Module 1

Question 1

SOURICING STRATERGIES CAN BE

STRATEGIC
*High Level Decisions
*Long Term
*High Supply Risk
TACTICAL
*Low Level Decisions
*Shorter Term
*Clear Requirements

Question 2

DEFINITIONS

PROCUREMENT
*Pre-Contract & Post Contact Activities

PURCHASING
*Post-Contact Such As Ordering or Invoice Clearing

SUPPLIER/CONTACT MANAGEMENT
*Post Contact Management Of Suppliers And Their Performance

Question 3

DIFFERENCE BETWEEN PROCUREMENT & PURCHASING

PROCUREMENT - INVOLVED IN MUCH WIDER RANGE OF P/CYCLE

• Strategic
• Pro-Active
• Adds Value
• Considers TCO And Value
• Aims To Avoid Defects

PURCHASING - JUST ABOUT BUYING / SELLING

• Tactical
• Reactive
• Accepts / Rejects Defects
• Price Is Key
• Seen As A Cost Centre

Question 4

PROCUREMENT CYCLE

1) Understand The Need
2) Market / Commodity - Make vs Buy
3) Develop Strategy
4) Pre-Procurement Activity
5) Develop Documents
6) Supplier Selection
7) Issue ITT / RFQ
8) Bid / Tender
9) Contract Award
10) Warehouse / Logistics
11) Contract Performance
12) SCM / SRM Management
13) Asset Management

Question 5

STEPS 1-4

1) Understand The Need
2) Market / Commodity - Make vs Buy
3) Develop Strategy
4) Pre-Procurement Activity

Question 6

STEPS 5-9

5) Develop Documents
6) Supplier Selection
7) Issue ITT / RFQ
8) Bid / Tender
9) Contract Award

Question 7

STEPS 10-13

10) Warehouse / Logistics
11) Contract Performance
12) SCM / SRM Management
13) Asset Management

Question 8

DIRECT COST VS INDIRECT COST

DIRECT - VARIABLE COSTS

• Raw Materials
• Labour
• Energy

INDIRECT - FIXED COST

• Admin
• Sales & Marketing
• Rent
• Insurance

Question 9

Type Of Organisation Costs

• Capital Purchases
• Insurance
• Marketing
• Raw Materials
• R&D
• Salaries
• Services
• Sundry Items For Office
• Training
• Utilities
• Vehicles & Transport

Question 10

STOCK VS NON STOCK

STOCK

• Raw Materials - Coal, Oil, Gas, Fish, Wheat.
• Components - Light Bulbs, Nuts & Bolts, Plastic Fittings
• Finished Goods - Cloths, Food, Beds, Jewellery

NON STOCK

• Advertising
• Telephone System
• Internet Contract
• Insurance

Question 11

CAPEX VS OPEX

CAPEX - (ASSET PURCHASE) - MACHINERY, LAND, BUILDINGS

• High Value
• Depreciates Over Time Needs TCO Consideration
• Long Term
• Borrow Money From Loan Or Lump Sum
• Takes Longer To Arrange

OPEX - (Ongoing Expenses) - RAW MATERIALS, SALERIES,RENT, ENERGY

• Lower Value
• Short Term Usually Same Financial Year
• Paid Monthly Or Annually

Question 12

DIRECT VS INDIRECT PROCUREMENT

DIRECT

• Directly Related To Produce The Product
• Raw Materials

INDIRECTS

• Don’t Contribute To Profit
• Salaries
• Stationery
• Consultancy

Question 13

KRALJIC MATRIX

USED TO CALCULATE IMPORTANCE OF SUPPLIERS

• Leverage Suppliers - Top Left
• Lots Of Competition
• Easier To Switch
• Examples - Utilities
• Routine Suppliers - Bottom Left
• Low Value Items
• Lots Of Work Assoicated
• Lots Of Variety Like Stationery
• Strategic Suppliers - Top Right
• Critical To Company
• Responsible For Core Products
• Bottle Neck Suppliers
• Usually Hold Monopoly
• Very Few Options
• Usually Low Value

Question 14

5 Rights Of Procurement

• Right Quality
• Fit for Purpose, Not Over Or Under Spec
• Right Quantity
• Sufficient To Meet Demand, Not Too Much To Cost In Storage
• Right Place
• Suitable Packaging & Delivered To Right Place To Not Hold Up Production
• Right Price
• Secured Goods At Fair Price That Is Reasonable For Quality And Quantity
• Right Time
• Delivered At The Right Time To Meet Demand * Maintain Service Levels
  Without Over Stocking

Question 15

SPEC ENSURES

• Conformance - Must Conform To Suppliers Description
• Performance - Buyer Dictates How Product Should Perform

Question 16

TOTAL COST OF OWNERSHIP

• BUY
• Price
• Delivery
• Spec
• Supplier Performance
• Own
• Depreciation
• Insurance
• Footprint
• Use
• Install
• Spares
• Maintenance
• Operating Cost
• Training
• Upgrades
• Disposal
• Un-Install
• Transport
• Waste Disposal

Question 17

KPI’S

Specific - Clear And Well Defined
Measurable
Attainable
Relevant
Timebound

Question 18

KPI - Types

Qualitive - Reject Numbers, Achieve ISO, Reduce Waste
Quantitative - Reduces Late Deliveries, Orders Despatched With Right Quantities

Question 19

WAYS TO ACHIEVE VALUE FOR MONEY

• Monitor Currency And Exchange Rates
• Environmental Factors
• Freight Costs
• Maintenance Costs
• Packaging Costs
• Payment Terms
• Place
• Product / Service Price

Question 20

THE SUPPLY CHAIN

• All Organisations & Activities Associated With The Flow And Transformation Of Good From Raw Materials Through To The End User As Well As The Information Associated With It”

Question 21

SUPPLY CHAIN MANAGEMENT
(INFRASTRUCTURE NEEDED TO GET DOOS TO CUSTOMER)

UPSTREAM
*Producers Extract Raw Materials
*Suppliers Obtain Raw Materials From Producers
——————–
- Materials Sent To Manufactures - Manufacturers Process Materials
——————–
DOWNSTREAM
* Distributor Collects Materials From Manufacturer Delivers Them To Customer
* Customer

Question 22

*REMEMBER

MANY PRODUCERS SELL TO MANY RETAILERS
- SHOE MANUFACTURER MAY SELL TO NIKE, ADDIDA, PUMA

IF ONE COMPANY RUNS OUT OF A PRODUCT THE CUSTOMER WILL GO TO A COMEPTITOR THIS IS WHY ITS IMPORTANT TO ENSURE GOOD NEGOTATION AND ENSURE YOUR PRODUCTS ARE AHEAD OR IN LINE WITH THE COMPETITORS SOURCING AND DELIVERIES

Question 23

LOGISTICS

“THE STORAGE, HANDLING AND MOVEMENT OF GOODS”

Planning, Implementing And Controlling Procedures For Efficient Transportation And Storage Of Goods Including Services And Related Information
From Point Of Origin To Point Of Consumption

Question 24

INTERNAL VS EXTERNAL LOGISTICS

• INTERNAL
• Extraction / Production
• Manufacturing
• Warehousing / Storage
• EXTERNAL
• Distribution
• Transport
• Retail

ALL RELY ON

• Demand Planning
• Fleet Management
• Inventory Management
• Warehousing & Storage
• Order Fulfilment

Question 25

MRP SYSTEMS

MRP

• Feed In Bill Of Materials
• Feed In Stock On Hand, Orders & Lead Times
• Feed In Master Production Schedule (MPS)

MRP SYSTEM WILL TELL YOU

• What You Need To Order
• What You Need To Expedite
• What Orders Should Be Cancelled

Question 26

ERP

THIS INCLUDES THE FUNCTIONALITY OF THE MRP SYSTEM AND IS MODULAR
YOU CAN CHOOSE TO ADD
- Machine Capacity
- Demand Forecasting
- Quality Assurance
- General Accounting
- Financials (GL, AR, AP)
- Customer Relationship Management
- Supply Chain Management
- Human Resources
- Enterprises Asset Management
- Marketing Automation
- Project Management

Question 27

STAKE HOLDERS

“ANY INDIVIDUALS OR GROUPS THAT HAVE A VESTED INTEREST IN THE SUCCESS OF AN ORGANISATIONS OBECTIVES”

“ANY INDIVIDUALS THAT WILL BE AFFECTED BY THE COMPANIES STRATEGIES”

Question 28

INTERNAL VS EXTERNAL STAKEHOLDERS

INTERNAL

• Owners
• Directors
• Management
• Employees

EXTERNAL

• Shareholders
• Customers
• Suppliers
• Competitors
• Unions
• Pressure Groups
• Government
• Local Community

Question 29

MENDELOWS MATRIX

HOW TO CALCULATE HOW A STAKEHOLDER SHOLD BE MANAGED.

• Manage Closely (Top Right)
• Minimum Effort (Bottom Left)
• Keep Informed (Bottom Right)