

Green Purchases

Answer 11

Point scale, there is an entry level for a government contract - need to be green friendly.

Question 12

Blanket Purchase Order

Open-End Purchase Order

Answer 12

Covers a variety and is negotiated for repeated supply over a fixed time period.

Additional items and expiration dates can be negotiated.

=Are suitable for buying maintenance, repair, operating supplies and office supplies.

Question 13

Stockless Buying or System Contracting

Answer 13

An extension of the Blanket Purchase Order it requires the supplier to maintain a minimum inventory level to ensure that the requires items are readily available for the buyer.
The burden of keeping inventory is on the supplier.
Minimizes order cycle time by keeping inventory at the buyers facility.

Question 14

Advantages of the e-Procurement System

Answer 14

Time Saving
Cost Savings
Accuracy
Real Time
Mobility
Traceability
Benefits

Question 15

Return on Assets Effect(ROA)

Answer 15

Is a financial ratio of a firms net income in relation to its total assets which include: cash, account receivable and current inventory.
Also include fixed:equipments, buildings and real estate.
Return on Assets - Suggests that the management is capable of generating large profits with little investments.

Question 16

Profit-Levarage Effect

Answer 16

A decrease in purchasing expenditures directly increases profits before taxes, assuming no decrease in quality or purchasing total cost. pg42

Question 17

4 Key Elements of SCM

Answer 17

Supply Management-> Supplier management
Operations-> Demand, production, and inventory.
Distribution-> Transportation, warehousing, and CRM
Integration -> SCM Process and performance

Question 18

Merchant Buyers

Answer 18

Wholesalers (Distributors) and retailers who purchase for resale

Question 19

Industrial Buyers

Answer 19

Purchase raw materials, services, capital equipment, & MRO supplies to produce another product or service.

Question 20

The Purchasing Process

Answer 20

1. )Material Requisition/Purchase Requisition - Stating product, quantity, and delivery date.
2. )The Request for Quotation (RFQ)
3. )The Purchase Order (PO) - Is the buyer’s offer & becomes a binding contract when accepted by supplier. When initiated by the supplier on their own terms, the document is a sales order.

Question 21

Small Value Purchase Orders

Answer 21

Processing costs for small value purchases are minimized through:
–Procurement Credit Card/Corporate Purchasing Card
–Blanket or Open-End Purchase Orders
–Blank Check Purchase Orders
–Stockless Buying

Question 22

The Make-or-Buy Decision

Reasons for Making

Answer 22

–Protect proprietary technology
–No competent supplier
–Better quality control
–Use existing idle capacity
–Control of lead-time, transportation & warehousing cost
–Cost advantage
It's a STRATEGIC DECISION

Question 23

Supply Base

Answer 23

list of suppliers that a firm uses to acquire its materials, services, supplies, and equipment

Question 24

Supply Base

Answer 24

list of suppliers that a firm uses to acquire its materials, services, supplies, and equipment