Chp 2 Flashcards
What is the Profit Leverage effect?
a $ saved worth more than $ sold…
its a purchasing performance that calculates impact of change in purchase spend on a firms profit before taxes
Small Value Procurment
pcard blanket purchase order blank check purchase order stockless buying petty cash
What are the 5 key activities of purchasing?
- Material Requisition /Purchase Requisition
- Request for Quotation (RFQ)
- Purchase Order (PO)
- Receiving Documentation (Packing slip)
- Supplier Invoice
What is Material Requisition/Purchase Requisition
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
What is RFQ?
Second step: a formal doc that says what you need to buy> gets bids from various companies> dictate which company gets order
What is PO?
Third step: legal doc from buying firm that states agreed bid prices for x amount of quantity > buying under terms and conditions when signed
What is Receiving Document?
Fourth step: packaging slip> receive receipt and now legally have buying contract
What is Supplier Invoice?
invoice for which amount owed
What are reasons to Buy(outsource 4)?
Cost advantage(save $)
Insufficient capacity (be more efficient)
lack of expertise
quality (FMC)
What are reasons to make(vertically integration 6)
protect propriety technology (patents) no competent supplier better quality control utilize existing idel capacity control/minimization of lead time transportation lower warehousing costs
When we bring functionality into our company, we call it?
Vertical Integration
When we take it outside our company its called?
Outsourcing
What is SSQDC?
Safety: internal external Sustainability: green, ethics Quality: Consistency, conformance, service Delivery: reliability, speed, capacity Cost: Total cost of Ownership
What are some reasons for single supplier 6?
(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
What are some reasons to favor multiple suppliers 5?
need capacity spread risk of supply interruption (redundancy) create competition information dealing with special kinds of business
What are advantages to Centralization 6?
concentrate volume leveraging purchase volume avoid duplication specialization lower transport costs no competition within units
What are advantages to Decentralization 3?
closer knowledge of requirements
local sourcing
less bureaucracy
what is centralized purchasing?
single purchase dept makes all purchasing decisions
Demand aggregation + Supplier rationalization = ?
Leverage Spending
What is a Portfolio Matrix?
Supply Contract Value(high low) vs. # of Qualified Suppliers(few, many)
Spend leakage
maverick spend, non-central compliance, failure of supplier to adhere to terms and conditions
What is included in Total Cost of Ownership 7?
Per Piece Price (unit price) Quantity Requirements (discounts) Payment Terms (Cash Discounts) Transportation Costs (Location) Ordering Costs Cost of Quality (Maintenance Cost) Delivery Performance
