exam1 Flashcards
a financial plan that spells out intended actions and the funding levels required for thie completion. Types includes: direct materials ___, indirect materials ___, capital expenditures ___ and operating expense ___ of each function
Budget
delivery timing, packaging, inventory levels, and risk
operational considerations
buying organizations long-term objectives and organizational strategy
Strategic
a legal entity that exists independently of its creators which has many rights given to individuals. A ___ may enter into contracts, buy and sell, ect
Natural Law?
the process of removing something from a location, typically the removal of scrap, surplus, excess, obsolete and waste item from an organization premises
disposal
the capacity to affect actions, behaviors or opinions, often without overt or apparent action
Influence
general statements about expected outcomes. they are targets set by management to give an organization direction
objectives
a request to suppliers to make submissions to a purchasing organization. one of the critical documents is the specification/SOW. generally called Invitations for proposal (IFP) in public sector and in negotiated procurement it is call an RFP or RFQ
Solicitation
the series of activities involved in obtaining necessary inputs for an organization. (1) determination and description of need; (2) communication of need; (3) identification of potential sources; (4) solicitation and evaluation of bids and proposals; (5) preparation of the purchase order; (6) follow-up and expediting; (7) receipt and inspections; (8) clearing the invoice and payment; (9) maintenance of records
Sourcing Process
the amount of an asset that remains beyond what is needed
Surplus
forecasting tool composed of autoregressive and moving average concepts used to understand and predict values in time series data
Autoregressive Moving Average (ARMA)
the amount of overhead
Burden
the cost of transportation, receiving, warehousing, materials management, shipping and distribution
Logistics Costs
the process of planning, implementing and controlling the efficient, cost-effective flow and storage of raw materials, in-process inventory, finished goods and related information from point of origin to point of consumption for the purpose of conforming to customer requirements
Logistics
the observed value that occurs most often in a data set
mode
the identification and analysis of the components necessary to satisfy a particular business requirement
needs analysis
the container, wrapper or shipping box of a product
Packaging
an organizations observance of laws, regulations and specifications applicable to the business
Regulatory Compliance
a document drawn by the seller on the buyer, instructing the buyer to pay the amount of the purchase under specified circumstances
Bill of Exchange
a job title in many supply management organizations. used to describe individuals engaged in procurement activities, regardless of their rank in the organization
Buyer
an organizational structure in which decision-making authority for specific activities rests with a particular group or location
Centralized
(1) businesses established for the purpose of buying goods from manufacturers and reselling them to a general customer base. Distributors sell in smaller quantities than manufacturers often with immediate delivery, and provide services that manufacturers are not willing to do; (2) process by which commodities move to final customers, including return of goods. activities include storing, transacting, packaging, and shipping; (3) relative arrangement of the elements of a statistical population based on distinctive characteristics
Distribution
the price of a currency as it is being exchanged for another
Exchange rate
the act of making special request, apply pressure and engaging in extraordinary effort to get delivery in less than normal lead time, to ensure on-time delivery or to speed up delivery of a delated order
expediting
(1) charge payable in the short-term, including depreciation, that is not for items to be resold; (2) cost associated with running a business
Expenses
the uninhibited flow of goods and services across national boundaries
Free Trade
the process of seeking qualified supplier of goods or services anywhere in the world
Global Sourcing
any material, component or product that is held for use at a later time
Inventory
the country where an organization has its world headquarters
Home Country
the study of the behavior of an economy at the aggregate level, as opposed to the level of specific subgroups or individuals (microeconomics). for example, a macroeconomist might consider the industrial sector, the services sector or the farm sector, but will not consider specific parts of any of these sectors
Macroeconomics
in this principle of international trade, one trading partner extends to a second the same low tariff rates that it confers to some third country’s with which it has its most unimpeded commerce. equal trading among all world trade organization members. if a tariff is reduced 5% for one nation, all WTO members will have their tariff cut by 5% into that nation
Most Favored Nation (MFN)
a version of the make or buy decision in which an organization elects to purchase a good or service that previously was made or performed in-house. may involve sourcing and using a supplier that provides the completed item or service rather than buying components and manufacturing them in-house
Outsourcing
a monopoly create by law that gives ___ holder the sole right to make, use/or sell the ___ articles and to prevent others from doing so without the holder’s permission for a set amount of time
Patent
the practice of deliberately concentrating purchase of a particular item or service with one source in preference over the other sources in a competitive marketplace
Single Sourcing
the use of the only available source possessing the ability to fulfill the purchasing organizations needs
Sole Sourcing
a description of the technical requirements for a material, product, or service
Specification
the time interval between product concept development and introduction to the marketplace. it includes specification development, product development, and release production
Time-To-Market
the value added to a product or service at each stage of its production and distribution, based on its increased value at that stage. From a lean thinking perspective, value is added when the customer is willing to pay for the activity, it is done right the first time (no waste) and the action positively changes the product or service
Value-Added
a common method of selecting sources for contract awards. suppliers interest in participating in the process are asked to submit information on prices and other specified elements of performance. major public sector purchases commonly are awarded on a sealed bid basis, with the law requiring that the award be made to the lowest responsive and responsible bidder. In private sector purchasing, competitive bids are usually solicited from several suppliers with the stated intention of selecting those organizations with whom negotiations subsequently will be conducted to arrive at a final contract award decision
Competitive bidding
(1) the request made to potential suppliers for a bid on goods or services to be purchased; (2) government purchasing: the solicitation document used in sealed bidding and in the second step of two-step bidding
Invitation for Bid (IFB)
proposals to make a contract; a binding expression of interest and willingness to create a contractual relationship usually including certain terms
Offer
a statement of price which may be given in response to a request. May or may not be a legally binding offer
Quotations
a solicitation document used to obtain general information about products, services, or suppliers. it is information request, not binding on either the supplier or the purchaser, and is often used prior to specific requisition for items
Request for Information (FRI)
a solicitation document used to obtain price and prosed method of execution of a project
Request for Proposal (RFP)
a solicitation document used to obtain price quotes for a specified product or service. These are often a follow-up to an earlier RFI. the law may or may not treat a quotation as a binding offer
Request for Quotations (RFQ)
a situation that exists when costs and revenue are equal. profit is zero
break even
method for identifying the output level at which revenues equal cost or that the costs of two systems are the same
Break-Even Analysis
the act of bringing inside an organization a function that has been performed outside the organization
Insourcing
the partial or complete transfer of control over government-owned assets to a private sector organization. Also, the act of transferring responsibility for selected government functions and services to the private sector
Privatization
the function of planning, organizing, controlling and improving the quality of products or services
Quality Management
the process of buying or selling through the use of competitive bidding
Auction
goods or services with similar characteristics or attributes that are grouped together for planning and management purposes and are brought and sold in any trading arena
Category
any tangible good that can be bought, sold or bartered. traded on a commodities exchange that facilitates the trade and establishes and enforces rules and regulations about the trading process
Commodity
is an actual commodity that is under a future contract
Cash Commodity
commodity traded on a spot market, pending delivery
Spot Commodity
a remedy available to a buyer in the event of a breach of contract by a seller. Displaying due diligence, the buyer is entitled to obtain the goods in the open market and to recover damages from the seller
cover
a technology that enables the electronic sharing of products designs between manufacturers and suppliers. it generally includes functionality to share documents in collaborative environments so that the documents can be viewed, analyzed, marked up and then easily shared with other resources
E-Design
an entire business organization, from the front line employees to top management, and all functions in-between
Enterprise
usually refers to a particular type of computer software package that integrates various functions within an organization. it may be used to enable processes such as forecasting, materials management and purchasing
Enterprise Resource Planning (ERP)
identifying suppliers to fulfill specific purchasing requirements using internet technology
E-Sourcing
a group that comes together to achieve shared objectives. In the supply area, a buying or purchasing consortium is created when two or more organizations coming together to increase purchasing power and reduce costs
Industry Consortium
a managerial and organizational approach to integrate the supply management functions in an organization. it involves planning, acquisition, flow and distribution of production materials from raw materials to finished goods. activities include procurement, inventory management, receiving, stores and warehousing, in plant material handling, production and control, traffic, surplus and salvage
Materials Management
a unilateral contract right, by means of which, for a specified time, the buyer may elect to purchase additional supplies or services called for in the contract, or may elect to extend the term of the contract
Option
an entity that transforms various types of inputs into outputs for chosen customers. not only covers for-profit entities but also non-profit institutions and government agencies
Organization
a fixed duration bidding event hosted by a single buyer, in which multiple prequalified and invited suppliers compete for business. potential suppliers review the requirements, choose to bid and enter their selling prices. suppliers prices are visible to competitors often resulting successively lower prices
Reverse Auction
an analysis of expected demand, the supply market, specific suppliers and the items in question, as well as development of budget. these activities culminate in the development of purchasing objectives and specific purchasing strategies. subsequent purchasing actions during the year are based off of this plan. many organizations develop an annual ___ plan for each major category of materials and services purchased
Purchase Plan
colloquial term for the total amount of money budgeted and/or spent on a particular product of service
Spend
analysis of historical spending patterns in an organization, usually by commodity or category. this analysis provides information about the type of items purchased and their cumulative dollar value, which becomes the substance for future strategic and operational purchase planning
Spend Analysis
a list containing the quantity and description of all materials required to produce one unit of a finished product. a ___ is an essential element in using a material requirements planning (MRP) system
Bill of Materials (BOM)
(1) the proactive compilation of requirements information regarding demand (customers, sales, marketing, finance) and the firms capabilities from the supply side (supply, operations, and logistics management); (2) the development of a consensus regarding the ability to match requirements and capabilities; (3) the agreement upon a synthesized plan that can most effectively meet the customer requirements within the constraints imposed by supply chain capabilities
Demand Management
a process in which a purchaser pre-qualifies multiple suppliers and invites them to participate in a fixed-duration Web-based bidding or sourcing event
Electronic Auction
goods that have completed the manufacturing or assembly process and are ready for sale to external customer
Finished Goods
a methodology for defining the raw material requirement for a specific item, component, or sub-assembly ordered by a customer, or required by the business process. ___ systems will usually define what is needed, when it is needed, and, by having access to current inventories and pre-existing commitment of that inventory to other orders to other customers, will indicate what additional items need to be ordered to fulfill this order
Material Resource Plan (MRP)
a relocation of business processes to a non-domestic location, usually to reduce costs
Offshoring
a statistical term referring to the likelihood of occurrence of an event, action, or item
Probability
is a set of activities that have a beginning and an end, occur in a specific sequence and have inputs and outputs
Process
the process of identifying elements or factors, and their probability of occurrence, that can lead to injury, damage, loss or failure
Risk Analysis
Person(s) with a vested interest in something; those who will be affected by and/or can influence decision making process. at the corporate level this includes management, employees, stockholders, customers, suppliers and so on who may gain or lose by a specific decision
Stakeholder
In the US a business that is at least 51% owned by a person or persons who have been socially or economically disadvantaged due to color, ethnic origin, gender, physical capabilities or other factors that result in barriers to conduct business
Historically Underutilized Business (HUB)
the desired end results toward which effort and resources are directed. ___ should be specific, measurable, attainable, results-oriented and time bound. Well written ___ direct attention, regulate effort, increase persistence and encourage the development of goal-attainment strategies and action plans
Goals
product, including raw materials, manufactured parts and completed merchandise. all things which are movable at the time of identification to the contract for sale, including growing crops, timber, oil, and gas
Goods
partnering with internal stakeholders to segment and manage supplier relationships. identifying and executing relationship strategies with stakeholders to improve overall efficiency, performance, accountability, compliance and value
Supplier Relationship Management (SRM)
test procedures that lead to formal acceptance of a new or changed product, process, or system. For example, the overall condition of a given lot may be determined by inspecting only a portion or sample of the low. for software system, a user acceptance test plan is agreed to by the buyer and seller, carried out and then results are compared to pre-established severity thresholds to determine corrective action
Acceptance Testing
a legally binding offer to sell or to buy. In public sector purchasing, a ___ is an offer in a sealed ___ding process. in the private sector, the offer may be referred to as a quotation and sometimes a proposal
Bid
a written instrument executed by a bidder or contractor (the principal) and a second party (the surety) to assure fulfillment of the principals obligation to a third parrt
Bond
a competitive procurement practice that: (1) is initiated by a request for proposals (RFP) which sets out the organization’s requirements and criteria for proposal evaluation; (2) assumes the submission of timely proposals by the maximum number of possible suppliers; (3) usually provides discussion with those suppliers found to be within the competitive range; (4) concludes with the award of a contract to the one supplier whos proposal is most advantageous to the organization, considering price and the other factors included in the solicitation
Competitive Proposals
often used interchangeably with “term”, a provision in a contract. in traditional common law a distinction is drawn between ___ precedent and ___ subsequent
Condition
a complete description of an item, including the composition of materials to be used in making the product, as well as size, shape, capacity, dimensions, tolerances and sometimes method of treatment of manufacture
Design Specification
specifications generally agreed to and shared across all organizations operating in a given industry. examples include lumber grades, wire thickness, bar codes and railroad track width
Industry Standard
a specification that is created by an industry group, a supplier, or a government agency
External Specification
a ratio, usually expressed as percentages, indicating average changes in values, quantities or prices. typically, the changes are measured over time, each item being compared with a corresponding figure from some selected base period which is set as 100%
Index
freestanding agreement or contract provision restricting the disclosure of certain information, generally proprietary information, given by one party to the other in the course of contract performance and imposing liability for unauthorized disclosure
Non-Disclosure Agreement
a process where organizations invite or require suppliers to submit their bids over the internet or private network
Online bidding
a specification that details the performance criteria required for a particular material or product
Performance Specification
a ratio expressing the relationship between the price of a commodity at a given point in time to its price during a specified base period. this information can be used to chart price level changes
Price Index
a measurement tool compiled by the US Bureau of Labor Statistics (BLS) reflecting the average change in prices charged by producers during a given time period, compared to those charged in a base year. the ___ measure inflation at earlier stages of production and marketing process than does the consumer price index
Producer Price Index (PPI)
compiled by the US Bureau of Labor Statistics the ___ program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services
Consumer Price Index (CPI)
the performance of executives duties, the act or process of managing or administering the conduct of affiars of the supply chain management process or function
Administration
an ongoing or comprehensive process for ensuring the continuity or uninterrupted provisions of operations and service, including risk or contingency planning, disaster planning, disaster recovery, business resumption and contingency plans
Business Continuity Planning (BCP)
preparation to deal effectively with unforeseen events, such as supply disruptions from single sources or natural disasters
Contingency Planning
a legally enforceable written or oral agreement between two or more competent parties that defines a job or service to be performed. the total legal obligation which results from the parties agreement as affected by this Act and any other applicable rules of law
Contract
an evaluation of actual or anticipated cost data. the application of experience, knowledge, and judgement to data to project reasonable estimated contract costs. estimated costs serve as the basis for buyer-seller negotiation to arrive at a mutually agreeable contract price
Cost Analysis
a quantitative technique that provides a logical approach to decision making. a basic ___ consists of establishing a set of weighted criteria upon which potential options can be decomposed, scored, and summed to gain a total score which can then be ranked. it may be used to rank supplier options, product options, design options or any other set of multidimensional entities. this is a variation of the L-shaped matrix and is also called the Pugh matrix
Decision Matrix
developing a contingent plan in the event of a man-made or naturally disruptive event such as a strike, earthquake, hurricane or major fire
Disaster Planning
protective software used to prevent unauthorized access to confidential recorts
Firewall
any liquid having a flash point below 100 degrees fahrenheit
Flammable liquid
the time that elapses from placement of order until receipt of order, including time for order transmittal, processing, preparation and shipping
LEad time
planning, managing, and performing the processing of materials into intermediate or final products, usually in large quantities
Manufacturing
an exploratory and communication process (identifying interest, walk-away alternatives, and options) internally and externally to reach a mutually satisfactory agreement, often involves a buyer and seller, each with their own viewpoints, interest, and objectives relative to all phases of a procurement transaction- including price, service, specifications, technical and quality requirements and payment terms
Negotiations
the risk of loss from inadequate or failed internal processes, systems and staff, or from external events
Operational Risk
the examination of a suppliers price proposal or bid by comparison with reasonable benchmarks, without evaluation of the separate elements of cost and profit making up the price
Price Analysis
a measure of an organizations ability to withstand adverse economic conditions, the ___ is usually taken from the organizations income statement and is calculated by dividing the gross profit by sales
Profit Margin
a special piece of work outside the normal flow of daily activities that has a specific objective and a time and budget limit
Project
discovering new knowledge about products, processes, and services, and then applying that knowledge to create new and improved products, processes, and services that fill market needs
Research and Development
organization formed to serve world business by promoting trade and investment, open markets for goods and services, and the free flow of capital
International Chamber of Commerce (ICC)
also known as the Pareta rule, it is the finding that a minority of a population accounts for the majority of a given effect. For example, in inventory management, 20 % of the inventoried items account for 80% of the total dollars
80/20 Rule
Application of Pareta’s law of the 80/20 rule to define three categories: A, B, C this is used to determine the relative ratios between the number of items and the dollar value of the items purchased repetitively for stock; the number of purchase orders and the dollar value; and the number of suppliers and percent of spend. In most organizations, 10-20% of the items (A) account for 70-80% of the investment, the next 15-25% of the items (B) account for 10-20% of the investment; and the remaining 65-75% of the items (C) account for 5-10% of the investment. inventories, purchases, and suppliers should be managed accordingly, with more emphasis placed on the strategic management of “A” items and looser controls and less attention on the “C” items
ABC Analysis
(1) a situation in which the capacity to accommodate products is less than what is needed to ensure smooth flow through the system; (2) in a kraljic matrix or quadrant analysis, the ___ quadrant represents items that are low-value and high-risk. items in this category are generally purchased in large quantities and inventory levels are monitored closely to avoid interruptions in supply
Bottleneck
the process of overseeing and maximizing the financial and operational value of a group of related commodities, products or services by identifying and monitoring total spend and consumption, keeping abreast of market shrifts, new alternatives or inventions, forecasting market supply and demand, and continuously evaluating supplier performance in order to drive down cost, improve supplier performance, and respond to changing business requirements and/or enhance stakeholder satisfaction
Category Management
the process of managing a commodity (corn, gold, natural gas, oil) including the identification and monitoring of total spend and market forces by commodity to control elements such as increasing leverage, managing cost, increasing quality, ensuring continuity of supply and/or focusing on the supplier relationship
Commodity Management
a process of combining resources usually to gain some type of advantage. for example, by combining less than truckload (LTL) or less than carload shipments from various facilities at a centrally located point, and transporting them as a larger shipment, the shipper typically pays a lower freight rate. or, by combining purchases from different divisions of a company, the buyer is able to leverage the consolidated volume for a lower price per unit
Consolidation
service inputs, such as labor, which are traceable to a unit of production
Direct Services
a set of processes or rules designed to optimize desired results and limit (optimally eliminate) undesired results, typically embedded within management practices
Governance
a four box matrix that reflects the segmentation of spend based on an assessment of the value of the spend (x-axis) relative to the market risk to acquire (y axis). the matrix typically includes four quadrants: acquisition or non-critical-low risk, low value items; critical or bottleneck-high risk, low value; leverage-low risk, high value; strategic, high risk, high value
Kraljic Matrix
part of an indemnification obligation requiring the indemnitor to protect the indemnitee from any harm resulting from the indemnitor’s actions or inactions; also referred to as save harmless
Hold harmless
a comprehensive study of the feasibility or viability of a new concept or idea, usually undertaken before entry into the marketplace
Market analysis
segmentation model originally introduced by Peter Kraljic. it is a 2x2 matrix with four spend categories assess along two dimensions- the risk in the marketplace and the value or impact of the category on the organization
Portfolio Analysis
the process of coordinating the organization, planning, scheduling, controlling, monitoring and evaluating of activities so that the objectives of a project are met
Project Management
the process through which an organization acquires its goods and services. the multi-step process includes; (1) recognition of need; (2) specification of need in terms of quality, quantity and timing; (3) search for potential sources; (4) analysis of suppliers and proposals; (5) negotiation with and selection of supplier; (6) administering the contract; (7) evaluation of performance and feedback to supplier; (8) disposal of excess, scrap or surplus
Sourcing Cycle
a discount designed to encourage prompt payment of an account. the net price of the purchased item (after allowing for the ___) yields a fair profit to the supplier and is the price the supplier expects most customers to pay. those who do not pay within the specified time limited must pay the gross (undiscounted) price
Cash Discount
the knowledge, behavior and skills that employees are expected to demonstrate to perform effectively within the organization
Core Competency
stipulated amount of time stated on an invoice that the customer has to pay and settle the invoice. can also include inducements for early payments as well as penalties for late payments
Payment Term
is the next best option that the negotiator will pursue if he or she chooses not to continue with the negotiation or the negotiation fails
Best Alternative to a Negotiated Agreement (BATNA)
linkage concept used to describe dependencies and relationship between and among businesses
Chain
a formula that expresses the empirical relationship between the number of units produced and the number of labor hours required to produce them. each time cumulative production volume doubles, the cost of the nth item produced decreases by a defined percentage. sometimes called the improvement or experience curve. the curve is most applicable to the production of repetitively produced complex products. Buyers can use the ___ to analyze the effects of learning on unit costs, and production managers can use it to determine staffing and scheduling requirements
Learning Curve
a team constituted for the purpose of conducting a specific negotiation. team members typically represent the functional areas to be addressed in the negotiation process; the purchasing member usually chairs the team
Negotiation Team
a model used by Porter to describe competition. the five forces are; the extent and intensity of direct competition; the threat of entrants; the threat of substitute products and services; the power of buyers; and the power of suppliers
Porter’s Five Forces
defines the scope of work and sets the expectations and defines the relationship of the buyer and service provider. it typically addresses what the provider is promising, how it will perform, the metrics and means of measurement, the consequences in the event of failure to perform, and any longer-term aspects of the agreement. commonly used with application service providers
Service Level Agreement (SLA)
technology-based communication that is user-created. where defined interest and groups can be found and influence can be gained based on content and frequency. now a significant part of business communication
Social Media
the analysis of existing or new suppliers on the basis of key performance indicators such as technical quality, production capacity, delivery, service, cost and managerial capabilities which are included in the spec of statement of work
Supplier Evaluation
special remedy for breach of contract available to a purchaser where a court orders the seller to perform the contract as agreed rather than awarding money damages
Specific Performance
the design and management of seamless, value-assessed processes across organizational boundaries to meet the real needs of the end customer. the development and integration of people and technological resources are critical to successful supply chain integration
Supply Chain Management
a term that indicates to the supplier that the buyer does not intend to negotiate after offers are received, so the supplier should submit final pricing and deliverables. it is included to prevent suppliers from submitting offers higher than they are willing to accept
Best and Final Offer (BAFO)
a specific department or supply management professional is given authority and responsibility for purchasing for the organization.
Centralized Buying
a process in which a purchaser pre-qualifies multiple suppliers and invites them to participate in a fixed-duration web-based bidding
Sourcing Event
the indication of an offeree to be bound by the terms of an offer; may be by communication or behavior
Acceptance
Contract provision under which major (and usually uncontrollable) events may excuse a party, in whole or in part, from performance of its contractual obligations. sometimes referred to as “Acts of God”, this term can be written to include various events that are not actually Acts of God and may or may not be beyond the parties control
Act of God Clause
the transfer by one contracting party (assignor) of his/her rights or obligations under a contract to another person (assignee). sometimes also referred to as delegation of duties
Assignment
activities directed toward maintaining a planned and expected flow of materials and services needed by the organization. this originally was directed toward evaluating and selecting suppliers that were reliable and able to source and produce the needed products on time, but in recent times this has expanded to include issues from longer supply chains, market supply and demand risks, and geological events such as floods, earthquakes, tsunamis, volcanoes, etc
Assurance of Supply
a contract in which both of the contracting parties make promises to each other. such a contract is formed when an offer is accepted formally by the offeree
Bilateral Contract
executed with the proper legal authority and imposing adherence to a commitment, an obligation, or a duty such as a ___ arbitration or a ___ agreement
Binding
a term commitment (usually one year or more) to a supplier for certain goods or services over a predetermined period of time at predetermined prices, or at prices to be determined based on market or other conditions. this practice is aimed at reducing the number of small orders, utilizing short-term release to satisfy demand requirements
Blanket Agreement
a failure to perform any obligation included in contract terms. Failure of material or product to meet quality or other specifications warranted by the supplier
Breach
Legal requirement for creation of a valid contract encompassing: (1) age; (2) mental capacity; (3) authority). sometimes referred to as capacity to contract or contractual capacity
Competent Parties
damage, loss or injury that arise not directly from a party’s act (such as a breach of contract) but from some consequence or result of that act; example loss profit, lost revenue, personal injury, cost-based, and incentive contracts
Consequential Damages
the pricing terms of an agreement between a buyer and a seller. examples include fixed price, cost-based, and incentive contracts
Contract Type
a form of intellectual property in which legal protection is provided by a country or governmental entity granting the authors and creators of original literary, dramatic, musical, artistic and other intellectual property, published or unpublished, the exclusive right to publish, reproduce, display, sell, perform, transmit or prepare derivative works from the original
Copyright
pricing arrangements or contract types that provide for payment of allowable, allocable and reasonable costs incurred in the performance of a contract, to the extent that such costs are prescribed or permitted by the contract. these contracts establish an estimate of total cost for the purpose of obligating funds and establishing a ceiling that contractor may not exceed without the approval of the buyer. types of cost-reimbursable contracts include; (1) cost without fee; (2) cost-sharing; (3) cost-plus-incentive; (4) cost-plus-award fee; (5) cost-plus fixed fee; and (6) cost-plus percentage-of cost
Cost-Based Contract
an opportunity given to a seller to correct product defects or other contract non-performance prior to an agreed-upon deadline
Cure
an upward movement. in supply management, often used to indicate an upward movement of price, also known as economic price adjustment
Escalation
legal principle that prevents a person from asserting a position that is inconsistent with his or her prior conduct if injustice would thereby result to a person who has changed position in justifiable reliance upon that conduct
Estoppel
a specific assurance made by the seller either in writing or orally concerning the performance, quality or nature of the goods or services sold. ___ies may be in the form of an affirmation of fact, a description or a sample
Express Warranty
a contract term which indicates that the price is set at a certain amount and is not subject to change (unless the purchaser requests a change in specification, delivery or terms)
Fixed-Price
the power of a court to hear a particular dispute and/or to exercise control over particular parties to a dispute
Jurisdiction
a preliminary written contractual instrument that authorizes the contractor to begin immediately performing the manufacturing or services requested. the ___ typically is followed by a definitive contract document
Letter Contract
any obligation incurred as a result of law, rule or agreement; being legally obliged and responsible; a debt or an obligation to another party
Liability
contractual arrangement with a supplier that defines price and terms of business but does not contain specifics of release or delivery. separate purchase orders are released later as goods or services are needed and reference the master purchase, whose price and terms are incorporated by reference
Master Purchase Agreement
contracts usually tied to maintenance of capital equipment
Master Service Agreement (MAS)
that which one is required to do as part of contract performance. contracts and purchase orders represent monetary ___s of a purchasing organization to a supplier
Obligation
generally, something that comes before; in law, the legal theories and rulings established in a previous case decision
Precedent
a legally binding document prepared by a purchaser to describe the terms and conditions of a purchase. in the contracting process the ___ may function as an offer, an acceptance, a confirmation of an oral agreement or a trigger for periodic performance (release) under an established contract
Purchase Order (PO)
contract formed when an offer (normally that of the buyer) is accepted through performance (normally by the supplier). this process is common for purchasing transaction, unless an acknowledgement or other acceptance form is requested
Unilateral Contract
common practice in government procurement by which unsuccessful bidders challenge the award of a contract. specific requirements for ___ (form, timing, etc) will vary depending on the particular government entity involved
Protest
private means of settling disputes between parties in which an objective outside party acts as a fact finder and a primary decision-maker. by prior agreement between the parties, the ruling of an arbitrator or panel may be binding and may not be subject to appeal
Arbitration
a failure to perform any obligation included in contract terms
Breach of Contract
action of one party to end a contract due to breach by the other party-UCC 2-106(4). the right to cancel may be provided by law or in specific contract language
Cancellation
conformity with or acting in accordance with certain standards
Compliance
methods for resolving contractual disputes outside the judicial system such as facilitated negotiation, conciliation, mediation, fact-find, non-binding arbitration and binding arbitration
Conflict Resolution
the management of various facets of a contract to ensure that the contractor’s total performance is in accordance with the contractual commitments and that obligation to the purchaser are fulfilled
Contract Administration
the actions taken by both parties in a contract upon completion of their respective obligations. these actions may include verification that all work has been duly performed, accepted, properly invoiced and fully paid
Contract Closeout
various means of resolving disputes or conflicts between the parties to a contract, including negotiation, arbitration, mediation, litigation
Dispute Resolution
the designated time frame used by an organization to provide an accounting of financial activities within a 12-month period
Fiscal Year
contract provision under which major (and usually uncontrollable) events may excuse a party, in whole or in part, from the performance of its contractual obligations;e.g. fire, ware or severe weather. sometimes referred to as Acts of God; this term can be written to include various events that not actually acts of god and may or may not be beyond the parties control
Force Majeure
the basis of all commercial dealings and the body of law, including statutory law, common law, case law, and private law, that governs contract enforcement
Law of Contracts
legal requirement for creation of a valid contract that it be consistent with federal, state, or provincial constitutions and not in violation of legal statutes or public policy
Legality of Purpose
legal action in which one party initiates suit against the other party in a court of law
Litigation
a voluntary, non-binding contract dispute resolution process in which a neutral third party attempts to assist parties in teaching an agreement. ___ may be transformed into arbitration and become binding or it may arise from an arbitration proceeding
Mediation
a document used in contract administration that normally includes a statement of work, the key schedule milestones for task accomplishment and the total amount of funds allotted to the tasks. upon receipt of the ___, the supplier will begin work and start cost and scheduling reporting for the tasks concerned
Notice to Proceed (NTP)
legal proceeding under which a party is returned to the condition it was in prior to the injury or is put in the position it would have been in if the breach had not occurred
Restitution
provision in a purchase order or contract that allows for unilateral ending of the contract, either in whole or in part, due to some behavior of the other party, usually breach or default
Termination for Cause
provision in a purchase order or contract that allows for the unilateral ending of the contract, either in whole or in part, without fault of the other party. not provided for by the law itself, ___ requires a specific contract provison
Termination for Convenience
the specific authority given to an agent by a principal
Actual Authority
the legal relationship that exists between two parties by which one (the agent) is authorized to perform or transact specified business activities for the other (the principal)
Agency
a person or an organization authorized to act for another person or organization (the principal) in prescribed dealings with a third party. all purchasers are most sales personnel are agents but may have differing levels of actual authority
Agent
type of authority created in an agency relationship when a principal permits an individual to operate in a fashion that allows third parties to believe that the individual is an authorized agent of the principal. it represents unauthorized purchasing or bypassing of the purchasing function by other functions within an organization. also known as rogue or maverick buying
Apparent Authority
minerals mined where there are human rights abuses and/or armed conflict. the current focus minerals are tantalum, tin, gold, or tungsten, and the US securities and Exchange Commission require certain companies to publicly disclose t heir use of ___ that originate in the Domestic Republic of Congo or adjourning countries, starting in 2014
Conflict Minerals
involves assigning tasks to subordinates, granting authority to them, and holding them responsible for results
Delegation of Authority
an individuals obligation to serve the best interest of selected stakeholders, especially those of his/her employer or principal in an agency relationship
Fiduciary Duty
Category of agency providing broad powers and considerable latitude in using the agents own judgement to carry out duties assigned by the principal. most purchasing professionals will fit into this category
General Agent
the legal relationship that exists between two parties by which one (the agent) is authorized to perform or transact specified business activities for the other (the principal)
Law of Agency
part of actual authority given by a principal to an agent. when the principle is less than comprehensive in describing the actual authority given, the law implies whatever is necessary to accomplish the principal’s expressed intent
Implied Authority
the process of an employee buying a needed product or service without complying with the organizations normal or prescribed process; off-contract buying
Maverick Buying
a written authorization or contract granting one party legal authority to act for another party
Power of Attorney
person or organization that has authorized another (the agent) to act on its behalf. for most employees, the employer is the ___
Principal
agents who authority is limited to performing only specific tasks. such agents have limited disscretion in determining how to carry out their duties
Special Agent
US federal anti-trust law that requires a supplier engaged in interstate commerce to sell the same item to all customers at the same price (assuming the same purchase quantity). exceptions permit a lower price: (1) for a larger purchase quantity, providing that the seller can justify the lower price through lower costs; (2) to move obsolete or distress merchandise; (3) to meet the lower price of a competitor in a certain geographic region
Robinson-Patman Act
US federal anti-trust law; passed in 1890 that makes it illegal for parties to act in combination, conspiracy or collusion with the intent of restricting competition in interstate commerce. price-fixing and group boycott fall within the parameters of this law
Sherman Anti-Trust
US statutory collection of provisions governing various aspects of commercial transaction such as sale of goods (article 2), lease of goods (2a), letters of credit (article 5) and secured transactions (article 9). statutory language is recommended by the National Conference of Commissioners on Uniform State Law (NCCUSL) to encourage uniformity among the states but must be adopted by individual state legislature to become effective
Uniform Commercial Code
a systematic review, normally by an independent party such as internal or external auditor, to verify that accounts, records, or performance are working as expected
Audit
a process, effected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting and compliance
Internal Control
US federal law adopted in 2002 in an attempt to restore public confidence in corporate governance; regulates the accounting profession and imposes extensive reporting requirements on all publicly-traded corporations in the US. the law requires internal financial controls to provide assurance of the reliability of financial reporting and preparations of financial statements
Sarbanes-Oxley Act (SOX)
identifies and defines five components that are required for internal control: (1) control environment; (2) risk assessment; (3) control activities; (4) information and communication; (5) monitoring
COSO Framework
an industry term for software solutions that help organizations manage customer relationships in an organized way and which includes all aspects of interaction of an organization has with its customer, whether sales or service related
Customer Relationship Management (CRM)
the path materials in the supply chain flow; e.g, raw materials move ___ to the manufacturer and, ultimately, the end customer
Downstream
that part of the total assets of a business not supplied by creditors (owner invest funds)
Equity
material in various stages of product-completion, including everything from raw material released to production to completed products awaiting final inspection and acceptance as finished goods
In-process Inventory
a worldwide federation established in 1947 that promotes development of global standards to enhance international business interactions. the ___ is comprised of standards organizations from more than 140 countries
International Organization for Standardization (ISO)
the business function concerned with planning and controlling inventory
Inventory Management
families of standards and guidelines. the ___ family is primarily concerned with quality management or what the organization does to fulfill the customer’s quality requirements and applicable regulatory requirements while aiming to enhance customer satisfaction and achieve continual improvement of its performance in pursuit of these objectives
ISO 9000
process required to ensure enforceability of a security interest, typically involves public filing of a financial statement
Perfection
the completion of ones contractual obligations
Performance
the location where a transportation organization receives a shipment from the shipper
Point of Origin
a guideline for decision making
Policy
a measurement of supplier quality that compares existing processes, constraints in these processes, and ___ competitive technologies that may be available to meet customer needs. two indices commonly used to measure ___ are Cp and Cpk
Process Capability
the ratio of annual operating income to the total capital invested in the business
Return on Investment
a quality management program with a goal of no more than three defects per million parts and an outstanding commitment to quality
Six Sigma
media used for both the long and short term ___ of data including mass ___ devices, tapes and discs
Storage
a process of documenting all tiers of suppliers primarily to support risk and mitigation and time-to-recovery concerns
Supply Chain Mapping
a supply chain mapping model (originally developed by the supply chain council which has since merged with APICS) that offers definitions, mapping conventions, metrics, and methodology for constructing the map. it also includes all flows: information, goods and money
Supply Operations Reference (SCOR)
the act of following the path along which something moves, such as a shipment from its departure to its destination. ____ capability is important for all modes of transportation
Tracking
the reverse of the path that materials in the supply chain follow; e.g, raw materials are ____ from the manufacturer and the manufacturer is ___ from the end customer
Upstream
a facility for receiving, storing and shipping materials to and from production or distribution locations
Warehouse
a close relationship between a buyer and seller in order to attain some advantages from each other in a positive way. a partnership in this context does not imply a legal relationship. Buyer-seller partnerships may be of operational importance, such as a long-term, single-source with an office supplier or a strategic importance, such as a long term, single-source relationship with a supplier of a good or service of strategic importance
Alliance
competition laws, are laws which prohibit anticompetitive behavior and unfair business practices. the laws make illegal certain practices deemed to hurt business or consumers or both, or generally violate standards of ethical behavior. such laws exists in developed countries throughout the world as well as developing countries. competition law has been substantially internationalized along the lines of the US model by nation state themselves; however, the involvement of international Competition Network (ICN) is an informal, virtual network that seeks to facilitate cooperation among competition law authorities globally and is a way for national authorities to coordinate their own enforcement activities. the ICN provides antitrust agencies from developed and developing countries with a focused network for addressing practical antitrust enforcement and policy issues of common concern
Antitrust Laws
a situation in which an individual has a personal interest as well as a job responsibility, with a possibility for a conflict between the two. the individuals actions may be influenced by his/her personally interest of performing the professional responsibility effectively
Conflict of Interest
processes that are used to maximize value by ensuring that a contract is initiated, utilized, fulfilled, modified and completed in a systematic fashion that ensures stakeholder value is maximized and risk minimized. may also be called contract administration or contract life-cycle management
Contract Management
the process of minimizing the total time required for a designated process; for example, the time required for production and delivery. efforts to shorten cycle time often focus on reducing wait time and/or eliminating unnecessary steps
Cycle Time Reduction
a practice that brings together one or more selected suppliers with a buyers product or service design team early in the product development process. the objective is to utilize the suppliers expertise and experience in developing a product specification that is designed for effective and efficient product roll-out
Early Supplier Involvement (ESI)
in manufacturing, ___ supplies to the final assembler, while tertiary-tier suppliers supply to another supplier
First-tier Suppliers
a newly introduced idea, system of thinking, method, product or process with attributes that do not currently exist
Innovation
a key performance indicator representing a suppliers level of performance against the buyers definition of ___.
Responsiveness
an aggressive approach to development a relationship with a supplier in which the buyer takes the initiative in making the proposal for the relationship and the specific business transaction- a reversal of the buyer/seller marketing practice
Reverse Marketing
“innate excellence”; a precise and measurable variable which is inherently present in the characteristics of the product/service, define by the user and therefore products and services have to have clusters of attributes which groups of people (users) want: “right the first time”; conformance and efficiency; design and measure conformance with no waste, meaning lower costs; performance at an acceptable price; or performance at an acceptable cost or conformance to specifications, satisfying or surpassing customer needs throughout the life of the product
Quality
a performance measurement and management document that records the ratings from a performance evaluation process
Scorecard
the systematic leveraging of purchasing’s resources and capabilities through mutually beneficial relationships with other internal and external players to strengthen the organizations competitive advantage
Strategic Partnering
a systematic effort to create and maintain a network of competent suppliers, and to improve various supplier capabilities that are necessary for the purchasing organization to meet its competitive challenges
Supplier Development
providing assistance to a supplier. the scope of mentoring may be limited or extensive, and may range from providing technical assistance with a manufacturing problem to lending capital so the supplier can make appropriate investments in equipment and raw materials
Supplier Mentorship
a commitment over an extended time to work together to the mutual benefit of both parties, sharing relevant information and the risks and rewards of the relationship. these relationships require a clear understanding of expectations, open communication and information exchange, mutual trust and a common direction for the future. such arrangements are a collaborative business activity that does not involve the formation of a legal partnership. the term “strategic alliance” is used in many organization to mean the same thing. in some organizations however the term “strategic alliance” is used to describe a more inclusive relationship involving the planned and mutually advantageous joint utilization of additional operating resources of both organizations
Supplier Partnership
an entities strategically important activities, typically highlighted to improve cost or differentiation
Value Chain
insightful initiatives undertaken to enhance the worth, relevance or importance of a product, service or system
Value creation
a general term applying to those things sought from a partner company when one’s own does not have the technology, capability, talent, time or capacity to provide on their own. unlike outsourcing, which is generally about cost, asset and head-count reductions, ___ is a top-line concept, where revenue growth and market growth are the pursuits
Access
a standard or point of refence used in measuring or judging an organization’s performance according to selected criteria
Benchmark
a process by which selected practices and results of one organization are compared to those of one or more other organizations to establish targets for improvement. ___ can be performed by identifying world class organizations and visit them for information gathering and comparison or by responding to surveys from third-party independent research organizations that collect, aggregate and disseminate benchmark data
Benchmarking
an organization within an industry that is identified as a state-of-the-art performer on selected benchmarks for an activity, operation or process
Best-in-Class
a system of moral principles or rules of conduct recognized (and prescribed in the case of a company or organization) as essential to a particular class of actions
Business Conduct
the maximum output or producing ability of a machine, a person, a process, an organization or a product or service
Capacity
(1) the circumstances, objects or conditions that surround an entity and may affect it or be affected by it. For example, the supply manager seeks to manage, control or influence the external supply ___ to efficiently and effectively conduct that supply management process
Environment
term that refers to practices or processes that are environmentally sound and follow the tenets of sustainability; e.g, ___ building is the practice of increasing the efficiency with which buildings and their sites use and harvest energy, water, and materials, and reducing building impacts on human health and the environment, through better siting, design, construction, operation, maintenance and removal. ___ purchasing is the practice of carefully considering the necessity of a product or service before purchasing it, and placing purchasing priority not only on the price and quality, but also on the impact that a product or service has on the environment. ___ economics focuses on the importance of the health of the biosphere to human wellbeing. ___ living is a lifestyle intended to ensure that one’s impact on the environment is as minimal and/or positive as possible
Green
measurements considered critical to the performance of a business or process, usually calculated and reviewed on a regular basis
Key Performance Indicators (KPI)
a comparison of actual performance to a planned level or standard to determine the degree of achievements as well as opportunities for improvement. may be applied to individuals, departments, processes or organizations such as suppliers
Performance Evaluation
a management technique for evaluating the performance of a particular function, person or organization such as a supplier. for suppliers, key performance metrics may include on-time delivery, flexibility, quality, basic competitive pricing and after-sales service
Performance Measurement
a framework of measurable corporate policies and procedures and resulting behavior designed to benefit the workplace and, by extension, the individual, the organization and the community as they relate to diversity and inclusiveness of the supply base, workforce, environment, ethics, financial responsibility, human rights, health and safety, and sustainability
Social Responsibility
the condition of being protected or free from the occurrence or risk of injury, danger, failure, error, accident, arm or loss
Safety
the ability to meet current needs without hindering the ability to meet the needs of future generations in terms of economic, environment and social challenges
Sustainability
a picture of what the organization will look like and be doing in the future. this perception of the organization’s future must be specific and shared to have an effect on behavior
Vision
a legal entity, organized to engage in commercial transactions, that is at least 51% owned and controlled by one or more minority persons who are American citizens. Ownership interest in the organization must be real, substantial and continuing
Minority Business Enterprise (MBE)
organization chartered in 1972 that promotes minority business development opportunities and provides resources for minority-owned business
National Minority Supplier Development Council (NMSDC)
a partnership in which the supply management organization wants the supplier to provide some unique or specialized product or service. it is usually reciprocal by design
Business Partnership
the strategic analysis of each supplier to determine the extent to which the supplier contributes to the core competence and competitive advantage of the buying organization. supplier can then be segmented according to the strategic value of the relationship, and the investment of resource can be aligned with that value
Supplier Segmentation
an organizations list of suppliers that have been evaluated and approved for purchases
Approved List
suppliers who meet an organizations selection criteria and have been added to the approved list
Approved suppliers
a supplier that has been researched and betted and is deemed eligible to become certified
Certifiable Supplier
a supplier whose quality control system has proven to be highly reliable, thus eliminating the need for incoming inspection
Certified Supplier
the concept of organizations intensively searching increasing large and complex amounts of data to find trends, identify customer and supplier behaviors, manage risk, enhance market intelligence, and so on. the data may come from on proprietary source or may come from aggregating multiple data capture points
Data Mining
efforts by an organization to distinguish its market offerings based on the distinctive products, services or other evaluative dimensions
Differentiation
individuals, companies or other organizations that fail to meet the standards established by a buying organization and are barred from competing for that organizations business
Disqualified Suppliers
diversity signifies variety, including variety in the ownership of organizations. in supply management, diversity typically means an organizations efforts to include different categories of suppliers in its sourcing process and active supply base and to address the opportunities and challenges that arise from difference and similarities
Diverse Supplier
(1) the process of examining items on arrival to ensure that they meet the specifications to which they were purchased; (2) the function that does this examination
Incoming Inspection
a contract established by an organization to meet its ongoing needs and intended to be used organization-wide. it sets forth the basis of pricing to be used to determine the costs of specific projects as they are defined. quotes are obtained on a project-by-project basis the holder of the ___ are based upon the pricing and terms and conditions
Master Price Agreement
an internet database created by the US small business administration (SBA) for government contractors and small businesses seeking federal, state, and private contracts
Pass
(1) a key site on the internet that numerous people visit; (2) a communication entrance or area for an organization
Portal
a group of suppliers that an organization has determined meets its expectations for quality, delivery and/or price and that are able to respond to unexpected changes. often, the organization establishes master price agreements with ___s for items where ___s have been identified, the entire organization is required to buy from these suppliers
Preferred Supplier
suppliers who meet an organization’s selection criteria and have been added to the approved list
Prequalified Suppliers
a series of integrated processes in new ___ chronicling steps from idea conception to commercialization
Product Development
a management-level process to develop an operating plan based on input from sales (sales plan or forecast), manufacturing (capacity), materials management (inventory levels and material availability), and finance and other stakeholders. demand is compared to production plan, materials plan, budget and workforce requirements. a primary goal is establishment of production rates that satisfy demand (by maintaining, raising or lowering inventory or backlog) while keeping the workforce relatively stable
Production Planning
the strategy of right-sizing the number of line items within a portfolio, thus simplifying support requirements
SKU Rationalization
strategically analyzing each supplier to determine the extent to which the supplier’s product contributes to the core competence and competitive advantage of the buying organization, and segmenting supplier into categories corresponding to competencies in order to effectively leverage relationships across the enterprise; also known as supplier segmentation
Supplier Differentiation
determining and maintaining the appropriate number of suppliers by category/item depending on the risk and value of the item/category. initially, rationalization often means reducing the size of the supply base. longer term, the process focuses more on managing the size of the supply base particularly as market dynamics change. this method reduces the expenses involved in qualifying and maintaining large supplier bases
Supply Base Rationalization
a leading-edge activity, operation or process that is innovative and successfully implemented and thus provides a more efficient and effective means of conducting business, helping an organization to reduce its costs and improve quality and customer service
Best Practice
a structured proposal for business improvement that functions as a decision package for organizational decision makers
Business Case
something of economic value. a tangible ___, such as real estate, a building, equipment or cash, can be touched. an intangible ___, such as a brand, trademark, or copyright or patent, cannot be touched
Asset
equipment used by an organization for its production potential that costs more than a predetermined threshold value and whose cost will be depreciated over time
Capital Equipment
the plan for what happens to a project after the current funding comes to an end. exit strategies are concerned with all aspects of the long-term survival of the project and may include a fundraising strategy or business plan. or, a fund’s intended method for liquidating its holdings while achieving the maximum possible return. in a buyer-supplier partnership or alliance, it is advisable to have a plan for ending the partnership or alliance if it becomes untenable. also known as a forward strategy
Exit Strategy
a statistical procedure for measuring a random sample of a lot of material to determine acceptability of the whole lot. the entire lot may be accepted or rejected based on the results of the sample as the sample is assumed to be representative of the population. involves determining the maximum number of defects discovered in a smaple before the entire batch is rejected
Acceptance Sampling
term often used interchangeably with “contract” but which has a different definition in the US law. Defined in UCC as “the bargain of the parties in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade of source of performance…whether an ___ has legal consequences is determined by the provisions of the Act, if applicable; otherwise by the law of contracts
Agreement
an organization that provides software applications over the internet
Application Service Provider (ASP)
Brining together individuals for a facilitated exchange of ideas about a specific topic for the purpose of getting input and gaining perspective that may influence decision-making. Focus groups are a technique used in qualitative research
Focus Group
the value of goods or services received from suppliers and other creditors from which invoices have been received but not yet paid by the buying organization. also, that branch of an organization which receives invoices and processes payments to suppliers and creditors
Accounts Payable (A/P)
a prediction based on quantitative (numeric) or qualitative (non-numeric) data. ___s attempts to predict future activities, such as demand, with sufficient accuracy to be the basis of planning
Forecast
the commercial activity of providing funds and capital; the branch of economics that studies the management of money and other assets; to obtain or provide money for; to sell or provide on credit; the management of money and credit and banking and investments
Finance
a statement about the nature and purpose of an organization. ___s are used to focus energies and decision-making within the organization, as well as to indicate to customers and suppliers those values that are important to the organization
Mission Statement
(1) the process of obtaining the best quality at the best price, including specifications development, value analysis, supplier market research, negotiation and buying activities, to meet the objectives identified through category management; (2) the term used to reflect the entire purchasing process or cycle
Sourcing
the selection and management of suppliers with a focus on achieving the long term goals of a business
Strategic Sourcing
in six sigma, a full-time leadership position in a team with responsibility for development related programs and monitoring process
Black Belt
the increase in the variability of orders upstream from retailer to wholesaler to distributor to factory even when the actual customer demand is fairly stable
Bullwhip effect
a cause-and-effect diagram that captures all the possible causes of a problem in a format designed to show their relationships to the problem (the effect) and to each other
Fishbone Diagram
a process improvement method that offers a practical approach to improvements, whether at the office, logistics function or the ware house. by assigning everything a location, time is not wasted looking for items. it is a concept that originated with the japanese and has five rules: seiri, seiton, seiso, seiketsu, shitsuke
Five S (5S)
system in which materials are purchased, transported and processed “___” for their use in subsequent stage of the manufacturing process. an operations management philosophy whose objectives are to reduce waste and cycle time. operationally, ___ minimizes the inventory at all levels. requires consistent quality at the appropriate level and frequent on-time delivery of small lot sizes
Just-in-Time System (JIT)
a japanese term for continuous improvement. the understanding that process and therefore product quality can improve as the result of numerous small improvements made continuously overtime
Kaizen
a japanese term meaning “signal”. it usually a printed card that contains specific information such as a part name, description, quantity and so on that signals a cycle of replenishment for production and materials. it is an order release mechanism and one of the primary tools of a JIT manufacturing system
Kanban
containing little excess. a ___ organization is on where ___ thinking is applied to identify value-creating activities and eliminate all others which represent waste in systems, processes, procedures and practices
Lean
a combination of six sigma quality with lean production to eliminate waste and achieve major cost, inventory and lead time reductions in less than a year
Lean Six Sigma
the act or process of building or creating a product or service; manufacturing, mining or growing something for sale
Production
a simple technique for getting past proximate causes to the real or root cause characterized by asking why reputedly. efforts should be undertaken to eliminate or reduce the root cause. may also identify root causes by drawing a fishbone chart or ishikawa diagram
Root Cause Analysis
a form of strategic planning resulting in the identification of possible future situations, outcomes, and trends that may drive or impact the business or industry
Scenario Planning
an integrated approach to production which manages equipment, materials and people in the most efficient manner while ensuring a healthy and safe work environment. it is built on two main concepts: “Just-in-Time” production and “jidoka”, which is the ability to stop production lines in the event of a problem to avoid passing along defects. this system allows the company to build in quality at the production process
Toyota Production System (TPS)
an extreme form of change whereby a company or a business model is altered in what it does, how it does it, the systems used, and culture of its management employees
Transformation
all processes and activities that transform raw materials into an end product or service for a customer
Value Stream
originally a lean manufacturing technique, in which the transformation of materials is traced from beginning to end to determine if there is waste in the process either in the form of a step where no value is added or point of “wait time” when material is being stored to await further value-adding transformation. this concept may also be applied to services
Value Stream Mapping
a change in data caused by one of four factors: special cause, common cause, tampering or structural ___
Variation
the total accumulation of costs for an imported item, including purchase price plus freight, handling, duties, customs clearance, and storage to a designated point
Landed Cost
is a type of total cost of ownership analysis that deal specifically with capital purchases such as equipment. considers purchase price of the equipment, plus all operating and usage costs of the item over its useful life
Life-Cycle costing (LLC)
the combination of records and procedures that discover, record, classify and report information about the financial position and operations of an organization
Accounting System
calculation used to determine profitability at a product level by looking at product variable costs in relationship to product revenue. also called contribution margin
Contribution to Profit
when managing a firm budget and various projects within it, cost management is imperative to controlling expenses and monitoring predicted and actual costs
Cost and Price Management
an effort to prevent or reduce supplier price increases and ancillary charges through the use of value analysis, negotiations and a variety of other techniques. although cost-avoidance efforts prevent increased spending, they do not result in a tangible budget savings, and there is a continuing debate over how reporting of cost-avoidance savings should be handled
Cost Avoidance
used by purchasers to understand better the logic behind a supplier’s pricing, especially as it pertains to materials, direct labor and overhead expenses. typically used to support pricing, and lead to a better understanding of the process that culminates in make-or-buy decisions
Cost Modeling
a process improvement method that offers a practical approach to improvements, whether at the office, logistics function or the warehouse. by assigning everything a location, time is not wasted looking for items. it is a concept that originated with the Japanese and has five rules: seiri, seiton, seiso, seiketsu, shitsuke
Cost Reduction
a reduction in the costs incurred by an organization which has tangible results; i.e, a reduction in outside spend and/or the availability of funds that can be used for purposes other than originally intended
Cost Savings
cost that tend to remain constant, regardless of the volume of operating activity. examples include rent, depreciation and property taxes
Fixed Costs
an overall quality-related term common in purchase agreements that encompasses the physical attributes of something (form), its desired output or performance (function) and fitness (appropriate for the application or use to which it is to be put)
Form, Fit and Function
immeasurable costs related to a specific action, decision or source. for example, loss of good will, trust and image as a result of inferior products or services
Intangible Costs
(1) in product management, the interval from design of a new product through introduction, growth, maturity and decline until its end of life in the marketplace; (2) for capital equipment, the time interval during which a piece of equipment is intended to provide useful service
Life Cycle
a determination of what products or services an organization should manufacture or provide in-house, as opposed to purchasing them from outside sources
Make-or-Buy
the systematic process of linking variables or factors representing some reality in the organization or marketplace
Modeling
the cost of the opportunity to earn money lost to an organization by spending or tying up money in one investment rather than another
Opportunity Costs
the stages a product goes through from beginning to end. five distinct stages are: design, introduction, growth, maturity and decline
Product Life Cycle
generally characterized as the basic motive of a business enterprise. in contract pricing, ___ represents the surplus realized by a seller after the deduction of all costs from the selling price of the item
Profit
the predetermined or planned cost of manufacturing a single unit or of providing a single unit of service. it represents a goal or baseline that is used to project costs, based on experience and/or analysis
Standard Cost
a systematic and objective evaluation of the value of a good or service, focusing on an analysis of function relative to the cost of manufacturing or providing the item or service. ___ provides insight into the inherent worth of the final good or service, possibly altering specification and quality requirements that could reduce costs without impairing functional suitability
Value Analysis
value analysis conducted at the design engineering stage of the product development process
Value Engineering
cost categories that change proportionately with the volume of production of goods or the performance of services. major ___ categories are direct material costs and direct labor costs
Variable Costs
a type of lease that covers the full life of the equipment and is typically entered into for financial considerations
Capital Lease
allocation of a portion of the value of an asset as an expense in the current period. it represents the declining value of the asset as a cost, a non-cash expense, it acts as a tax shield and reduces tax payments
Depreciation
expenses that can be identified with individual units of output, typically direct materials and direct labor. these costs are usually treated as variable and not include general overhead or common cost allocations
Direct Costs
expenses for the traceable labor involved in producing individual units of output
Direct Labor Cost
expenses for the materials that become part of finished products, e.g., raw materials or components; includes the cost of scrap
Direct Material Cost
the series of activities involved in obtaining necessary inputs for an organization. key steps are: (1) determination an description of need; (2) communication of need; (3) identification of potential sources; (4) solicitation and evaluation of bids and proposals; (5) preparation of the purchase order; (6) follow-up and expediating; (7) receipt and inspection; (8) clearing the invoice and payment; and (9) a lease that runs for the full life or near full life of the equipment and is typically entered into for financial considerations, when the lessee seeks to gain financial leverage and related long-term financial benefits. the three major types of ___s are full payout where the lessee pays the full purchase price, plus interest charges, maintenance, insurance, and administrative costs; partial payout where the lessee receives credit for the residual value of the leased item after the lease period is completed; and lease/purchase where the lessee has the option to purchase the equipment at the end of the lease, or at specific time intervals. also known as capital lease
Financial Lease
a financial lease under which the lessee pays the full purchase price, plus interest charges, maintenance, insurance and administrative costs
Full Payout Lease
the rate of return that would make the present value of future cash flows plus the final market value of an investment or business opportunity equal the current market price of the investment or opportunity
Internal Rate of Return (IRR)
the total accumulation of costs for an imported item, including purchase price plus freight, handling, duties, customers clearance and storage to a designated point
Landed Cost
the decision to contract for the possession and use of an asset owned by another party for a period of time, in return for lease payments, or to purchase the asset
Lease or Buy Decision
a cost analysis tool that incorporates the purchase price of a piece of equipment and all operating and related costs over the life of an item; including, but not limited to maintenance, downtime, energy costs and salvage value. cost of ownership is often divided by expected lifetime production to determine cost-per-price. ___ is the concept of total cost of ownership applied to capital acquisitions
Life-Cycle Costing
any costs not directly identified with specific products or services but related to the normal operations of an organization. also referred to as overhead, ___ are composed of fixed costs, variable costs and semi-variable costs
Indirect Costs
compares the value of a dollar today to the value of that same dollar in the future, taking inflation and returns into account. if the ___ of a prospective project is positive, it should be accepted. however, if ___ is negative, the project should probably be rejected because cash flows will also be negative
Net Present Value (NPV)
a lease used to obtain equipment to fill a temporary need
Operating Lease
the value of an asset remaining at the end of a lease period
Residual Value
a cost modeling technique in which price is projected by estimating the dollar value of each cost component based on objective cost data. the estimate is the analyst’s view of what the item “should cost” versus what the supplier may ask the customer to pay once the product or service has been defined. this analysis provides a comparison point for bids or proposals and encourages the buyer and seller to identify, discuss and remove avoidable costs, and eliminate waste
Should-Cost Analysis
(1) a structured approach to determine the life-cycle at which a proposed product with a specified functionality and quality must be produced to generate the desired level of profitability overs its life cycle when sold at its anticipated selling price; (2) used in supply management to identify the allowable price for a supplier’s product or service which starts with the selling price of the buyer’s end product or service in the marketplace and subtracting out the required profit. the amount remaining is the total that it can cost the organization to make that product or to perform that service, including materials. this cost is allocated among purchases and internals costs, with the results being the target cost for each item. Purchasing then works with supplier to ensure that their prices come in at or below the target cost. further analysis and negotiation then seeks to remove costs from both the buyers and the sellers operations to reduce the price to the acceptable target level
Target Costing
money available today is of greater value than money to be received in the future
Time Value of Money (TVM)
a quantitative expression of planned costs, schedule and technical requirements for a define project; a known value or quantity with which an unknown is compared when measured or assessed; information gathered at the beginning of a study from which variations found in the study measured
Baseline
an estimate of cost over the life of a project and used as one measure of project success
Cost Baseline
the branch of social science that deals with the production, distribution and consumption of goods and services, and their management
Economics
a measure of a nation’s domestic output, which is the total value of all finished goods produced within the country during a specified time period (typically one calendar year)
Gross Domestic Product (GDP)
going in advance or showing the way. in the context of supply management, ___ typically refers to a process, practice or procedure that is more advanced than that performed by most organizations
Leading-Edge
a compilation of the specific dollar spent with each supplier in a firm’s supply base. the data is then used to develop a strategy on how to most efficiently allocate this spend to both save the firm money and provide quality products and services efficiently to users
Spend Data
is the principal fact-finding agency for the US federal government in the broad field of labor economics and statistics
Bureau of Labor Statistics (BLS)
a unit of measure used to quantify biocapacity
Global Hectares
the process of developing and implementing a budget, its steps include: (1) review goals and objectives; (2) define needed resources; (3) estimate the dollar value of needed resources; (4) present the budget/obtain the appropriation; and (5) control expenditures
Budgeting Process
the funds available for investing in assets, particularly those of a fixed nature
Capital
a financial plan, specifying the amount of money to be spent on plant and equipment. the ___ is buildings, equipment and other long-term assets used for the operation of the organization. the primary purpose of capital expenditures budgeting is to provide a formal summary of future plans for acquiring facilities and/or equipment. purchasing can use the capital expenditures budget to determine the best possible source in accordance with the funds available
Capital Budget
money spent for a long-term asset which is expected to generate a stream of future benefits
Capital Expenditure
to identify, analyze and correct problems in process or performance to bring a process that has veered off the planned course back on track
Corrective Action
an examination of both the costs and benefits of alternative courses of action to aid in determining whether a course of action should be pursued
Cost-Benefit Analysis
a financial plan spelling out the expenses incurred in the operation of a function or business process such as purchasing and supply
Expense Budget
a distinctive and desirable characteristic of an item or service
Feature
a budget that provides alternative sets of budget estimates to use under different circumstances, such as projected costs and revenue over a range of production, sales or distribution volumes. a ___ demonstrates the variance in cost and/or revenue under different circumstances
Flexible Budget
similar to a futures contract, except that it is an agreement crafted and entered into by two parties outside the scope of regulated exchange
Forward Contract
a budget that shows individual expenses during a budgetary period for each expenditure category separately without tying those expenses into broad programs or goals
Line-Item Budget
the budget for materials (maintenance, repair and operating supplies or MRO) that do not become part of finished goods
MRO Budget
a financial plan spelling out the expenses incurred in the operation of a function or business process such as purchasing and supply
Operating Budget
a schedule of events and responsibilities that details the actions to be taken in order to accomplish the goals and objectives laid out in an organizations strategic plan. the ___ should describe required financing, facilities, location, space requirements, capital equipment and human resources. the plan ensures everyone knows what needs to get done, coordinates their efforts when getting it done and can keep close track of whether and how it got done
Operating Plan
an operating, planning and budgeting process in which each manager must begin each budgeting period with no predetermined allocations, and must justify all proposed expenditures
Zero-Based Budgeting
a market established to trade a specific primary material such as gold, cattle and so on
Commodity Market
in the supply area, a buying or purchasing consortium may be created to increase purchasing power for goods or services that are common across multiple entities
Cooperative Purchasing
the interest rate used in calculating the present value of expected yearly benefits and costs
Discount Rate
the price paid for borrowing money, expressed as a percentage. ___s fluctuate according to a number of factors, including lender’s willingness to postpone use of the money, lender’s willingness to assume risk, the possibility that inflation will reduce the purchasing power of the funds by the time they are repaid and the administrative costs of processing a loan
Interest Rate
in cost-reimbursement contracts, an agreed-upon amount beyond the initial cost estimate, usually reflecting a variety of factors, including risk and services. the ___ may be fixed initially (cost-plus-incentive-fe or cost-plus-award-fee arrangement
Fee
a widely accepted set of rules, conventions, standards and procedures for reporting financial information as established by the US Financial Accounting Standards Board and other bodies. Country-specific principles may co-exist side-by-side with principles developed and published by internationally recognized bodies
Generally Accepted Accounting Principles (GAAP)
contract in which one party (lessor) agrees to transfer possession and the right to use certain goods to another party (lessee) in exchange for payment, usually periodic, by the lessee
Lease
what are the steps of the sourcing cycle?
- recognition of need
- specification of need including all technical and performance requirements, quantity, quality, and delivery timing
- searching for potential suppliers
- analyze suppliers proposals and capabilities
- negotiation with and selection of supplier
- administrating the contract
- evaluation of performance and feedback to the supplier
- disposal of excess, scrap or surplus
online communities of businesses or individuals that can share information and leverage to complete transactions; help identifying potential sources for international supply
Trade Networks
They clients receive one itemized invoice for total of services performed, they find qualified sources and perform product quality audits, supplier evaluation, contract negotiations, total logistics management, pre-shipment inspection, expediating and duty classification. this can lower the cost of international purchases instead of doing all those activities in house
Trading Companies
benefits of manufacturers vs distributors
manufacturers–> buying in bulk
distributor–> advantage if have limited warehouse space and only need small amounts of products or need to purchase a wide range of products
Benefits large vs small suppliers
small suppliers more willing to specialize in certain goods
large suppliers typically can keep up with demand if volume of business grows
benefits national vs local suppliers
national, sources with multiple warehouse and shipping locations. great competition, wide range of available products and better prices
local, faster delivery at lower costs, more willing to tailor their business, interested in maintaining a higher level of service
benefits international vs domestic suppliers
domestic, same laws, transportation links and modes of transportation
international, higher quality, lower prices, wider range of goods and services, and great competition
several organization combining their purchasing power for selected items to gain leverage in the marketplace and reduce costs. can enable smaller organizations to secure price and other advantages of large-volume buying
Consortium Buying
Governance–>market based
efficient equity markets; dispersed ownership ex US, UK, Australia, Canada
Governance–> family based
management and ownership combined EX Hong Kong, Singapore, France, Taiwan
Governance–> Bank based
government influenced in bank lending; lack of transparency; family control EX Germany, South Korea
Governance–>Government-affiliated
state of ownership of enterprise; lack of transparency, no minority influence EX China and Russia
a refund of customs duties paid on goods that an importer receives when it re-exports the goods
Duty drawback
the movement of profits made in a foreign country back to the home country
Profit repatriation
keeping work in the home country but moving to a lower cost location within the home country
Onshoring
what are Porters 5 forces
Supplier, Buyers, Substitutes, new entrants and market internal competition
few sellers and many buyers ex cereal, few organization but wide variety that compete with themselves
Monopolistic
few sellers and many buyers, price is controlled by either industry leader or a cartel
Oligopolistic
several sellers and few buyers
Monopsony
many sellers and few buyers. buyers have effect on price but sellers compete for their business
Oligopsonistic
horizontal bar chart that is used to plot the planned and actual progress of project tasks
Gnatt Chart
mathematical-based algorithm for scheduling a set of project activities that shows the longest path of planned activities to the end of the project, and the earliest and latest that each activity can start and finish without making the project longer. includes list of project activities known as the work breakdown structure, the expected time that each activity will take to complete, and the dependencies among the activities
Critical Path Method (CPM)
network planning technique used for controlling the activities in a project. pessimistic, probable, and optimistic estimate of duration. the critical path and project duration are calculated and progress is monitored using this data
Program Evaluation and Review Technology (PERT)
chart that captures all the possible causes of a problem in a format designed to show their relationship to the problem (the effect) and to each other
Cause and Effect Analysis (Fishbone diagram)
the rate of return that would make the present value of future cash flows plus the final market value of an investment or business opportunity equal to the current market price of the investment opportunity. the return that the organization would receive in the event it invested in itself rather than somewhere else
Internal rate of return (IRR)
relationship between cost, schedule, and technical aspects of a project; measure progress; accumulate actual costs; analyze actual costs; analyze deviations from plans; forecast completion of events; incorporate changes in a timely manner
three constraints: delivery, performance, and cost objectives
multiply budgeted costs of each task by the estimated percentage completed of that task. the value of each task summed together
Earned Value Management System (EVMS)
contract term which indicates that the price is set at certain amount and is not subject to change (unless the purchaser requests a change in specification , delivery or terms)
Fixed Price
supply professional agrees to pay the supplier a set price for a specified good or service. any risk that the cost of the specified good or service will exceed the fixed price are borne by the supplier. most preferred by the supply professional. encourages supplier to improve efficiency and hold costs down
Firm Fixed Price
for contracts involving a long time period and use an adjustment/escalation clause, which provides for both upward and downward changes in price as a result of change in either material or labor costs. usually used during periods of uncertainty or for market prices that fluctuate like energy, metals, and agricultural products
Fixed price with escalation
used when both future costs and amounts of labor materials are uncertain. amounts of labor and material become known during the course of the contract. typically start with a temporary fixed price that is adjusted after experience is gained and cost become known. maximum redetermination contracts provide only for downward adjustment. flexible redetermination provides for price adjustment either up or down. initial price may be subject to a price ceiling
Fixed price with redetermination
provides supplier with an incentive to control costs by establishing a target cost, target profit, a ceiling price, and final profit formula. profit formula allows supplier to share in any cost savings that accrue below target costs. this contract form is most appropriate in high-cost, long lead time projects
Fixed price with incentive
price is fixed per unit level of effort. used when neither the work nor the results can be specifically defined prior to performance. decide on specific level of effort at a specific rate per unit of effort (number of hours of testing at a fixed rate per hour), after will access results and decide if additional effort is required. usually used in contracts that include research and development work and laboratory testing
Fixed price level of effort
maximum protection for buying organization. similar to fixed price contract with adjustment except the price may only be adjusted downward due to changes in costs
Fixed price with downward price protection
fixed pricing with an option to be reimbursed for extraordinary expenses, particularly where one party has breached the original contract terms. example, if the delivery date for a contract is extended, extra cost incurred by the supplier would be allowed
Fixed price with remedies
this form guarantees the supplier reimbursement for allowable costs plus a negotiated fee
Cost plus a fixed fee
most undesirable for buying organization. supplier has no incentive to control costs, higher costs leader to higher profits for the supplier
Cost plus percentage of cost
parties establish a target cost. if suppliers costs are below target, both parties share in the savings. if costs are above target, the supplier’s fee is reduced accordingly
Cost plus incentive fee
“profit” element is included in a fee that is stated upfront
Cost plus award fee
payment for overhead and reimbursement of costs, but no profit. usually for non-profits
Cost without fee
provides for both the buying organization and the supplier to share the cost and benefits
Cost sharing
used when buying organization is not sure of its schedule, the quantity of material needed, or frequency of requirements
Indefinity Delivery Contracts
during a given period of time, the organization will place its requirements with a specific supplier. quantities and delivery dates are unknown, but minimum and maximum quantities are usually specified
Indefinite delivery/indefinite quantity
the method of initiating a specific delivery order is a written or oral delivery order. format essentially the same as a PO, except it should reference the indefinite delivery contract. the delivery order will not include standard TC’s because the order is backed up by a contract
Task order and delivery order
used to purchase requirements that are not yet known. often minimum quantity is contracted for and an expected range of quantity or service is expected
Requirements contract
payment for labor and overhead at a given rate per hour, plus the sales price of parts, supplies and materials
Time and Material Contract
preliminary written contractual instrument that authorizes the contractor to immediately begin contract performance. usually followed by definitive contract document. states clear limits to the buying organizations liability and asserting the buying organizations TC’s of purchase
Letter Contracts
contract, expressed or implied, oral or written between a supplier and a dealer. dealer is granted the right to purchase, sell, distribute or service the supplier’s merchandise
Dealer’s Agreement
legal principle that prevents a person from asserting a position that is inconsistent with his or her prior conduct if injustice would thereby result to a person who has changed position in justifiable reliance upon that conduct
Estoppel
what are the five components for internal control
control environment, risk assessment, control activities, information and communication, and monitoring activities
seeks to resolve international IP issues and bring alignment to IP laws across countries
World Intellectual Property Organization (WIPO)
strive to ensure decent working conditions for women and men in developing countries
International Labor Organization (ILO)
organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world
International Monetary Fund (IMF)
serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in those areas, and to act as a bank for central banks
Bank of International Settlements (BIS)
requires companies with sales of $100M or more that do business in California to report on their websites efforts to reduce slavery and human trafficking within their supply chains
California Transparency in Supply Chain Act
requires companies to file reports to the securities exchange commission to disclose their use of these materials (conflict minerals)
Dodd-Frank Act
illegal for parties to act in combination, conspiracy, and collusion with the intent of restricting competition in interstate commerce, including price fixing and group boycotts
Sherman Anti-Trust Act 1890
prohibits corrupt payments to foreign officials for the purpose of obtaining or keeping business and can apply to both buyers and sellers
The Foreign Corrupt Act (FCA)
describes standards for quality management system (QMS) that address the processes surrounding design, development, and delivery of a general product or service
does not guarantee quality but certifies that consistent business processes are being applied
International Organization for Standardization ISO 9000 series
Environmental management, framework for developing and implementing an environmental management system (EMS)
ISO 4000
formula for return on equity
ROE=net profit/equity
Formula for Return on assets
ROA=gross profit/balance sheet total
formula for P/E Ratio
P/E ratio=stock price/earnings per share`
using the internet to distribute a problem to a group of people, typically unknown, to ask for input, ideas, and solutions
Crowdsourcing
Internal considerations for exit
stakeholders, timing, documentation, continuity of supply, organizational impacts
External considerations for exit
contractual, customer requirements, supplier certification status, assets, sources of supply
