Chapter Two/Three Flashcards
Who are Merchant Buyers?
Wholesalers and retailers who purchase for resale
Who are Industrial Buyers?
Purchase raw materials for conversion, services, capital equipment, & MRO supplies
What are the primary goals of purchasing?
- Ensure uninterrupted flows of raw materials at the lowest total cost
- Improve the quality of the finished goods produced
- Optimize customer satisfaction.
What objectives does purchasing contribute to?
- Actively seeking better materials and reliable suppliers
- Work closely with strategic suppliers to improve quality materials
- Involving suppliers and purchasing personnel in new product design and development efforts.
What are the steps of the old system to the Manuel purchasing process?
- Material Requisition (MR)/Purchase Requisition (PR)
- The Request for Proposal (RFP) & Quotation (RFQ)
- The Purchase Order (PO)
What is a Material Requisition (MR)/Purchase Requisition (PR)?
Stating product, quantity, and delivery date. May originate as a planned order release from the MRP system.
What is a The Request for Proposal (RFP) & Quotation (RFQ)?
Buyer identifies suppliers & issues a request for quotation (RFQ) for routine items or a Request for Proposal (RFP)for highly technical products.
What is a The Purchase Order (PO)?
Is the buyer’s offer & becomes a binding contract when accepted by a supplier?
What is The e-Procurement Purchasing Process?
- Material user inputs a materials requisition: Relevant information such as quantity and date needed.
- Materials requisition submitted to buyer: At purchasing department (electronically).
- Buyer assigns qualified suppliers to bid: Product description, closing date, & conditions are given.
- Buyer reviews closed bids & selects a supplier
What are the four sourcing decisions?
- Make or buy decision (theory)
- Make or buy (simple) financial evaluation
- Managing the supply base (portfolio)
- Total Cost of Ownership
Define Backward Vertical Integration
Refers to acquiring sources of supply
Define Forward Vertical Integration
Refers to acquiring customer’s operations.
Reasons for favoring a single supplier
- To establish a good relationship
- Less quality variability
- Lower cost
- Transportation economies
- Proprietary product or process
- Volume too small to split
Reasons for favoring multiple suppliers
- Need capacity
- Spread risk of supply interruption
- Creates competition
- Information
- Dealing with special kinds of business
What is Purchasing Organization?
Is dependent on many factors, such as market conditions & types of materials required.
What is Centralized Purchasing?
Purchasing department located at the firm’s corporate office makes all the purchasing decisions.
What is Decentralized Purchasing?
Individual, local purchasing departments, such as plant level, make their own purchasing decisions.
Advantages to Centralized Purchasing
- Concentrated volume
- Leveraging purchase volume
- Avoid duplicationSpecialization
- Lower transportation costs
- No competition within units
- Common supply base
Advantages to Decentralized Purchasing
- Closer knowledge of requirements
- Local sourcing
- Less bureaucracy
What is a Decentralized-Centralized organization?
Decentralized corporate and centralized at the business unit
What is a Centralized-Decentralized organization?
centralized large national contracts at a corporate level and decentralized items specific to business unit
Supplier Relationship Management
Refers to streamlining the processes and communication between buyer and supplier using software applications manage processes more efficiently and effectively.
What is Transactional SRM?
Used to track supplier interactions such as order planning, order payment and returns
What is Analytic SRM?
Allows the company to analyze the complete supplier base.
What are the five key points of an SRM system?
- Automation
- Integration
- Visibility
- Information sharing
- Optimization of processes & decision making
What is Vender Managed Inventory (VMI)?
Suppliers manage buyer inventories to reduce inventory carrying and stockout costs for the buyer.
What is Third-Party Logistics (3PL) Provider?
An external supplier that performs all or part of a company’s logistics functions
What is the Total Cost of Ownership and what type of costs does it include?
Cost of a product is MORE than just per unit cost.
- Unit cost
- Ordering cost
- Logistics costs
- Inventory cost
- Maintenance cost
- Capital costs
- Others?
What is supplier development?
A buyer’s activities to improve a supplier’s performance and/or capabilities based on the following approach
