Test 1 Flashcards
Direct Materials
Goes into production of finished goods
EX: Engine or door for car
Indirect Materials
MRO goods, Power tools to make a car
Elements up Supplier Evaluation
Right Quality Right Quantity Right Time Right Price Right Source RFI, RFP, RFQ
Supply Chain
Three or more companies linked together by the flow of upstream or downstream products, services, finances, or information
Value Chain
Support activities that can lead to competitive advantage.
VC is broader than SC
Classification or Types of Purchases
Raw Materials Semi-finished products Finished products MRO Production Support Items Services Capital Equipment Transportation and 3PL
Purchasing Objectives
Supply Continuity Support Operational Requirements Manage Purchasing process Supply Base Mangement Develop relationships Support goals and objectives Develop purchasing strategies
Responsibilities of Purchasing
Evaluate and select suppliers
Review specifications
Act as the primary contact with suppliers
Determine the method of awarding purchase contracts
Purchasing Process
Identify need Evaluate suppliers Bidding, negotiation, and supplier selecting Purchase approval Release and recieve purchase requirement Measure supplier performance
Policy Overview Advantages
Define and clarify top management objectives
Provide framework for consistant decision making and action
Policy Overview Disadvantages
Difficult to communicate throught large companies
Employees view policies as a substitube for effective management
Can restrict innovation and flexibility
Goals and Objectives in Strategic Planning
Define business requirements Define strategic importance Determine business requirements Conduct supply market research Set goals and conduct gap analysis Develop sourcing strategy Execute strategy Monitor results and review process
Supplier Evaluation and Selection Process
Recognize need Identify requirements Determine sourcing strategy Identify suppliers Limit pool Determine method of selection Select supplier and reach agreement
Supplier Evaluation and Rank-ordering
Identify supplier evaluation categories
Assign a weight to each category
Idenfity and weigh subcategories
Define scouring system for categories and subcategories
Evaluate supplier directly
Review evaluation results and make selection decision
Review and improve supplier performance continuosly
Porters Five Forces
Threat of New Entrants Supplier Bargaining Power Market Internal Competition Buyer Bargaining Power Pressure from Substitutes
When to use Competitive Bidding
Volume is sufficiently high Have clear specifications Marketplace is competitive Adequate time is available for the process Do not have prefered supplier
Effective Supplier Selection Process Characterisitcs
Straight forward Reliable Comprehensive Objective Flexible
Greater the c…
Greater the consumer risk
Less the producers risk
Alpha
Probability of neglecting a good lot
Producers Risk
Beta
Probability of accepting a bad lot
Consumers Risk
Routine Product
Low value
Small individual transaction
Everyday use
Many sources of supply
Leverage Product
High expenditure
Commodity items
Many alternative products and sources of supply
Large marketplace
Bottleneck Product
Complex specifications
Fewer alternatives
Big impact on operations
New technology
Critical Product
Critical to profitability
Few qualified sources of supply
Large expenditure
Complex and rigid specs
AQL
Acceptance Quality Level
LTPD
Lot Tolerance Percent Defective
OC Curve
Operating Characteristic
Probability of acceptance vs. Fraction Defective
Probability of Acceptance is computed by
Binomial Distribution or
Poisson Distribution
Increasing n will…
Increase Alpha
Decrease Beta
Drop the OC Curve Faster
Increasing c will…
Decrease Alpha
Increase Beta
Keep the OC Curve higher
