Question 10

Question 1

Purpose of supply chain mapping

Answer 1

To gain an overview and minimize complexity, as well as identifying where improvement or optimization is needed (bottlenecks, under-utilization, to high supplier complexity)

Question 2

Types of SC mapping

Answer 2

1. Logical map: process-relationship map, showing nodes in the SC and the flows between them (material, financial and information)
2. Geo map: geographical node relationship map, showing locations and transportation of materials (flow)
3. Swimlane diagram: activity/responsibility map, showing who is responsible for what process and when responsibility is passed on
4. Process flow chart: route-relationship map, showing what routes different items need to travel throughout the manufacturing and assembly line

Question 3

SC KPIs

Answer 3

• Lead time
• TCO
• COGS
• Inventory turns
• IDOS

Question 4

Lead time

Answer 4

The amount of time that passes from the start of a process to its conclusion.

Examples:
* Manufacturing lead time (time it takes to manufacture the product)
* Replenishment lead time (time for suppliers to us)
* Customer lead time (time from us to the customer)

Question 5

Total Cost of Ownership (TCO)

Answer 5

Deals with all cost of acquiring, using and getting rid of product.
Looks at the bigger picture in sourcing instead of just the price of getting the product.

There are three “buckets”:
* Acquisition cost (supplier price, taxes, delivery…)
* Ownership cost (Inventory cost, manufacturing cost…)
* Post-ownership cost (Reputation if poor quality (non-quantifiable, replenishment…)

Question 6

Cost of Goods Sold (COGS)

Answer 6

Total cost of incurred of making product:
* Direct labor cost (salary, hire and fire)
* Direct material cost (cost of buying material)
* Overhead cost (electricity, rent)

Question 7

Inventory turns

Answer 7

The number of times that an inventory cycles, or turns over, during the year

Inventory turns = Annual COGS / Average inventory value

Question 8

Inventory Days of Supply (IDOS)

Answer 8

A measure of how many days the current inventory will last without replenishment

IDOS = Inventory on hand / Average daily usage

Question 9

Market Boundaries

Answer 9

A line between two methods of distribution where the landed cost is the same - choosing when to supply a customer from one location instead of another

Deciding which customers should be served from which location

Formula: Landed cost = P + Tx + F
P: Product unit cost
T: Transportation cost
X: number of units
F: Fees

Question 10

Procurement perfomance

Answer 10

The extent to which the procurement function is able to realise its predetermined goals at the sacrifice of a minimum of the company’s resources, i.e. costs

Question 11

Objectives of procurement performance measurement

Answer 11

To realise its predetermined goals at the sacrifice of a minimum of the company’s resources

Question 12

Procurement effectiveness

Answer 12

The degree to which previously established goals and objectives have been met

Question 13

Procurement efficiency

Answer 13

The relationship between planned and actual sacrifices (costs) made in order to realise a goal previously agreed upon

Internal and external resources used

Question 14

The six dimensions of procurement performance measurement

Answer 14

1. Procurement cost impact
2. Product quality
3. Procurement logistics
4. Sustainability
5. Procurement organisation
6. Supplier relationships

Question 15

Procurement cost impact

Answer 15

The relationship between standard and actual prices paid for materials and services

Materials costs/price control: continuous monitoring and evaluation of prices and price increases

Materials costs/price reduction: continuous monitoring and evaluation of activities initiated to reduce costs

Question 16

Product quality

Answer 16

The quality of purchased materials and services

Product quality - total quality management: ensure that goods and services ordered are delivered according to the company’s specifications

Procurement’s involvement in New Product Development (NPD) - product innovation: indication of why new product development projects are becoming out of control both in terms of costs and time-to-market

Question 17

Procurement logistics/delivery
(supply chain management)

Answer 17

An efficient incoming flow of purchased materials and services

Requisitioning and ordering: control of timely and accurate handling of requisitions

Supplier delivery reliability: control of timely delivery by suppliers - level of control over the incoming materials flow

Inventory management and control: control of quantities delivered - determination and control of inventory levels

Question 18

Sustainability

Answer 18

To secure the sustainability of purchased materials and services (on product-, supplier- and SC level)

Improve carbon footprint, reduce waste and improve fuel efficiency

Social impact and ethical practices - labour conditions and safety

Question 19

Procurement organisation

Answer 19

The internal resources used to achieve goals and objectives of procurement

Management - the way the procurement department is organized and strategically managed

Staff and competencies

Information systems

Processes and procedures

Question 20

Supplier relationships

Answer 20

The external resources used to achieve goals and objectives of procurement

Supplier operational performance - monitoring the operational relationship with the supplier

Supplier satisfaction - monitoring the buying company’s position versus its suppliers
monitoring the quality of relationships with key suppliers