Definitions Flashcards
Procurement
Process of acquiring goods and services the company requires
Supply Chain Management
The extensive infrastructure needed to get the goods
Inter-business Relationships
Chain of commercial relationships
Supply
infrastructure which ensures products or services get from the supplier to the customer
Purchasing
The act of physically ordering or buying something
Fixed Costs
costs which do not change with the output of the company (must be paid independent of output of the company)
Direct Costs
Costs associated directly with the project/job/contract
Indirect Costs
Costs not directly associated with a project/job/contract
Variable Costs
Costs which change with the output of the organisation (rise as production increases)
Elements of Procurement
- Added Value
- Purchasing
- Inventory
- Waste Management
- Logistics
- Supply
- Cost
- Quality
Waste Management
Movement of waste from its inception to its final disposal
Primary Materials
Raw materials
Secondary Materials
Manufactured materials
Tertiary Sector
Provide Services
Stock Procurement
1- Primary Materials
2-Secondary Materials
3- Finished Product- stock for retail industry resale
Direct Procurement
Purchasing of large quantities of raw materials needed for production to produce product for customers
Indirect Procurement
Services and tools that do not form part of final product but required to maintain the business and production process
Non-Stock Procurement
Not on inventory, can be intangible goods. Belongs to tertiary sector; commercial services used to help run business.
Economies of scale
The trend of cost per unit decreasing as output increases and cost of tooling being shared amongst larger number of units.
Organisational budget
Monitors income and expenditure
Operational budget/expenditure
cost associated with running a business e.g. raw materials, rent, salary, transport
CAPEX
Budget relating to capital expenditure including capital purchases
OPEX
Budget relating to operational expenditure
Capital Purchases
Relate to assets of an organisation purchased to help a business develop, make money and keep with market trends
Supply Chain
How the goods transform from raw materials to end user, including all activities and organisations associated
Upstream
Getting raw materials needed for production
Downstream
Processing raw materials into finished product
Supply chain management
Aims to reduce costs, improve value and reduce risk. Gives a competitive advantage over competition by adding value through the process and achieving it in the most effective, efficient and ethical way. Also involves managing customer relationships
Procurement v Supply Chain Management
Procurement ends from the point of delivery of the goods/services; SCM continues until the end consumer receives the product.
Complex Supply Chains
Tiers of suppliers; the lower the number, the closer to buyer
Logistics
The process of planning, implementing and controlling procedures for the efficient and effective transportation and storage of goods, including services and related info, from the point of origin to the point of consumption for the purpose of conforming to customer requirements. (Control of flow of goods/services between 2 points)
Materials Management
the handling, storage, inspection and issuing of raw materials, components and finished goods
Material Requirement Planning
Materials and production planning system used in manufacturing environments- it can schedule orders, monitor inventory and manage production process
Enterprise Resource Planning
Includes more functions than MRP e.g. accounting, SCM, CRM, Manufacturing, Procurement management and materials management
Total Cost Ownership
total cost incurred by owning a product throughout its useful life
Total Cost of Acquisition
Total cost of acquiring a product from sourcing to receiving and installing. (Budget needed to get product onsite)
Internal Suppliers
linked by working either on same site or for same company
External Suppliers
Separate business entities from buying organisation
KPIs
Values that can be measured or monitored to assess levels of achievement
Supplier relationship management
Process for identifying all interactions with key suppliers and then managing them in a way that increases value from relationship for both parties
Tangible
Physical existence
Depreciate
Easier to liquidate
Cost can be easily determines
Intangible
No physical existence
Amortised
Not easy to liquidate and sell
Cost harder to determine e.g. software
Stakeholders
Any individuals or groups of individuals that have an interest in an organisation. They have an affect or are affected by the achievement of an organisations objectives
External stakeholders
Individuals outside the organisation who have an interest in the organisation and either impacted by it or could impact it
Internal stakeholders
People involved directly in the business e.g. directors
Service level agreement
An agreement between a supplier and a buyer based on quality, delivery, availability and other measurable criteria
Incoterms
Ex works Free carrier Carriage Paid To Carriage and insurance paid to Delivered at terminal
Fisher v Bell
Invitation to treat is not an offer
Felthouse v Brindley
Silence does not constitute acceptance
Contractual relationship
Consideration Intent to create legal relations Authority to sign 2 parties Offer & acceptance
Value
Extent to which a produce or service supplied to a customer or consumer meets their requirements
Requisitioning
Demand the supply of something by official order
Reverse auction
An auction in which sellers are bidding to sell services (reduce sale price)
E-auction
Auction between buyer and seller on an electronic platform
Electronic Data Interchange (EDI)
Electronic exchange of documents in an agreed format between organisations.
When does a conflict of interest arise?
When a person’s involvement within a business includes multiple interests which could influence and lead to preferential treatment
Ethics
Set of rules which govern behaviour of a person.
Moral principles influenced by professions
Actual conflict of interest
If decision affects them personally
Perceived conflict of interest
Procurement person has personal interests which could influence the process
Policy
Part of an organisations strategic plan and contains info on how a business will conduct itself and its business activities
Procedure
How a policy is delivered
Organisational Accountability
All members of business working together and independently to achieve objectives defined through policies and procedures
Step change
Unfreeze —> change —> referees
Incremental change
Constant reaction to events - less problematic as it is a gradual change
Centralised structure
Activities carried out at 1 central location
Devolved procurement
Procurement carried out by location or departments
Hybrid structures
Combo centralised and decentralised
Consortium structures
When similar organisations or organisations with same needs collaborate for their mutual benefit
Sector
A classification given to an area of industry, society or the economy to distinguish it from other areas
Economic classifications
How they were funded, objective and policy
Name the economic sectors
Public
Private
Third Sector
Compliance
adhering to regulations, following legislation and conforming to rules.
Sustainability
(1) Supplier is performing well and likely to be in existence for foreseeable future
(2) Environmentally aware and replacing natural resources used
Corporate Governance
the system of standards, procedures and policies by which an organisation is controlled
