L4 M7 LO3 Flashcards
Market/trade price
The amount payable to acquire a specific item at a specific time.
Consignment stocking
Product owned by the supplier which is stored on the buying organisations site to ensure immediate availability without any delivery lead.
Commodity markets
Raw material or part-processed product markets with established standards and trading allowing published prices reflecting demand and supply
Multi-part pricing
There will be two or more elements that are charged as part of an overall price package.
Retrospective volume discounts
Can be offered as a solution to the problem of an uncertain volume required over a period of time. Allows a review if volumes or values of orders with a resulting discount allowed.
Opportunity Cost
The potential benefits foregone as a result of choosing one alternative over another
Disadvantages of hiring/leasing
Asset is not owned
Must agree to the terms and conditions of the hire
Hire fees will also need to cover the non hire time for the owner
Asset could already be on hire and no alternative can be found, stopping operations from going ahead
Advantages of hiring/leasing
Reduces the need to borrow money
Company owning the asset will have safe storage
Maintenance taken care of
Not locked in to a specific type or technology
Money saving
3E’s model
Traditionally looked at efficiency, economic and effectiveness as three ways to reduce expenditure
Methods to reduce acquisition costs
Buyer discretionary spend
User buying
Vendor managed inventory
Two-bin Kanban
Product catalogue
E-procurement techniques
Procurement cards
Buyer discretionary spend
Many buyers have a value and/ or type of purchase they are empowered to order without reference to colleagues or managers. Typically low value items however different spend limits depending on buyer experience.
User buying
Training and limiting users to specific pre approved suppliers, items and total spend.
Vendor Managed Inventory (VMI)
Inventory owned by the buying organisation that is monitored and managed by the supplier to ensure that adequate supply provision is made in line with usage and forward demand
Two- bin Kanban
A reordering process involving two bins. Product is taken from the front bin until it is empty, at which stage the bin is sent back to the supplier to be refilled, during which time the second bin is used.
Procurement cards
Corporate payment cards which may run from a specific bank account, charge card or credit card operator.
