Procurement management [8] *G10

Question 1

Purchasing function responsible for…

Answer 1

Buying goods/services needed by all departments of the business

Question 2

Categories (departments needing goods)

Answer 2

*Products used by the business to carry out activities (computers, stationery)
*Products bought with the aim of reselling
*Products used for manufacturing (raw; semi-finished; finished; capital goods)

Question 3

The economic principle

Answer 3

Purchase costs are kept as low as possible to maximize profit

Question 4

Purchasing function must find

Answer 4

The right SUPPLIER to provide the right QUANTITY, the right QUALITY at the right TIME+PLACE at the BEST PRICE. (SQQTPB)

Question 5

What the Purchasing department must consider when picking a supplier

Answer 5

*Price - must be reasonable on quality, price, quantity + discounts
*Capacity - (right quality @ right quantities)
*Support - (do they deliver; can they assist on how to use)
*Labour
*Reputation
*Delivery

Question 6

Name all parts of purchasing cycle

Answer 6

1. Identify needs
2. Asses+Select best supplier
   3.Placing of orders ( have stock control system… they ensure correct inventory levels)
   4.Receiving of goods ordered(control system checks the stuff + signs delivery note)
3. Assessing orders ( checking if everything is ok)
4. Send resources to warehouses/departments

Question 7

What’s stockpiling

Answer 7

Ensures that there’s enough stock available when needed

Question 8

Warehousing?

Answer 8

Storage of different resources until needed by departments.

Question 9

Functions of warehousing

Answer 9

STORAGE
CONSOLIDATE
BREAK EN BULK
POSTPONEMENT

Question 10

*storage

Answer 10

• Warehouses store resources until needed by the business
• Ensures there’s more resources than needed in case of emergencies 🚨

Question 11

*consolidate

Answer 11

• Warehouse is a central point for products until they’re transported

Question 12

*breaknbulk + mixing

Answer 12

Large amounts of stock are made into smaller quantities needed by different parts of the business

Question 13

*postponement

Answer 13

• Different elements are kept in warehouse until orders are placed
• (labels, bubble wrap, boxes)

Question 14

Different types of stock

Answer 14

*raw material
*semi-finished goods
*finished goods
*capital goods
*perishable stock
*dangerous material
*maintenence stock (consumed within business)

Question 15

Most economic ordering quantity

Answer 15

Quantity of an item (that’s obtained regularly) is stored at the lowest possible unit cost

Question 16

What to think about most ordering quantity

Answer 16

*Stock ordering costs (transport+insurance)
*Holding costs

Question 17

Good thing about keeping stock low

Answer 17

*saves money and space

Question 18

Good thing about keeping stock high

Answer 18

*less likely of running out of goods

Question 19

What’s JIT ( just in time)

Answer 19

Purchasing department makes sure goods arrive just before they’re needed
THIS: *REDUCES STORAGE COSTS + SAVES SPACE
MAKES SURE STOCK LEVELS DONT EXCEED DEMAND
ENSURES SUPPLIER IS RELIABLE

Question 20

What’s economies of scale

Answer 20

The business being able to benefit from cost advantages

Question 21

Examples of discounts

Answer 21

*Trade- loyalty + relationship
*Bulk negotiations
*Seasonal- usually agricultural (high season)
*Cash- debtors pay cash/early

Question 22

Good thing about using credit

Answer 22

It improves cash flow
The process is faster

Question 23

Bad thing about using credit

Answer 23

Business can change interest
Bad skills = debt

Question 24

Diseconomies of scale

Answer 24

Business doesn’t have cost advantages
High chance of losing money