Chp 2

Question 1

What is the Profit Leverage effect?

Answer 1

a $ saved worth more than $ sold…

its a purchasing performance that calculates impact of change in purchase spend on a firms profit before taxes

Question 2

Small Value Procurment

Answer 2

pcard
blanket purchase order
blank check purchase order
stockless buying
petty cash

Question 3

What are the 5 key activities of purchasing?

Answer 3

1. Material Requisition /Purchase Requisition
2. Request for Quotation (RFQ)
3. Purchase Order (PO)
4. Receiving Documentation (Packing slip)
5. Supplier Invoice

Question 4

What is Material Requisition/Purchase Requisition

Answer 4

first step Find out there is a need…: (direct) Material:
need more material/ get more material
(non direct ) Purchase: need more computers for new hires and manufacturing assembly

Question 5

What is RFQ?

Answer 5

Second step: a formal doc that says what you need to buy> gets bids from various companies> dictate which company gets order

Question 6

What is PO?

Answer 6

Third step: legal doc from buying firm that states agreed bid prices for x amount of quantity > buying under terms and conditions when signed

Question 7

What is Receiving Document?

Answer 7

Fourth step: packaging slip> receive receipt and now legally have buying contract

Question 8

What is Supplier Invoice?

Answer 8

invoice for which amount owed

Question 9

What are reasons to Buy(outsource 4)?

Answer 9

Cost advantage(save $)
Insufficient capacity (be more efficient)
lack of expertise
quality (FMC)

Question 10

What are reasons to make(vertically integration 6)

Answer 10

protect propriety technology (patents) 
no competent supplier
better quality control
utilize existing idel capacity
control/minimization of lead time transportation
lower warehousing costs

Question 11

When we bring functionality into our company, we call it?

Answer 11

Vertical Integration

Question 12

When we take it outside our company its called?

Answer 12

Outsourcing

Question 13

What is SSQDC?

Answer 13

Safety: internal external
Sustainability: green, ethics
Quality: Consistency, conformance, service
Delivery: reliability, speed, capacity
Cost: Total cost of Ownership

Question 14

What are some reasons for single supplier 6?

Answer 14

(no choice, there is only one choice for that source)
establish good relationship
less quality variability
lower cost
transportation economies
proprietary product/process
volume too small to split

Question 15

What are some reasons to favor multiple suppliers 5?

Answer 15

need capacity
spread risk of supply interruption (redundancy)
create competition
information
dealing with special kinds of business

Question 16

What are advantages to Centralization 6?

Answer 16

concentrate volume
leveraging purchase volume
avoid duplication
specialization
lower transport costs
no competition within units

Question 17

What are advantages to Decentralization 3?

Answer 17

closer knowledge of requirements
local sourcing
less bureaucracy

Question 18

what is centralized purchasing?

Answer 18

single purchase dept makes all purchasing decisions

Question 19

Demand aggregation + Supplier rationalization = ?

Answer 19

Leverage Spending

Question 20

What is a Portfolio Matrix?

Answer 20

Supply Contract Value(high low) vs. # of Qualified Suppliers(few, many)

Question 21

Spend leakage

Answer 21

maverick spend, non-central compliance, failure of supplier to adhere to terms and conditions

Question 22

What is included in Total Cost of Ownership 7?

Answer 22

Per Piece Price (unit price)
Quantity Requirements (discounts)
Payment Terms (Cash Discounts)
Transportation Costs (Location)
Ordering Costs
Cost of Quality (Maintenance Cost)
Delivery Performance