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Business Process Management 3 > Procurement > Flashcards

Procurement Flashcards

1
Q

What is sourcing?

A

Finding sources of supply, guaranteeing continuity in supply, ensuring alternative sources of supply and gathering knowledge of procurable resources.

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2
Q

What is purchasing management?

A

All activities that are required to manage supplier relationships.

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3
Q

What are the stages in the strategic sourcing process?

A
  1. Assess Opportunities
  2. Profile Internally & Externally
  3. Develop the Sourcing Strategy
  4. Screen Suppliers and Create Selection Criteria
  5. Conduct Supplier Selection
  6. Negotiate and Implement Agreements
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4
Q

What is a tool for assessing opportunities?

A

Spend Analysis

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5
Q

What is Spend Analysis?

A

The application of quantitative techniques to purchasing data in an effort to better understand spending patterns and identify opportunities for improvement.

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6
Q

What are the two approaches to creating profiles?

A
  1. Category profile
  2. Industry analysis
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7
Q

What is a category profile?

A

An approach to understand all aspects of a particular sourcing category that could ultimately have an impact on the sourcing strategy.

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8
Q

What is industry analysis?

A

An approach to provide a more detailed understanding of the characteristics of the external supply base.

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9
Q

What is the Make-or-Buy Decision?

A

A high-level, often strategic, decision regarding which products or services will be provided internally and which will be provided by external supply chain partners.

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10
Q

What is insourcing?

A

The use of resources within the firm to provide products or services.

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11
Q

What is outsourcing?

A

The use of supply chain partners to provide products or services.

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12
Q

What are the advantages of insourcing?

A
  • High degree of control
  • Ability to oversee the entire process
  • Economies of scale and/or scope
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13
Q

What are the disadvantages of insourcing?

A
  • Reduced strategic flexibility
  • Required high investment
  • Potential suppliers may offer superior products
    and services
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14
Q

What are the advantages of outsourcing?

A
  • High strategic flexibility
  • Low investment risk
  • Improved cash flow
  • Access to state-of-the-art products and services
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15
Q

What are the disadvantages of outsourcing?

A
  • Possibility of choosing a bad supplier
  • Loss of control over the process and core technologies
  • Communication/coordination challenges
  • Increased risk of supply chain disruption
  • Corporate social responsibility (CSR) risks
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16
Q

What factors favour insourcing?

A
  • Low Environmental uncertainty
  • Low Competition in the supplier market
  • Low Ability to monitor supplier’s performance
  • High Relationship of product/service to buying firm’s core competencies
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17
Q

What factors favour outsourcing?

A
  • High Environmental uncertainty
  • High Competition in the supplier market
  • High Ability to monitor supplier’s performance
  • Low Relationship of product/service to buying firm’s core competencies
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18
Q

What is Total Cost Analysis?

A

A process by which a firm seeks to identify and quantify all of the major costs associated with various sourcing options.

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19
Q

What are direct costs?

A

Costs tied directly to the level of operations or supply chain activities.

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20
Q

What are indirect costs?

A

Costs that are not tied directly to the level of operations or supply chain activity.

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21
Q

What are the direct costs of insourcing?

A
  • Direct material
  • Direct labor
  • Freight costs
  • Variable overhead
22
Q

What are the indirect costs of insourcing?

A
  • Supervision
  • Administrative support
  • Supplies
  • Maintenance costs
  • Equipment depreciation
  • Utilities
  • Building lease
  • Fixed overhead
23
Q

What are the direct costs of outsourcing?

A
  • Price (from invoice)
  • Freight costs
24
Q

What are the indirect costs of outsourcing?

A
  • Purchasing
  • Receiving
  • Quality control
25
Q

What is portfolio analysis?

A

A structured approach used by decision makers to develop a sourcing strategy for a product or service, based on the value potential and the relative complexity or risk represented by a sourcing opportunity.

26
Q

What are the 4 categories in the Kraljic Matrix?

A
  1. Bottleneck
  2. Critical/Strategic
  3. Routine
  4. Leverage
27
Q

What is The Routine Quadrant?

A

Readily available products or services (small % of total).

28
Q

What is The Leverage Quadrant?

A

Standardized and readily available products or services (large % of total).

29
Q

What is The Bottleneck Quadrant?

A

Unique or complex products or services supplied by few suppliers.

30
Q

What is The Critical Quadrant?

A

Unique or complex products or services supplied by few suppliers, representing large % of total.

31
Q

What are the four sourcing strategies?

A
  1. Single sourcing
  2. Multiple sourcing
  3. Cross sourcing
  4. Dual sourcing
32
Q

What is single sourcing?

A

The buying firm depends on a single company for all or nearly all of an item or service.

33
Q

What is multiple sourcing?

A

The buying firm shares its business across multiple suppliers.

34
Q

What is cross sourcing?

A

Using a single supplier for a certain part or service and another supplier with the same capabilities for a similar part.

35
Q

What is dual sourcing?

A

Using two suppliers for the same purchased product or service.

36
Q

What are the criteria to evaluate suppliers?

A
  • Process and design capabilities
  • Management capability
  • Financial condition and cost structure
  • Longer-term relationship potential
37
Q

What is the weighted-point evaluation system?

A

An evaluation system to evaluate potential suppliers, track supplier’s performance over time, and rank current suppliers.

38
Q

What is the method of the weighted-point evaluation system?

A
  • Assign weights to performance dimensions.
  • Rate the performance of each supplier with regard to each dimension.
  • Calculate the total score.
39
Q

What are the two types of supplier assessment?

A
  1. Subjective methods
  2. Objective methods
40
Q

What are subjective methods?

A

Methods that are used when companies evaluate suppliers through personal judgments.

41
Q

What are objective methods?

A

Objective methods attempt to quantify the supplier’s performance.

42
Q

What techniques and tools are used for supplier assessment?

A
  • Spreadsheets
  • Personal assessment
  • Vendor rating
  • Supplier audit
  • Cost modeling
43
Q

What are spreadsheets?

A
  • A tool used to systematically compare and asses quotations obtained from suppliers.
  • Important criteria are listed on one axis and the supplier quotations on the other.
44
Q

What is personal assessment?

A
  • Used for suppliers with whom exist close business relationships.
  • Specialists who have experience with the suppliers rate them according to a agreed checklist.
45
Q

What is vendor rating?

A
  • Limited to quantitative data only.
  • Entails measuring the aspects of price, quality and delivery reliability per supplier.
46
Q

What is suplier auditing?

A

Entails that the supplier is periodically visited by specialist(s) from the customer. They investigate the production process and quality organization.

47
Q

What is cost modeling?

A
  • Specialists from the buying company estimate, based on the production technology, the cost of the product.
  • This may lead to ‘should cost’ discussions with the supplier.
48
Q

What is the difference between supplier auditing and vendor rating:

A
  1. Supplier auditing
    - Focused on the future
    - Applied to new and current suppliers
    - Qualitative
    - It has a broad scope
    - Time consuming
    - Subjective
    - Co-operation with suppliers
  2. Vendor rating
    - Based on historical data
    - Applied to current suppliers
    - Quantitative
    - Limited scope
    - Factual
    - Based on internal administrative data
49
Q

What is ISO 9001?

A

A family of standards supported by the International Organization for Standardization.

50
Q

What are the goals of ISO 9001?

A
  • Meet the customer’s quality requirements and applicable regulatory requirements.
  • Enhance customer satisfaction.
  • Achieve continual improvement of performance in pursuit of these objectives.
51
Q

When do we use competitive bidding?

A
  • The buying firm can provide qualified suppliers with clear descriptions of the items or
    services to be purchased;
  • Volume is high enough to justify the cost and effort; and
  • The buying firm does not have a preferred supplier.
52
Q

When do we use negotiation?

A
  • The item is a new and/or technically complex item with only vague specifications;
  • The purchase requires agreement about a wide range of performance factors;
  • The buyer requires the supplier to participate in the development effort; and
  • The supplier cannot determine risks and costs without additional input from the buyer.

Business Process Management 3 (7 decks)

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