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Supply Chain Management > Chapter 6 Sourcing > Flashcards

Chapter 6 Sourcing Flashcards

1
Q

What business function has primary responsibility for the supply side?

A

Sourcing

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2
Q

What business organization addresses the upstream part of the supply chain?

A

Sourcing

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3
Q

What is the business function responsible for all activities and processes required to purchase goods and services from suppliers

A

Sourcing

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4
Q

What are the 5 related terms that are used interchangeably

A

Purchasing
Procurement
Sourcing
Strategic Sourcing
Supply Management

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5
Q

This word refers to the overall management of supplier base, encompassing all the terms and range of activities from tactical to strategical

A

Sourcing

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6
Q

This term is defined as the process of buying goods and services

A

Purchasing

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7
Q

This term is described as having a narrow functional activity with duties such as supplier identification and selection, buying, negotiating contracts, and measuring supplier performance

A

Purchasing

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8
Q

This term is described as a tactical process and is a common title of the business function within firms

A

Purchasing

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9
Q

This term looks at sourcing function from a strategic and future-oriented perspective
- it also seeks competitive advancing with sourcing opportuneness
- builds close and long-term supplier relationships

A

Strategic Sourcing

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10
Q

Which related term is classified as more strategic?

A

Strategic Sourcing

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11
Q

Which term is classified as more tactical?

A

Purchasing

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12
Q

GO back to page 9 part 1

A
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13
Q

T/F- Tech enabled
- supply chain integration
- lower transaction costs
- faster response times
- internet and B2B e-commerce changed how sourcing goods was conducted

A

True

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14
Q

Sourcing functions elevated within the organization and created 2 new jobs from it. What are those jobs?

A

VP of Purchasing
VP of Supply

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15
Q

T/F- During the late 90’s, companies were increasingly dependent on performance of suppliers

A

True

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16
Q

When many suppliers have common items it gives the consumer the ability to have choices on where to buy what they want. This is an example of?

A

Consumer Sourcing

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17
Q

When a company has larger volumes purchased because the product is specialized might result in a slower production times because the number of suppliers is limited. Is this an example of customer or commercial sourcing?

A

Commercial

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18
Q

Which type of sourcing is much more complex?

A

Commercial

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19
Q

Acquiring the right materials and services, make sure they are available to all parts of the organization in the right
quantities, at the right price, at the right time are all important for what function?

A

Commercial Sourcing

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20
Q

What are five types of impact on the organization and supply chain

A

Operational
Financial
Strategic
Risk Mitigation
Information

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21
Q

Which organization impact ensures the right materials, right quantities, right place, and right time and strikes an optimal balance of inventory
- Shortage= disruption
- Excess=tied-up capital and financial losses

A

Operational Impact

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22
Q

Which organization impact ensures sourcing spends 50% - 90% of revenue in most manufacturing
organizations and ensures large sums of money

A

Financial Impact

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23
Q

What business function has the largest single category of spend for the company

A

Sourcing

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24
Q

Which organization impact supports organization’s strategic direction (business strategy –competitive priorities and matching criteria when selecting
suppliers)

A

Strategic Impact

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25
Q

Which organization impact minimizes supply disruptions and protects reputation? This impact also ensures suppliers meet performance standards and evaluates suppliers on a longer-term source of supply

A

Risk Mitigation

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26
Q

Which organization impact will continually collect information on prices, suppliers, goods, new products and tech

A

Information Impact

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27
Q

This process begins when a specific purchase need within the organization is
identified

A

Purchasing Process

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28
Q

A camera is needed for a phone. Sourcing then determines if this can be met with existing suppliers or if new suppliers will be required. This process is known as

A

Purchasing Process

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29
Q

What is an important part of the sourcing function of the Sourcing Process which involves identifying potential suppliers and solicits business from potential suppliers by sharing RFQ, RFP, and RFI

A

Supplier Selection

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30
Q

What 3 documents do businesses show potential suppliers?

A

Request for Quotation
Request for Proposal
Request for Information

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31
Q

Which document is used to solicit vendor responses when a product has been selected and price quotations are needed from several vendors

A

Request for Quotation (RFQ)

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32
Q

Which document is used to solicit vendor responses when the functional requirements and features are known but no specific product is in mind

A

Request for Proposal (RFI)

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33
Q

Which document is an inquiry to a potential supplier about that supplier’s product or service for potential use in the business. The inquiry can provide certain business
requirements or be of a more general exploratory nature.

A

Request for Information (RFI)

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34
Q

T/F- It is important for supplier management to be
directed through the sourcing function

A

True

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35
Q

During the sourcing process, the company should combine requests from different users for same materials to lower costs. This will result in?

A

Economies of Scale/ Quantity Discount

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36
Q

A phenomenon whereby larger volumes reduce unit cost by distributing fixed costs over a larger quantity is known as

A

Economies of Scale

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37
Q

T/F- “Maverick buying” bypasses the sourcing function. This should not be done on a routine basis, i.e.

A

True

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38
Q

T/F- the office employee making a one time purchase
of paper is an example of “Maverick Buying”

A

True

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39
Q

T/F-Sourcing Function must act as the primary supplier contact, but other functions should be able to interact with suppliers as needed.

A

True

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40
Q

This function in the sourcing process, should assess tolerance specification requirements for
purchased parts

A

Engineering

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41
Q

This function in the sourcing process, should determine which sourcing choice is preferred given the current production process

A

Operations

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42
Q

This function in the sourcing process, should understand if product changes influenced by sourcing selection will impact sales

A

Marketing

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43
Q

T/F- Companies often have “sourcing teams” and must
consider inputs from all other organizational functions.

A

True

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44
Q

What personnel is responsible for understanding a range of material requirements and whether they can meet
organizational needs.

A

Sourcing Personnel

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45
Q

An example of *** reviews material specifications and questions whether a supplier’s lower cost material can meet
performance standards set by engineering is??

A

Sourcing Personnel

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46
Q

What two things are sourcing managers responsible for?

A

Buying goods and services
Determining a fair price under a range of circumstances

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47
Q

T/F- Sourcing Managers must understand the relationship between cost and price

A

True

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48
Q

What is determined by the summing of all costs incurred to produce the product

A

Cost

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49
Q

The *** cost of producing a product or service is the sum of its fixed and variable costs

A

Total Costs

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50
Q

This type of cost are those the company incurs regardless of how much it produces; overhead, taxes, insurance

A

Fixed Costs

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51
Q

This type of costs vary directly with the number of
units that are produced, i.e. direct materials, direct labor

A

Variable Cost

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52
Q

What is the formula for total cost?

A

Total Cost= Fixed Costs + Variable Costs

53
Q

The amount at which the item is being solid in marketplace is known as

A

Price

54
Q

The lowest price that can be paid while ensuring a continuous supply of quality goods is known as

A

Fair Price

55
Q

The purchase price plus all other costs associated with acquiring the item
- All other costs may include transportation, admin costs, follow-up, expediting, storage, inspection and testing, warranty,
customer service, and handling returns
This is known as?

A

Total Cost of Ownership (TCO)

56
Q

T/F- Buyers understand that a supplier must cover
total cost and make a profit to stay in business

A

True

57
Q

T/F- After selecting a supplier, total cost of
ownership (TCO) should be estimated to
evaluate price

A

False, BEFORE

58
Q

T/F- If total cost of ownership(TCO) is not taken into account, the organization may not actually profit the desired amount above

A

TRUE

59
Q

KNOW THIS EXAMPLE

A

Variable Cost:
Materials $5,000
Labor $2,000
+
Fixed Cost:
Facility Overhead $3,500
= Total Cost $10,500
+ Profit $1,000
= Selling Price $11,500

60
Q

After suppliers have been identified, the Sourcing
Function can pursue one of two methods to reach an
agreement and develop contracts with potential
suppliers. What are the two methods?

A

Competitive Bidding
Negotiation

61
Q

This method can help develop contracts with potential suppliers because it awards business to the most qualified bidder and is the most efficient for purchasing standard items

A

Competitive Bidding

62
Q

This method can help develop contracts with potential suppliers because the communication process between two parties that attempt to reach a mutual agreement and is best when working with supplies on factors beyond the purchase

A

Negotiation

63
Q

What are some characteristics of Competitive Bidding

A
  • Performance criteria and specifications can be clearly defined
    -Volume purchased is high
  • Products being purchased are standardized
  • Many qualified suppliers exist in the marketplace
    -Time is available for bid evaluations
64
Q

What are some characteristics of Negotiation

A
  • Performance criteria and specifications cannot be clearly defined
  • Many criteria exist for suppliers selection ( cost, quality, delivery, and service)
  • Product being purchased is new or technically complex
  • Few qualified suppliers exist in the marketplace
  • Suppliers customize the product to buyer
65
Q

T/F- Supply chains have uncertainty on the demand, but not the supply side

A

False, BOTH demand and supply side

66
Q

Which uncertainty occurs when product demand is unstable and difficult to predict

A

Demand Uncertainty

67
Q

Which uncertainty occurs when there is uncertainty regarding sources of supply and their capabilities

A

Supply Uncertainty

68
Q

Demand and supply uncertainties are
related to what 2 things

A

1) the TYPE of product and 2) their supply chains

69
Q

In order for us to understand demand uncertainties, we must first understand the TYPEs of products. What are two types of products?

A

1) Functional
2) Innovative

70
Q

Which demand uncertainty products satisfy basic functions or needs
- have a long life cycle
- a lot of competition
- have low profit margins
- have a stable and predictable demand ( supply chain is easier to manage)
- are typically acquired in retail outlets, grocery and convenient stores

A

Functional Products

71
Q

Which demand uncertainty products are those that are purchased for reasons other than basic needs, such as
innovation or status
-Are new products to the market that offer something different
– Products are introduced quickly
– Have unpredictable demand patterns
– Have short life cycles
– Have supply chains that are more difficult to manage
– Can have a high profit margin

A

Innovative Products

72
Q

Uncertainties on the sourcing side of the supply chain can be classified as either:

A
  1. A Stable supply process or
  2. An Evolving supply process
73
Q

A *** supply process is where sources of supply are well established
- manufacturing processes used are mature
- underlying tech is stable

A

Stable Supply Process ( low supply uncertainty)

74
Q

A *** supply process is where sources of supply are rapidly changing
- manufacturing processes are in early stage of execution
- underlying technology is quickly evolving

A

Evolving Supply Process (high supply uncertainty)

75
Q

What supply side uncertainty process can be described as sourcing apples, lumber, or t shirts

A

Stable Supply Process

76
Q

What supply side uncertainty process can be described as sourcing certain organic foods, computer tech , or energy sources

A

Evolving Supply Process

77
Q

Figure 6.5 KNOW

A

Low demand and supply uncertainty = efficiency focused supply chain ( least challenging)

Low demand uncertainty and high supply uncertainty= Risk-hedging SC

High demand uncertainty and low supply uncertainty = responsive SC

High demand and supply uncertainty= Agile SC ( most challenging)

78
Q

What are 4 types of supply chains

A

Efficiency- focused
Responsive
Risk-hedging
Agile

79
Q

What SC am I describing? low demand and supply uncertainty, EASIEST TO MANAGE, low profit margins, operations are highly predictable, gains made here are realized through efficiency and
elimination of waste

A

Efficiency- focused

80
Q

What SC am I describing?
innovative products with stable supply base, mass customization (postponement),
challenge to respond quickly to customer demands
Example: HP printers are kept in generic form as long as possible, only customizing for
country at the last step in process

A

Responsive

81
Q

What SC am I describing?
high supply uncertainty, needs to minimize risk of supply disruption and inventory shortages (must carry high safety stocks), and pooling of resources

A

Risk-hedging

82
Q

What SC am I describing?
high demand and supply uncertainty, MOST CHALLENGING!, use mass customization strategies on the demand side, carry higher safety stock and pool resources to mitigate
risk on the supply side

A

Agile

83
Q

Which type of sourcing am I describing? (single or multiple)
- traditionally considered the best
- increases competition
- ensures supplier security
- arms-length relationship with buyer
- can result in variations between sources

A

Multiple Sources of Supply

84
Q

Which type of sourcing am I describing? (single or multiple)
- becoming the norm!!
- focuses on building close, long term relationship
- cooperative negotiation
- lower freight costs
- easier scheduling
- can be risky!! ( capacity, dependency, catastrophic event)

A

Single Source of Supply

85
Q

Which sourcing strategy has a portfolio of few suppliers?

A

Portfolio Strategy

86
Q

For a portfolio strat, suppliers are selected to create a balance of requirements such as

A

Local supplier for rapid delivery and Global with lower cost per piece

87
Q

This strategy of sourcing balances the risks of relying on a single supplier in the event of supply chain disruption

A

Portfolio Strategy

88
Q

Which type of sourcing
-reduces transportation costs
-can monitor quality more closely
- closer buyer-supplier relationships
- an emphasize on sustainability and “green” has resulted in a push toward local sourcing

A

Domestic Sourcing

89
Q

Which type of sourcing is also referred to as “off-shoring”
- takes advantage of cheaper labor
- prominent with products with easily defined standards
- higher fuel costs result in high transportation costs
- visual teaming can result in culture clashes and misunderstandings
- can also be used in service operations, i.e. call centers, processing claims, and reading x-rays

A

Global Sourcing

90
Q

What is defined by APICS as the process of having suppliers provide goods
and services that were previously provided
internally

A

Outsourcing

91
Q

What term involves substitution internal capacity and production by that of the supplier

A

Outsourcing

92
Q

Why would a company outsource? ( 3 reasons)

A
  • access technical skills
  • lower costs
  • free themselves of doing non-core activities
93
Q

What are two key dimensions that help define outsourcing?

A

Scope and Criticality

94
Q

What outsourcing dimension has a degree of responsibility assigned to the supplier
- As *** increases, buyer control decreases

A

Scope

95
Q

What outsourcing dimension emphasizes on the importance of outsourced activities.
The more critical the outsourced task is, the more
risk the buying firm takes on…which means
supplier management must step up!

A

Criticality

96
Q

What enables efficient and effective supplier selection

A

E-auctions

97
Q

What are the advantages of E-Auctions

A

-simplified comparison of supply sources
– decreased error rate
– market transparency
– increased buying reach
– reduction in ordering cycle time

98
Q

What are some of the disadvantages of E-Auctions

A
  • unrealistic low bidders seek to renegotiate after contract is awarded
    (WARNING – the
    E-auction process may eliminate better suppliers!!!!)
    – auction may include nonparticipants seeking
    to gather market intelligence
    – may interrupt an existing good supplier relationship
99
Q

What are the 3 different types of E-Auctions

A

Open
Sealed Bid
Reverse

100
Q

Which type of E-Auction am I describing?
-suppliers can select items to place offers on
– suppliers can SEE competitive offers
– suppliers can keep submitting offers until close

A

Open Auction

101
Q

Which type of E-Auction am I describing?
- sellers submit one bid while other competitors are NOT able to see his offer

A

Sealed Bid Auction

102
Q

Which type of E-Auction am I describing?
-one buyer and many sellers
– most common type
– sellers place decreasing bids
“An internet auction in which suppliers attempt to underbid their
competitors. Company identities are known only by the buyer.”

A

Reverse Auctions

103
Q

The specifications for goods or services are well defined and the Buyer’s expectations are clear. What are 4 clear expectations

A

Product Characteristics
Quality Standards
Technological requirements
Delivery Expectations

104
Q

T/F- there is a sufficient number of qualified suppliers in E-auctions and the number is usually between 3 and 6 as “sufficient”

A

True

105
Q

What are the three stages of the E-Auction Process?

A

Preparation
The Auction Event
Follow-up

106
Q

In this stage of the E-auction, the buyer sets product requirements
- buyer must identify and prequalify suppliers and must specify auction rules
- they also must pre-test tech and train participants on how to use the tech
( often the determining factor for success or failure)

A

Preparation

107
Q

This stage of the E-auction, is where most software enables communication between buyers and bidding suppliers
- tech offers the buyer alternative approaches such as price visibility and rank adjustments
( tech assistance must be available during the auction)

A

The Auction Event

108
Q

T/F- We measure sourcing performance because sourcing has a LARGE responsibility over supply chain inventory

A

True

109
Q

What are the three common performance measures of how we measure sourcing performances?

A

Inventory Turnover
Weeks of Supply
Cash to Cash Cycle Time

110
Q

The number of times that an inventory cycles or “turns over” during the year or how quickly inventory moves

A

Inventory Turnover

111
Q

What is the formula for inventory turnover?

A

Cost of goods sold DIVIDED by Average inventory value

112
Q

An accounting classification useful for determining the amount of direct materials,
direct labor, and allocated overhead associated with the products sold during a
given period of time (APICS defn.)

A

Cost of Goods Sold

113
Q

Where do we find cost of goods sold? or also known as cost of sales or cost of revenue

A

Income Statement

114
Q

Where do we find the average inventory value?

A

Balance Sheet

115
Q

What is one of a firm’s core financial statements that
shows their profit and loss over a period of time
This also displays the firm’s revenue, expenses, and profits for a period of time

A

Income Statement

116
Q

This is another one of a firm’s core financial statements that shows assets, liabilities, and owner’s equity at
a given point in time.

A

Balance Sheet

117
Q

Income Statement: Cost of Revenue = $34,768,000
Balance Sheet Inventory = $5,017,000
What is the inventory turnover?

A

34,768,000/$5,017,000 = 6.93

118
Q

Which sourcing performance provides the length of time current demand can be met with on-hand inventory

A

Weeks of Supply

119
Q

T/F- A LARGE Weeks of Supply means the firm is holding too much inventory ($$$)

A

True

120
Q

T/F- A small Weeks of Supply increases the likelihood of a
stock-out or lost sale

A

True

121
Q

What is the formula for weeks of supply?

A

Average On- Hand Inventory DIVIDED BY Average Weekly Usage SUBTRACTED BY Average Weekly Usage= COGS/52 weeks

122
Q

Income Statement: Cost of Revenue = $34,768,000
Balance Sheet 6/30/2019: Inventory = $5,017,000
What is the week of supply?

A

$5,017,000/($34,768,000/52 weeks) = 7.50 weeks of supply

123
Q

Which sourcing performance is an indicator of how efficiently a company
manages its assets to improve cash flow

A

Cash to Cash cycle time

124
Q

Which sourcing performance can be defined as the number of days between paying for raw materials and components and getting paid for a product

A

Cash to Cash cycle time

125
Q

What is the Cash to Cash cycle time formula

A

the number of inventory days of supply
+ days sales outstanding
– the average payment period for materials

126
Q

Cash-to-Cash Cycle Time Example:
Sales Revenue $5,000,000
Cost of Goods Sold $2,500,000
Gross Profit $2,500,000
Number of units sold per year 5,000,000
Average inventory on hand $500,000
Inventory days of supply 73
Days sales outstanding 25
Days payables outstanding 40

What is the Cash to Cash Cycle Time?

A

Cash-to-Cash Cycle Time = 73+25-40 = 58 days

127
Q

Cash-to-Cash Cycle Time Example:
Sales Revenue $5,000,000
Cost of Goods Sold $2,500,000
Gross Profit $2,500,000
Number of units sold per year 5,000,000
Average inventory on hand $500,000
Inventory days of supply 73
Days sales outstanding 25
Days payables outstanding 40

What is the inventory turnover ratio?

A

Inventory Turns= $2,500,000/$500,000
=5 turns per year

128
Q

Cash-to-Cash Cycle Time Example:
Sales Revenue $5,000,000
Cost of Goods Sold $2,500,000
Gross Profit $2,500,000
Number of units sold per year 5,000,000
Average inventory on hand $500,000
Inventory days of supply 73
Days sales outstanding 25
Days payables outstanding 40

What are the weeks of supply?

A

Weeks of Supply= $500,000/($2,500,000/52 weeks per year)=10.4 weeks of supply

Supply Chain Management (11 decks)

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