Materials Management

Question 1

ABC analysis percentages (Value and Vol.)

Answer 1

A-goods: 70% - 80% value; 10% - 20% vol.
B-goods: 10% - 20% value; 20% - 30% vlo.
C-goods: 5% - 10% value; 60% - 70% vol.

Question 2

ABC analysis procedure

Answer 2

1. Calculation of total consumption value (price X quantity)
2. Ranking products in descending order
3. Calculate cumulative TCV
4. Calculate % share of TCV

Repeat process for quantities

Question 3

Central issues of procurement policy

Answer 3

WHAT?
Make-or-buy decisions
FROM WHO?
Supplier Policy & Sourcing Strategies
• HOW MUCH and WHEN?
Demand and order quantity planning

Question 4

Make or Buy decision Pro Making

Answer 4

Pro Making:
Cost: VC down and FC up
Know How: don’t need to share
Flexibility: more flexible
Quality: better quality control, less mistakes
Product Range: do what you can, outsource the rest
Risk: You meet your own expectations, less dependent on someone else.

Question 5

Make or Buy decision Pro Buying

Answer 5

Pro Buying:
Cost: VC up and FC down
Know How: use supplier’s know how
Flexibility: use as many sources you can. Easier to change portfolio
Quality: quality based in supplier’s know how
Product Range: do what you can, outsource THE REST
Risk: shared risks

Question 6

Sourcing Strategies

Answer 6

Single Sourcing; Multiple Sourcing; Local Sourcing; Global Sourcing

Question 7

Single Sourcing

Answer 7

Pros: 
Close relationship
No need to share info
Reduces complexity
High quantities (economies of scale)
Cons:
Fully dependent on one supplier

Question 8

Multiple Sourcing

Answer 8

Pros:
Gain from competition among suppliers
Flexibility
Cons:
High complexity
lower purchase volume from supplier
Share info with many suppliers

Question 9

Local Sourcing

Answer 9

Pros:
Low transport costs
Same mentality, language, currency
Cons:
Often prices are too high
No international know-how transfer

Question 10

Global Sourcing

Answer 10

Pros:
World wide selection of best suppliers
Lowest costs
Presence in international market
Cons:
High process cost
Customs, bureaucracy, corruption
Other mentality, language, time

Question 11

Strategic and operational decisions

Answer 11

Deployment procedure:

1. Demand determination (short-term demand).
2. Inventory determination.
3. Determination of order quantities & time of order.
4. Execution of operative procurement process.

Question 12

Determination of demand - conceptual basics

Answer 12

Primary demand; Secondary

demand; Tertiary demand

Question 13

Determination of demand - Primary demand

Answer 13

Market demand for saleable

products and services

Question 14

Determination of demand - Secondary demand

Answer 14

Demand for raw materials and
pre-products for the production
of primary demand

Question 15

Determination of demand - Tertiary demand

Answer 15

Demand for auxiliary materials,
consumables, wear tools for the
production of the primary requirement