L4 8 L2 Flashcards
Name the 7 stages of Sourcing process.
Understand the need Develop strategy Raise requisition Source suppliers Issue ITT/RFQ Negotiate and award contract SRM/Contract management
Sourcing can take place in which locations?
Localised
Regional
National
Global
What should a buyer think about when deciding the type of sourcing which is best?
Urgency of need
Volume of need
Quality of need
Budget allocated to need
What is a contract?
It is an agreement made between two or more parties that is legally enforceable
Contracts can either be;
Verbal
Written
What are the five stages of forming a contract?
ICOCA
Intention Capacity Offer Consideration Acceptance
Define lmplied and express terms?
Implied terms do not have to be written or verbally agreed. They always exist
Express terms-are negotiated and created rather than being automatically included
What are standard term contracts?
Standard term or model, contracts are agreement between 2 or more parties where the terms are defined by one part and not open to negotiation. The only choice is whether to reject it or accept it.
Standard term contracts are especially used in the public sector
What are some of the Express terms?
Price Specification Payment terms Warranties Conditions Retention of title Damages Exclusion Indemity clauses Breaches Termination Conflict resolution
What tactics may be used by a buyer when negotiating a price?
Take it or leave it
Good cop, bad cop
Salami
One last thing- the buyer makes one final request of the supplier just when agreement is about to be made.
Russian front- 2 offers are presented but one of them will never be accepted as it is unreasonable
Mother Hubbard- the buyer states that the cupboard is empty and that they cannot offer any more
Log rolling
What are primary and secondary terms in warranties?
Primary terms are those that relate to the products or services being supplied.
Secondary terms are those that relate to payment, damages or failure to perform.
A breach of contract occurs when one part fails to perform its legal obligations.
Name 3 types of breaches
Material- one of the parties fails to perform its agreed responsibities
Anticipatory- one party has suggested that it will be unable to fulfill its obligations
Fundamental- the injured party is affected by the failure of Perfomance from another party that the contract ceases.
A procurement proffesional can identify suppliers in the following ways
Existing relationship Prior knowledge Recommendation Internet searches Trade shows Marketing materials
What are trade shows?
Trade shows are events where business professionals can network and learn about industry standards.
They usually focus on one industry and include all the suppliers that support it.
The following may attend Machinery suppliers Seed suppliers Animal feed suppliers Chemical and fertilizer suppliers Labour providers Insurance companies Support organisations Fencing suppliers
Evaluating suppliers
Procurement professionals should research potential suppliers after they have been selected and gather information about the following
FORCCEES (QGLT)
Financial performance Organisational structure Culture Ethical policy Corporate social responsibility CSR Sustainability Environmental awareness Reputation Quality Global accreditations Technology Location
Explain 3 methods used to evaluate the suppliers financial perfomance. 15 marks
Credit ratings from a credit agency
Reviewing the balance sheet
Reviewing liquidity
Reviewing profitability
Requesting references from other customers
Discuss five methods of managing contracts or suppliers. 25 marks
KPI SLA Management by objectives Continuous improvement Training Back up plan Reviews Ammendments
Continuous improvement which is also known as Kaizen. A Japanese word which literally means change for the better. Kaizen is based on a long term process of regular incremental changes to improve processes and reduce waste.
Which seven categories define waste?
Transport and handling-movt of paperwork approvals
Inventory- purchasing or making things before they are needed
Unnecessary Motion- walking to copier, printer, fax, between offices
Waiting- slow computer speed.waiting for approvals. Waiting for information,clarification
Over production-printing paperwork before it is needed
Over processing- relying on inspections rather than designing the process to eliminate errors
Defects-data entry errors
Explain 3 methods that can be used to evaluate the suppliers financial performance. 15 marks
Credit ratings Reviewing the balance sheet Reviewing liquidity Reviewing profitability Requesting references from other customers
Explain with examples any of the five final criteria that can be used to analyse potential suppliers offers when awarding contracts. 25 marks
Financial performance Organisational structure Culture Ethical policy CSR Sustainability Environmental awareness Reputation Quality Global accreditations Technology Location
Explain 3 advantages of using a standard term contract. 15 marks
Saves time
Saves money
Industry standard contracts are widely accepted and understood by both buyers and suppliers
Explain 5 express terms that could be included in a contract. 25 marks
Price Specification Payment terms Warranties Conditions Retention of title Damages Exclusion Indemnity clauses Breaches Termination Conflict resolution
