Chapter 4 Flashcards
Refers to the process or method of finding and procuring quality goods, services, or works through cost- effective methods
Procurement strategy
Key strategies of procurement/Types of procurement strategies
-cost reduction
-sustainable purchasing
-risk management
-supplier relationship management
-global sourcing
-total quality optimization
This type of strategy is beneficial to organizations in accounting for company expenditure and improving organizational functions
Cost reduction
Also known as green purchasing, sustainable purchasing highlights the procurement of quality goods and services with low environmental impact
Sustainable purchasing
Is an ideal option for businesses striving toward minimizing their carbon footprint
Sustainable procurement
Are a part of any business transaction or process
Risk
Concentrates on minimizing risks related to the procurement of goods and services
Risk mitigation
Emphasizes forming robust supplier relationship and empowering them to enhance their capabilities
Supplier relationship management
Is a well-defined strategy that entails procuring products and services from an expansive range of international suppliers
Global sourcing
Is a method of strategy that ensures quality procurement by way of acquiring the right products that adhere to the highest standards
Total quality optimization
Involves the gathering of facts, data, observations and trends about the marketplace in which suppliers conduct business
Supply chain market analysis
Involves an assessment of multiple key areas that impact the full sourcing and procurement spectrum
Spend management
Involves all of the common processes that you would expect-data retrieval, cleansing, classification, interpretation and presentation
Spend Analysis
2 Factors considered while developing this model
- Annual Expenditure Value of the SKU/Service
- Criticality to the business
Strategic tools used by procurement and supply chain professionals to identify and minimize supply risks
Kraljic Matrix
This quadrant is represent by items which are least critical to your business and account for least expenditure value
Routine
SKUs/Service in this quadrant are similar to routine quadrant but the spend value is very high for these items
Leverage
Different quadrants
-Routine
-Leverage
-Bottleneck
-Critical
These SKUs/Service are characterized by high risk and low annual expenditure value
Bottleneck
Similar to bottleneck items, these items are very critical to your business
Critical
Was developed in the 1970s to improve the purchasing process
Electronic Data Interchange (EDI)
Benefits derived from implementing an e-procurement system
-Time saving
-Cost saving
-Accuracy
-Real time use
-Mobility
-Trackability
-Management benefits
-Supplier benefits
Is essential in creating strong and mutually beneficial relations with vendors
Strategic sourcing
Benefits include lower barriers to entry and transaction costs access to more buyers, and the ability to instantly adjust to market conditions, this making e-procurement attractive to most suppliers
Supplier benefits
The system can be designed to store important supplier information, including wether suppliers are minority or locally owned, thus allowing the buyers to support such businesses
Management benefits
The e-procurement system allows submitters and buyers to track each purchase requisition electronically through the process-from submission to approval and finally conversion to a purchase order
Trackability
The buyer can submit, process, and check the status bids as well as communicate with supplier regardless of the buyer’s geographical location and time of day
Mobility
Buyers have a real-time access to the purchase requisition once it is prepared
Real-time use
The system eliminates double-key inputs-once by the material users and then once again by the buyers
Accuracy
Buyers can handle more purchases, and the manual tasks of matching bids to purchase requisition is reduced
Cost savings
E-procurement is more efficient when (a)selecting and maintaining a list of potential suppliers (b) processing requests for quotation and purchase orders, and (c) making repeat purchase
Time savings
Formula for total assets
=net income/ROA
Profit leverage effect formula
=Cost Savings/Current Profit
Process of acquiring goods and services from a third party member
Procurement
Supply Chain Market Analysis
-Comprehensive Assessment
-Characteristics of a market
-Develop effective procurement strategies
-insight needed
Advantages of Supply chain market analysis
-It helps to identify market opportunities
-It helps guide interaction with suppliers
-It can help reduce expenses
-It improves efficiency
