purchase and sales simplified Flashcards
Describe two disadvantages of decentralized purchasing.
Decentralized purchasing, where each department or business unit is responsible for its own procurement, can offer flexibility and faster decision-making. However, it also has notable disadvantages:
Inconsistency: Different departments may choose different suppliers, products, and terms, leading to inconsistencies in quality and affecting overall operational efficency
Higher Costs: losing bulkdiscounts, less negotation leverage compared to centralazied purchasing
Increased Administrative Costs: Decentralized purchasing can lead to duplicated efforts, with multiple departments performing the same tasks such as vendor evaluation, order processing, and contract management.
Shortly describe and exemplify the SPIN-selling technique
The SPIN selling technique shifts the focus from the seller to the buyer, encouraging the buyer to talk more and the seller to listen and guide the conversation strategically
Situation: These questions help you understand the prospect’s current situation.
“What systems are you currently using?”
Problem: These questions identify problems or challenges the prospect is facing.
“What challenges do you face with your current system?”
Implication: These questions explore the consequences and impact of the identified problems.
“How does this issue affect your productivity?”
Need-Payoff: These questions lead the prospect to articulate the benefits of your solution in their own words.
“How would improving this process benefit your team?”
Shortly describe and exemplify the term BATNA.
BATNA stands for Best Alternative to a Negotiated Agreement. It is a concept in negotiation that refers to the best course of action a party can take if negotiations fail and an agreement cannot be reached
Suppose you are negotiating a job offer. Your BATNA might be another job offer you already have, continuing in your current job, or pursuing freelance opportunities. If the new job offer doesn’t meet your salary and benefit expectations, you can confidently walk away, knowing you have a viable alternative.
This knowledge empowers you to negotiate more effectively and avoid accepting an unfavorable deal.
Describe the concept of a reverse auction.
In a reverse auction, sellers compete to offer their goods or services to a buyer, and the price typically decreases over the course of the auction.
Reverse auctions are commonly used in procurement processes to drive down costs and ensure that buyers get the best possible prices through competitive bidding.
Describe, exemplify and discuss the use of close relationships in purchasing or sales using an
example of your own choosing.
Close relationships in purchasing or sales, focus on building long-term connections between buyers and sellers.
These relationships are based on trust, mutual benefit, and frequent, personalized communication, leading to increased customer loyalty and higher satisfaction.
describe, exemplify and discuss the procurement process
(8 steps)
The procurement process involves a series of steps organizations follow to acquire goods and services from external suppliers. Effective procurement is crucial for ensuring the quality, cost-efficiency, and timely delivery of needed resources.
(ISREPDIR)
-Identifying Needs:
Determine what goods or services are required, specifying quantity, quality, and timing.
-Supplier Research and Selection:
Identify potential suppliers, evaluate their capabilities, and select the most suitable one based on criteria such as price, quality, and reliability.
-Request for Proposal (RFP) and Quotation (RFQ):
Issue RFPs or RFQs to shortlisted suppliers, detailing the requirements and inviting them to submit proposals or quotations.
-Evaluation and Contracting:
Assess the received proposals or quotations, negotiate terms, and finalize the contract with the selected supplier.
-Purchase Order (PO):
Issue a PO to the chosen supplier, outlining the agreed terms and conditions, including delivery schedules and payment terms.
-Delivery and Inspection:
Receive and inspect the delivered goods or services to ensure they meet the specified standards and requirements.
-Invoice Approval and Payment:
Approve the supplier’s invoice and process the payment according to the agreed terms.
-Record Keeping and Performance Evaluation:
Maintain records of all procurement activities and evaluate the supplier’s performance for future reference.
Shortly describe the key account concept
The key account concept involves identifying and prioritizing high-value customers who are crucial to a company’s success.
These key accounts receive specialized attention and customized services to build strong, long-term relationships
Describe two disadvantages of outsourcing.
Quality Concerns: When outsourcing, the company relinquishes direct oversight of the outsourced functions.
Communication Barriers: Differences in time zones, languages, and cultural practices can hinder effective communication.
sustainablity: can be less sustainable for the enviornment than insourcing (different standards, transportation etc)
Describe two disadvantages of insourcing.
Higher Costs:
Initial Investment:Insourcing often requires significant upfront investment in infrastructure, technology, and training.
Ongoing Operational Costs: Maintaining internal teams involves recurring expenses such as salaries, benefits, and overhead costs.
imited Access to Expertise:
Skill Gaps: Developing the necessary expertise in-house can be challenging, especially for specialized or rapidly evolving fields.
Lack of Innovation: Internal teams may have a narrower focus and fewer opportunities to be exposed to diverse industry practices and innovations
Shortly describe the pyramid of corporate social responsibility.
Economic Responsibility:
Legal Responsibility:
Ethical Responsibility:
Doing What is Right
Philanthropic Responsibility:
contributing to the community: include charitable donations, community engagement, and support for educational and cultural initiatives.
The Pyramid of CSR suggests that while economic responsibilities are fundamental, businesses should also strive to fulfill their legal, ethical, and philanthropic duties, creating a holistic approach to social responsibility.
Give two examples of how purchasing function works different after implementation of JIT
purchasing.
Just-In-Time (JIT) purchasing is a strategy that aims to increase efficiency and reduce waste by receiving goods only as they are needed in the production process
Reduced Inventory Levels and more frequent orders:
Increased Supplier Coordination and Collaboration:
Explain the components of Kraljic purchase portfolio matrix (strategy from the book)
Leverege item (High, high): High profit impact material, but many suppliers within the market.
Example: satellite navigation screen (tesla)
Strategic items: (low,high): Materials with high profit, but are limited in the market (lithum, tesla)’
Non critical items: (high,low): Items that have low profit impact but there is alot of them in the market (bolts, tires at tesla)
Bottleneck items: (low,low): Supplies that have low profit impact for the supplychain, but are also limited in the market. (Seat fabric, tesla
how do companies work with category management
Category management is about strategically grouping and managing purchases to align with business goals, save costs, and improve efficiency. It can be applied at a broad level (like all IT purchases) or a specific level (like buying steel components).
imagine you manage a large office and need to buy supplies. Instead of buying items randomly, you group similar items (like all office supplies) into a category. Then, you decide the best way to purchase these supplies—either by negotiating long-term deals, using quick online auctions, or improving relationships with key suppliers.
Selling Just-In-Time has both advantages and disadvantages for suppliers. Describe one
advantage and one disadvantage for the suppliers with JIT.
Advantage:
Stronger Customer Relationships
Disadvantage
increased operational pressure to meet tight delivery schedules and high flexibility demands.
Describe work with sustainability in purchasing using the terms People, Planet, and Profit.
-People (Social Responsibility)
Fair labor practices
fair labor practices, including safe working conditions, fair wages, and no child or forced labor.
Diversity and Inclusion
Prioritizing suppliers that embrace diversity and inclusion, such as minority-owned, women-owned, or local small businesses.
-Planet (Environmental Responsibility)
Eco-Friendly Products:
Green Suppliers:
Sustainable Logistics: Opting for suppliers who use sustainable packaging and eco-friendly transportation methods.
Profit (Economic Responsibility)
Cost Efficiency: Achieving cost savings through efficient use of resources and reduction of waste, which can lower procurement and operational costs
Value: Focusing on long-term benefits rather than short-term gains by investing in sustainable practices that ensure future resource availability
