Lecture 3

Question 1

strategic sourcing

Answer 1

The development and management of supplier relationships to acquire goods and services in a way that aids in achieving the immediate needs of the business

In the past: sourcing was just another name for purchasing, a corporate function that financially was important but strategically was not the center of attention

As a result of globalization, sourcing implies a more complex process suitable for procuring products that are strategically important to the firm

Question 2

specificity

Answer 2

Refers to how common the item is and, in a relative sense, how many substitutes might be available

Commonly available products can be purchased using a relatively simple process, from online catalogs

Question 3

A request for proposal (RFP)

Answer 3

Used for purchasing complex or expensive items; number of potential vendors; vendor responds with proposal

Question 4

Request for bid/reverse auction

Answer 4

Same as RFP (request for proposal) but vendors bid in real time

In a reverse auction, the buyer puts up a request for a required good or service. Sellers then place bids for the amount they are willing to be paid for the good or service, with the winner being the seller prepared to accept the lowest amount.

Question 5

Vendor managed inventory

Answer 5

when a customer actually allows the supplier to manage the inventory policy for an item or group of items

Question 6

Sourcing/ purchasing design mix:

Answer 6

check out slide 5 of lecture 3

Question 7

The bullwhip effect

Answer 7

Phenomenon of variability magnification as we move from the customer to the producer in the supply chain

A slight change in consumer sales ripples backward as magnified oscillations upstream, like the result of a flick of a bullwhip handle

Forward buying, the practice of stocking up on products due to temporary price reductions, makes this variability even worse

Question 8

Continuous replenishment

Answer 8

Inventory is replaced frequently, as part of an ongoing process to reduce variability

Question 9

Functional products

Answer 9

Functional products include the staples that people buy in a wide range of retail outlets, such as grocery stores and gas stations

Question 10

Innovative products

Answer 10

many companies introduce innovations to incentivize customers to buy

Question 11

Typically innovations have a life cycle of

Answer 11

just a few months

limitators quickly erode the competitive advantage that innovative products enjoy

Companies are forced to introduce a steady stream of newer innovations

Question 12

stable supply process

Answer 12

manufacturing process and underlying technology are mature and supply base is well established

Question 13

Evolving supply process

Answer 13

Manufucturing process and underlying technology are still under early development and are rapidly changing. Supply base is limited in both size and experience