D3 - Sourcing in Procurement & Supply Flashcards
1
Q
What are 3 measures of profitability?
A
- Gross profit margin
- Operating (net) profit margin
- Return on capital investment (ROCE)
2
Q
How do you calculate gross profit margin?
A
Gross profit (without overheads) / sales * 100%
3
Q
How do you calculate operating (net) profit margin?
A
Net profit (profit on each sale after paying overheads) / sales * 100%
4
Q
How do you calculate return on capital investment?
A
Operating profit (profit after paying overheads) / long term capital employed * 100%
Long term capital includes all business assets including shareholder funds less liabilities and outstanding costs
5
Q
What are the 4 main measures of financial stability?
A
- Profitability
- Gearing
- Investment
- Liquidity
6
Q
What are 2 measures of liquidity?
A
- Current ratio
2. Quick ratio (or acid test)
7
Q
How do you calculate the current ratio?
A
Current assets / current liabilities * 100%
8
Q
How do you calculate the quick ratio (or acid test)?
A
(Current assets - stocks) / current liabilities * 100%
9
Q
What are 3 measures of gearing?
A
- Gearing ratio
- Debt to equity ratio
- Interest cover
10
Q
How do you calculate gearing ratio?
A
External debt / (external debt + equity) * 100%
11
Q
How do you calculate debt to equity ratio?
A
External debt / equity * 100%
12
Q
How do you calculate interest cover?
A
Operating profit (profit after paying overheads) / interest
13
Q
What are 4 measures of investment?
A
- Earnings per share
- Price earnings per share
- Dividend yield
- Dividend cover
14
Q
How do you calculate earnings per share?
A
Profit attributable to shareholders / shares
15
Q
How do you calculate price earnings per share?
A
Market price per share / earnings per share
16
Q
How do you calculate dividend yield?
A
Dividend per share / market price per share
17
Q
How do you calculate dividend cover?
A
Earnings per share / dividend per share
18
Q
What are the 3 types of financial account which may be published?
A
- Profit / loss account
- Balance sheet (assets and liabilities)
- Cash flow statement
19
Q
What are the main purposes of financial accounts?
A
- To show the company financial position at year end
2. To track the company financial performance over a given period of time
20
Q
What are 4 places you can find company financial information?
A
- Financial accounts (which must be published every year)
- Credit ratings (can be provided by 3rd party organisations for low cost, D&B)
- Bank references (can show available cash)
- Market information provided by other suppliers in the market
21
Q
Give 4 examples other than selection and award criteria which make us the sourcing strategy?
A
- Make vs buy?
- Market analysis (raise awareness of supply base or any buying consortium)
- Supplier profiling
- Contracting strategy (t&m, fixed price, dual source)
22
Q
When marking award criteria there are technical considerations, give 3 examples that can be assessed.
A
- Review method statement
- Review resource plan
- Timings and delivery milestones
23
Q
What elements make up the total cost, give examples
A
Other considerations - training, delivery, defects, support, consumables, repair, maintenance, inspection, delay, inventory, handling costs, disposal
24
Q
What are 4 commonly used selection criteria?
A
- Quality management
- Supplier financial position
- Environmental policies
- Technical standards
25
What are the typically used headings in a sourcing plan?
Executive summary, description of business requirement, business case &a targets, overview of supply markets, proposed sourcing strategy, selection criteria, award criteria, project plan / timescales, sourcing team & stakeholder roles, key recommendations, sign off.
26
Name 3 e-requisitioning systems.
1. MRP - materials resource planning
2. MRP 2 - manufacturing resource planning
3. ERP - enterprise resource planning
27
What is MRP used for? (Materials resource planning)
Allows the production department to create a schedule for delivery which can then be used as requisition for the materials by the Buyer
28
What is MRP 2 used for? (Manufacturing resource planning)
Allows materials resource planning to be extended across other departments including budgeting and forecasting
29
What is ERP used for? (Enterprise resource planning)
An end to end management tool linking many departments, requisitioning, planning, forecasting, contract management etc
30
What are 5 e-sourcing systems?
1. E-requisitioning
2. E-purchase ordering (allows pos to be sent directly to supplier)
3. E-catalogues (Tailors discounts to specific contracts and customers)
4. E-auctions (anonymous bidding)
5. E-tendering (wipes out inefficiencies for paper based tendering)
31
What technical criteria can be used to mark bids against?
Proposed working methods, proposed materials, timescales and project plan, service standards, proposed delivery team, health & safety plan, technical performance, resources, communications, use of technology
32
What is a two envelope method of tendering?
A technical bid is sent in and reviewed first then if they are compliant the commercial bid is reviewed.
33
What steps must you take to ensure tenders are evaluated fairly?
1. Ensure all bids are submitted by the same date and discard late bids
2. All bids opened by impartial to the tender
3. Marked against same criteria
4. Bidding against same terms and conditions
34
What is the process for evaluating bids?
1. Receive and open bids
2. Clarify questions about the bid
3. Mark against award criteria
4. Make recommendation and gain approval
5. Award contract
35
What are 4 methods of obtaining informal bids?
1. Request for quotation (RFQ)
2. Request for information (RFI)
3. Invitation to quote (ITQ - public sector)
4. Request for proposal (RFP)
36
What are 5 forces affecting competition?
1. Threat of new entrants
2. Buyer bargaining power
3. Supplier bargaining power
4. Threat of substitutes
5. Market rivalry
37
What external factors may affect your sourcing requirement?
```
S - social (demographic, cultural changes)
T - technological
E - economic changes
E - environmental changes
P - political movement
L - legal changes
E - ethical
```
38
What techniques are there for analysing data obtained by market research?
1. Supply chain mapping - look at start to finish supply chain from raw materials to finished products
2. Value chain analysis - involves analysing the supply chain to see where costs are incurred and value can be added.
3. Portfolio analysis - analysing requirements
4. Competition analysis (porters 5 forces)
5. Macro environmental analysis (STEEPLE)
39
Give examples of economic indices.
Stock markets, sector indices, sustainability trackers, commodity pricing, inflation indexing
40
What is secondary data and how can you obtain it?
Secondary data is the result of other research not specifically for your use.
Obtainable by:
Press & newspapers, magazines, trade press, published indices, published market analysis, published statistical surveys, price comparison websites, professional institutes such as CIPs.
41
What is primary data and how can you obtain it?
Primary data is obtained by ones self for a specific purpose.
Obtainable by:
Contact with suppliers, market research, buyers records, suppliers marketing (catalogues, publications, brochures, websites, price lists), online market exchanges - auctions & forums, trade fairs, exhibitions, conferences, benchmarking, networking
42
What are 4 main data sources you can use to understand present and future spend profiles?
1. Suppliers can provide you with data
2. Own data can be extracted from sap
3. Invoices can manually be checked
4. Purchase ledgers are sometimes held by finance
43
What should be considered before sourcing as part of your market research?
1. How many suppliers are in the market?
2. How much is your expenditure?
3. What's the competition?
4. What are the price trends?
44
What legislation around sourcing is in place in the private sector?
1. Utilities procurement regulation
2. Fraud and money laundering
3. Anti bribery legislation
4. Anti competition legislation
5. Payment protection legislation
45
What is the five-step contract award procedure in public sector procurement?
1. Evaluate offers
2. Make recommendation
3. Inform market
4. Provide opportunity for legal challenge
5. Accept offer and form contract
46
What are for competitive tendering methods?
1. Open tender
2. Restricted tender
3. Negotiated tender
4. Competitive dialogue (restricted tender but with upfront conversation about dialogue)
47
What five principles define a fair selection tendering process
1. Transparency (clear award criteria)
2. Proportionality (tender process is proportional to size of purchase)
3. Mutual recognition (treating other European states as you would your own)
4. Equal treatment (of tenderers)
5. Non discrimination (because of company size etc)
48
What are benefits and drawbacks of longer procurement tasks?
+ bidders have time to develop a well constructed response
+ bids are likely to be of a higher quality
- buyers have to wait longer and it may impact on the program
- mandatory timescales must be built into a sourcing plan
49
What essential information must be submitted when advertising work in public sector procurement?
In EU it must be published in ojeu and give
- deadline for bids
- contract requirements
- contract award criteria
50
What are the 4 topics of governing legislation in public sector procurement?
1. Advertisement
2. Timescales
3. Tendering procedure
4. Contract award
51
What are the three governing principles in public sector procurement around the world?
1. Regional legislation
2. National legislation
3. Local organisational policies
52
Name the main risks to sourcing internationally
1. Currency fluctuations
2. Damage in transit
3. Governing law
4. Jurisdiction (where will disputes be settled?)
5. Payment has to be credit rather than on delivery
6. Differing standards (ASME rather than BS)
7. Ownership (liabilities need to be apportioned)
53
What is a bill of lading of air waybill and what happens if the goods are damaged?
Bill of lading is used for shipping and an airway bill is used for transport by flight. They are signed by the captain before delivery to state the condition of the of the goods.
A clean bill is no damage to the goods.
A claused bill states the damage or the loss to protect transporter
54
What does the incoterm EXW mean?
Ex works is used for any mode of transport.
The buyer is responsible for picking the goods up from the suppliers premises and all associated costs or import licenses.
55
What does the incoterm CIP mean?
Cost and interest paid is used for any mode of transport.
The supplier is responsible for getting the goods to the buyers port of choice however the buyer is responsible for customs clearance.
56
What does the incoterm DDP mean?
Delivery duty paid is used for any mode of transport.
The supplier is responsible for all delivery costs including customs clearance and is liable while in transit.
57
What does the incoterm FCA mean?
Free carrier is used for any more of transport.
The supplier hands over the goods cleared for export to a buyers carrier of choice with duty paid and when the buyers carrier takes the goods the buyer becomes liable.
58
What does the incoterm CPT mean?
Carriage paid to is used for any mode of transport.
The supplier delivers to a specific location such as a rail depot and the buyer takes ownership.
59
What does the incoterm DAT mean?
Delivery at Terminal is used for any mode of transport.
The supplier is responsible for delivering to a terminal except any costs relating to importing and assumes risk until the good are unloaded at the terminal.
60
What does the incoterm DAP mean?
Delivery at Place is used for any mode of transport.
The supplier delivers it to a place except any import costs and assumes all risks until offloaded at the buyers location.
61
What does the incoterm FAS mean?
Free alongside ship is used for shipping and waterways only.
The supplier is responsible for placing the goods alongside the ship and clearing the goods for export. This is used for maritine transport but not multimodal transport in containers, typically for heavy lifting or cargo.
62
What does the incoterm FOB mean?
Free on board is used for shipping and waterways only.
The supplier must get the goods on board a vessel nominated by the buyer and are responsible for the goods until they're on board. Export costs are paid by the supplier and liability passes to the buyer when on board.
63
What does the incoterm CFR mean?
Cost and Freight is used for shipping and waterways only.
The supplier must get the goods on board a vessel nominated by the buyer and are responsible for the goods until they're at the destination port. Liability passes to the buyer when at the destination port.
64
What does the incoterm CIF mean?
Cost, Insurance, Freight is used for shipping and waterways only.
The cost for insurance is responsibility of the supplier and the liability passes when they arrive at the destination port. Export is also paid for by the supplier.
65
What is the difference between selection criteria and award criteria?
Selection criteria is used upfront to assess if a supplier could deliver the work (Customer references, Track record, financial credit rating, environment management, staff numbers, capacity, insurance, endorsements, QA accreditations, experience, technical standards, supply chain.
Award criteria is evaluated on the scope of the offer (Price, method statement, timescales, materials, proposed people).
66
What methods of prequalifying suppliers are there?
RFI - request for information used to find information about a company.
PQQ - pre qualification questionnaire is very objective and scored against pre set requirements.
67
Why is it important (particularly in public sector) to distinguish between award criteria and selection criteria?
When a supplier is invited to tender they cannot be ruled out on the basis of selection criteria (things which aren't in the scope of the offer).
68
What is the price / quality ratio?
The price / quality ratio is used in an assessment which compares what is more important in the tenders you recieve, the price or the technical quality. In public sector this is referred to as MEAT (Most economically advantageous tenderrer)
69
Name 3 types of organisations governments try to protect from sourcing.
1. Small Medium Enterprises, a large % of the population is employed by them so it is important they aren't excluded from sourcing requirements.
2. Local Companies, government have a duty to protect local businesses and ensure they aren't disadvantaged.
3. Third Sector Organisations (TSO's) - include non profit organisations or charities which can't compete in the private sector.
70
What are advantages of using SME's?
1. Quicker Response
2. Fewer overheads
3. Specialisms larger organisation can't always achieve
71
What are Carters 10C's or pre-qualification?
Competence, Capacity, Commitment, Cash, Cost, Control, Consistency, Cultural compatability, Cleanliness compliance, Communication
72
What considerations must a buyer make when trading abroad?
1. Exchange rates
2. Export / Import licenses
3. Ethical trading
4. Applicable law
5. International standards
73
What would be the likely steps in a tendering process?
Advertise, Pre-qualify, Invite tenders, Evaluate offers, Award contract
74
What are 3 methods for tendering?
1. Open tender - work is advertised and anyone can bid. (best used in small markets)
2. Restricted tender - The buyer will pre-qualift and select suppliers to submit bids.
3. Negotiated tender - The buyer allows opportunity after the submission to negotiate and then submit a final offer.
75
Identify the 6 steps in the sourcing cycle.
1. Identify the requirement
2. Market analysis
3. Sourcing plan
4. Pre qualify suppliers
5. Evaluate offers
6. Award contract
76
What are benefits / drawbacks of dual sourcing?
+ better capacity, more resource to call on
+ greater competition forcing continuous improvement
+ avoid complacent suppliers
+ mitigate risk of failure
- miss on potential economies of scale
- lose efficiencies gained through loyalty
77
What are 4 methods of sourcing?
1. Single sourcing - exclusive agreemnts
2. Multiple sourcing - various suppliers used
3. Tendering - formal bidding process
4. Negotiation - discussion with 1 or more suppliers to make agreement for delivery
78
What differences are there for a buyer between tactical & strategic sourcing
Tactical - generally price focussed, lower risk items which specify the short term need, spot buying.
Strategic - generally long term requirements, generally high value and value focussed. Market wide engagement and relationship building.
79
What is the difference between sourcing & procurement?
Procurement the process of acquiring supplies, services or works right from defining the need to contract completion including whole life management.
Sourcing is a subset of procurement about identifying, selecting and developing suppliers.
80
What does Equity mean?
It is the amount of shares issued by a company
81
What does Liquidity mean?
It is the availability of liquid assets (things you can sell in order to pay off debts)
