Fundamentals of Purchasing and Procurement

Question 1

Purchasing

Answer 1

The term used in industry and management denotes the function of and the responsibility for procuring materials, supplies, and services.

Question 2

Procurement

Answer 2

The business functions of purchasing, procurement planning, inventory control, and strategic sourcing.

Question 3

What are key differences between purchasing and procurement?

Question 4

When should centralized versus decentralized purchasing be used?

Question 5

What are the steps in purchasing cycle?

Question 6

How are the roles of a planner/buyer/, buyer and material manager different?

Question 7

Why is classifying materials and services an important part of procurement strategy?

Question 8

Concept of purchasing

Answer 8

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.

Question 9

Purchasing as integral to Supply chain Managment

Answer 9

Purchasing is part pf procurement, procurement is part of material management, and materials management is part of supply chain management.

Question 10

Materials Management

Answer 10

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.

Question 11

Supply chain management

Answer 11

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.

Question 12

Inventory

Answer 12

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.

Question 13

Inventory functions.

Answer 13

Anticipation, hedge, cycle (lot size), fluctuation (Safety, buffer or reserved), transportation (pipeline), and services parts.

Question 14

Direct materials

Answer 14

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.

Question 15

Finished good inventories

Answer 15

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.

Question 16

MRO- Maintenance, repair, and operating supplies.

Answer 16

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.

Question 17

Capital Assets

Answer 17

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.

Question 18

Service

Answer 18

Activities that support the production or distribution functions in any organization, such as customer service and field director.

Question 19

Trasportation

Answer 19

The function of planning, scheduling, and controlling activities related to mode, vendor, and movement of inventories into and out of an organization.

Question 20

Landed Cost

Answer 20

This cost includes the product cost plus the cost of logistics, such as warehousing, transportation, and handling fees.

Question 21

Tactical Purchasing Objectives

Answer 21

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.

Question 22

Product Specification

Answer 22

A statement of acceptable physical, electrical and or chemical properties or an acceptable range of properties that distinguish one product or grade from another.

Question 23

Supplier Base

Answer 23

The group of suppliers from which a firm acquires goods and services.

Question 24

Tactical Buying

Answer 24

The purchasing process focused on transactions and nonstrategic material buying. Involves common products with standard specifications and reliable quality.

Question 25

RFQ

Answer 25

Request for Quote.

Question 26

Total cost analysis

Answer 26

A process by which a firm seeks to identify and quantify all of the major costs associated with various sourcing options.

Question 27

ERP

Answer 27

Enterprise Resources Planning.

Question 28

Globalization

Answer 28

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.