Chapter 4: Supply Management Flashcards
Define Purchasing
Involves buying products and services from other firms in a legal and ethical manner
Purchasing is a functional that includes what five aspects?
-Supplier identification and selection.
-Buying, negotiating, and contracting.
-Market research and supplier evaluation.
-Supplier measurement and improvement.
-Development of purchasing systems
Define Sourcing
-A broader concept than purchasing, involving:
Identifying, evaluating, selecting, and managing suppliers.
* Includes purchasing but extends beyond it.
* Ensures firms establish reliable supplier relationships and maintain supply continuity.
Define Supply management
-The identification, acquisition, positioning, and management of resources and capabilities to meet strategic objectives.
-A wider concept that includes both purchasing and sourcing but is more strategic in nature
-Involves analysing sourcing opportunities, developing sourcing strategies, selecting suppliers, and managing procurement.
-Primarily concerned with inbound logistics (materials and services flowing into the firm), but also includes some outbound activities like
packaging and distribution
Explain the Supply management’s impact on a firm’s bottom line: role in increasing sales
- Faster to market: enter markets first→ competitive advantage by being “first movers”; customers become loyal to firm’s products and firm will benefit from increased sales
- Improved quality
- Pricing flexibility
- Innovation
- Enhancing customer satisfaction
Explain the Supply management’s impact on a firm’s bottom line: role in reducing total costs
→ Reducing acquisition cost
→ Improving product design
→Reducing cost of quality and downtime
→ Risk cost
→ Shorter cycle times
→ Overall supply chain costs
→ Post-ownership costs
List the 8 Supply management’s links with other departments in the firm
- Manufacturing and operations
- The engineering department
- The quality department
- The marketing department
- The finance department
- Information technology (IT)
- The legal department
- Logistics and supply department
List the 7 steps in the Strategic Sourcing Process
- Conduct a spend analysis
- Analyse the supply market
- Develop a sourcing strategy
- Evaluate potential suppliers
- Select supplier(s)
- Reaching agreement with suppliers
- Supplier management (and supplier development)
Explain step 1 in the Strategic Sourcing Process: Conduct a spend analysis
- It helps firms understand spending patterns
- Essential for identifying cost-saving opportunities
What are the three key aspects of the spend analysis?
- Determines what is being bought and where money is being spend
- Identifies supplier relationships and spending concentration
- Analyses internal departmental spending
Explain step 2 in the Strategic Sourcing Process: Analyse the supply market. What does it determine?
a) The number of possible suppliers
who can provide the product or service.
b) The number of buyers who will
potentially buy the product or service.
c) The nature of competition within these markets.
Name useful sources where information can be found to analyse the supply market
- Trade journals and trade directories
- Suppliers’ websites and annual reports
- The internet and social media
- Supplier catalogues
- Suppliers’ sales staff
- Trade shows and conferences
Categorise suppliers according to spend and supply risk (the Kraljic portfolio matrix)
-Bottleneck
-Strategic/critical
-Routine/non-critical
-Leverage
List the characteristics of the Bottleneck category in Kraljic portfolio matrix)
- Supplier dominant
- Few alternative suppliers
- Complex specifications
- Big impact on firm’s operations
List the characteristics in the Strategic/critical category in Kraljic portfolio matrix
- Critical to firm
- Few alternative suppliers
- Large expenditures
- Unique specifications
List the characteristics in the Routine category in Kraljic portfolio matrix
- Many alternative suppliers and products
- Everyday use, unspecified items
- Low value
List the characteristics in the Leverage category in Kraljic portfolio matrix
- Buyer dominant
- Many alternative suppliers (and products)
- Market/price sensitive: change in price has significant impact on firm’s bottom line
- Substitution is possible; switching costs are low
The make-or-buy decision: outsourcing
