Fundamentals of Purchasing and Procurement Flashcards
Purchasing
The term used in industry and management denotes the function of and the responsibility for procuring materials, supplies, and services.
Procurement
The business functions of purchasing, procurement planning, inventory control, and strategic sourcing.
What are key differences between purchasing and procurement?
When should centralized versus decentralized purchasing be used?
What are the steps in purchasing cycle?
How are the roles of a planner/buyer/, buyer and material manager different?
Why is classifying materials and services an important part of procurement strategy?
Concept of purchasing
1-Purchasing is a business function.
2-Purchasing is about the acquisition of goods and services.
3-Purchasing is about developing supplier relationships.
4-purchasing is about the close review of purchasing and supplier performance.
Purchasing as integral to Supply chain Managment
Purchasing is part pf procurement, procurement is part of material management, and materials management is part of supply chain management.
Materials Management
The grouping of management functions supporting the complete cycle of material flow, from purchase and internal control of production materials to the planning and control of work in process to the warehousing, shipping, and distribution of the finished product.
Supply chain management
The design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally.
Inventory
items used to support production ( raw materials and work-in-process items), supporting activities ( maintenance, repair, and operation supplies), and CS ( finished goods and spare parts). Demand for inventory can be dependent or independent.
Inventory functions.
Anticipation, hedge, cycle (lot size), fluctuation (Safety, buffer or reserved), transportation (pipeline), and services parts.
Direct materials
Material that becomes a part of the final product in measurables quantities. Raw materials that will be consumed or converted during the production process.- include items such as petroleum, coal, and wood.
Finished good inventories
Items on which all manufacturing operations, including the final test, have been completed. These products are available for shipment to the customer as either end items or repair parts.
MRO- Maintenance, repair, and operating supplies.
Items used in support of general operations and maintenance such as maintenance supplies, spare parts, and consumables used in the manufacturing process and supporting operations.
Capital Assets
A physical object that is held by an organization for its production potential and that costs more than some threshold value. Examples include machinery and equipment.
Service
Activities that support the production or distribution functions in any organization, such as customer service and field director.
Trasportation
The function of planning, scheduling, and controlling activities related to mode, vendor, and movement of inventories into and out of an organization.
Landed Cost
This cost includes the product cost plus the cost of logistics, such as warehousing, transportation, and handling fees.
Tactical Purchasing Objectives
Obtaining the right products or services, at the right time, in the right quantities, delivered to the right place, and at the right price.
Tactical purchasing focuses primarily on price as compared to procurement which will understand the cost dynamics of their suppliers, and then negotiate quality, price, and service arrangements that achieve optimum value.
Product Specification
A statement of acceptable physical, electrical and or chemical properties or an acceptable range of properties that distinguish one product or grade from another.
Supplier Base
The group of suppliers from which a firm acquires goods and services.
Tactical Buying
The purchasing process focused on transactions and nonstrategic material buying. Involves common products with standard specifications and reliable quality.
RFQ
Request for Quote.
Total cost analysis
A process by which a firm seeks to identify and quantify all of the major costs associated with various sourcing options.
ERP
Enterprise Resources Planning.
Globalization
The interdependence of economics globally results from the growing volume and variety of international transactions in goods, services, and capital, and also from the spread of new technology.
