WEEK 1

Question 1

Core competency

Answer 1

the ability of a company to perform a task or provide a service better than its competitors. It is a set of skills or knowledge that a company does better than anyone else. This core competency allows the company to stand out from the rest of the providers in the marketplace. It is skills and production techniques that add value to the product, and provide for future sales potential.

Question 2

Gap analysis

Answer 2

it is the continuous improvement process of a company or individual by identifying what is needed and comparing that to the current condition. Gaps are then identified and a course of action is taken to fill those gaps.

Question 3

Synergy

Answer 3

is the total output is more than the sum of the individual parts. It is the combination of actions, when combined, leads to a greater result than the sum of each individual’s effort.

Question 4

Supply Base Management

Answer 4

Supply Managers typically perform the selection, development and maintenance of the strategic supplier base.

Question 5

Supply Management is not a stand-alone department.

Answer 5

Supply Management interacts and can have a major impact on the departments company wide. Supply management must quickly address and fill the needs of the internal and external customers, all within the required budget limits.

Question 6

One of the Supply Manager’s function

Answer 6

is to perform a gap analysis of the department’s capabilities, and find a way to close the gap

Question 7

Effective

Answer 7

producing the desired results. (Getting from point A to point B. This could be using a long path, curvy path, or over the hill path. This path may not be the fastest way).

Question 8

Efficient

Answer 8

producing the desired results with a minimum amount of effort. (Getting from point A to point B directly, using the shortest possible path).

Question 9

Communication between the departments is key.

Answer 9

The overall view of the purchasing department should always be of a proactive nature. Trust and credibility from other departments will be developed over a period of time. This trust is very fragile. Mistakes or non-performance on the part of the purchasing department is not acceptable.

Question 10

The operational function of a Supply Management department is

Answer 10

To buy products and services at the right price. (This does not necessarily mean the lowest price.)

To obtain the products and services from the right source.

To obtain the products and services at the quality level required by the user.

To have the product and service delivered on time.

To have the product and service delivered at the right place.

Question 11

Typical Purchasing cycle

Answer 11

. Receiving and evaluating the purchase requisition.

2. Reviewing Approved Supplier list for potential suppliers, issuing requests for quotes, then receiving and evaluating the received bids.
3. Selecting the supplier based upon compliant bids received. Negotiating with the supplier on the terms of the contract, including price, quality level, delivery date and F.O.B. point.
4. Issuing a contract in the form of a purchase order.
5. Following-up on the progress of the contract to assure requirements will be met.
6. Receiving, inspecting and accepting the goods or services.
7. Approving the invoice for payment.

Question 12

Cost savings

Answer 12

a reduction in costs incurred. The difference between the original cost proposed and the revised cost.

Question 13

Planning

Answer 13

establishing a plan, which is a predetermined course of action.

Question 14

Plan

Answer 14

a predetermined set of actions that will lead to accomplishing a set of goals.

Question 15

Goals

Answer 15

the ultimate results expected to be reached when using a set of resources. Goals are broad statements of an ideal future situation, with an anticipated outcome, over specific time period.

Question 16

The hierarchy is

Answer 16

Vision

Mission

Strategy

Goals, which are developed from the strategy.

Plans, which are maps to achieve the strategy and goals.

Plans can come in many different forms. They are the roadmaps in achieving the established goal. Well-developed plans help a company to act more efficiently by focusing on a specific objective. Each plan will serve a specific purpose.

Plans will also include specific items, such as authority levels of the participants, resources required, skill sets needed, time-frames to complete the plan, and other important data.

Question 17

A contingency plan is tactical in nature,

Answer 17

which would only be placed into action if an event occurred. Example: You may decide to switch to Fed Ex should UPS go on strike. These plans are created to reduce the risk of material disruption, causing production stoppages. Notice, in this example, the risk is that UPS might go on strike. To reduce the risk of lost or delayed shipments, the contingency plan of shipping with Fed Ex would ONLY go in effect if UPS went on strike. (exam hint).

Question 18

A strategic plan is a plan of direction

Answer 18

utilizing the company’s resources, to gain some sort of advantage, typically in the market place, over a long-term period of time. Example: to hire more engineers to develop a new product line, or to buy a company and gain their market shares.

Question 19

A single use plan is a plan that is used only once

Answer 19

Examples would be to buy the executives a new car or to paint the building. Once the task is complete, the plan is complete. (exam hint).

Question 20

Strategic planning

Answer 20

is the developing of a strategic plan using the organization’s mission as a baseline, and evaluating the company-wide and supplier resources to achieve the mission.

Question 21

Tactical plans

Answer 21

a set of plans that are functional in nature. These are typically based on daily activities to achieve the company’s goals.

Question 22

Plans are dynamic in nature.

Answer 22

Sometimes plans will need to be modified in the middle to bring the project back on course. Dr. Edward Deming called this the PDCA cycle.
Plan – establish the course of action.

Do – initiate the action.

Check – monitor the actions to see if they are following the prescribed course.

Act – enact any changes to bring the action back to the original prescribed course.

A well-developed plan will have the following elements:

Delegation and authority level for needed decisions.

The skills requirements of the individuals involved.

Timeframes.

Resources required.

Any additional supplemental data.

Question 23

The Supply Management department also needs to develop a solid buying strategy. Some items to be considered are

Answer 23

1. A reduction in the number of suppliers to gain price leveraging through quantity discounts.
2. An increase in sources for strategic material to reduce the possibility of stock-outs.
3. Find ways to work with the engineers and requisitioner to make adjustments on specifications to reduce costs.
4. To work with engineering on standardizing as many components as possible.

Question 24

Notice

Answer 24

once again we are doing SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis. We have seen this topic come up several times. Again, we are looking at strengths, weaknesses, opportunities and threats.

Question 25

Issues relating to the development of objectives include.

Answer 25

1. Priority of the specific objective – which objectives should be pursued and in what order. Priority of objectives, depending on the resources to be used, should be established for company wide focus.
2. Integration with other objectives – objectives need to be integrated and aligned with existing company wide and departmental objectives.
3. Alignment with company goals – objectives should be aligned with the goals of the organization.
4. Measurability of results – objectives need to be measurable which data can be used to compare the future situation against the benchmark established.

Question 26

Issues relating to the development of objectives include.

Answer 26

1. Priority of the specific objective – which objectives should be pursued and in what order. Priority of objectives, depending on the resources to be used, should be established for company wide focus.
2. Integration with other objectives – objectives need to be integrated and aligned with existing company wide and departmental objectives.
3. Alignment with company goals – objectives should be aligned with the goals of the organization.
4. Measurability of results – objectives need to be measurable which data can be used to compare the future situation against the benchmark established.

Question 27

Policy

Answer 27

a set of general statements or guidelines that are used to control the daily activities of the work being performed

Question 28

Procedure

Answer 28

a step by step set of instructional statements or work instructions to establish work to be performed.

Question 29

Forecasting

Answer 29

the process of using situation models and data to generate a future expected outcome. A model of the situation is created, data in placed into the model and an expected outcome is generated.

Question 30

Forecast

Answer 30

a prediction of future activities based upon numerical historical data and non-numeric data.

Question 31

Market intelligence

Answer 31

• the process of gathering quantitative information and analyzing the data to determine the aggregate market of a specific product, service or situation. This information can be used to determine the strategic direction a company would like to take to leverage their resources to take advantage in the marketplace.

Question 32

Modeling

Answer 32

creating an artificial situation which mimics a current situation. This looks at the linking of various factors that represent a real situation found in the world.

Question 33

Model

Answer 33

is an artificial situation which mimics a current situation and represents a real situation found in the world.

Question 34

Qualitative Forecasting techniques

Answer 34

the approach used to forecast a future situation based upon judgment or intuition. (exam hint).

Question 35

Quantitative Forecasting techniques

Answer 35

the approach used to forecast a future situation based upon hard fact, such as historical and current data. (exam hint)

Question 36

The forecasting process includes the following

Answer 36

1. Determine the purpose, accuracy, and the item to be forecast.
2. Select the model to be used and collect the needed data.
3. Develop and test the forecasting model to confirm its usefulness.
4. Verify that the forecast uses enough available inputs.
5. Periodically review the model and adjust as needed.

Question 37

Qualitative methods

Answer 37

Delphi Method - surveying a panel of the experts in the field of interest. This can be done posing a series of questions regarding the topic to the experts, to which they provide a response. Each expert then receives anonymous copies of all the other responses. Each expert is then asked to evaluate the responses, revise their own response, or defend their original position.

Market Research - surveying current and potential customers to determine their current and future expected buying plans. The output would be based upon the opinions of those who are currently purchasing products and services.

Executive Opinions - surveying those who are in a high management position of a company. These executives look at the long-term and strategic planning for the company.

Sales force composites - the sales forecast from each salesperson, broken down in forecast periods, aggregated together to create a sales forecast for current and future periods.

Question 38

Time Series Methods

Answer 38

Moving averages - This is simple taking the historical data and plotting it against a time line. The line would indicate the average of the peaks and valleys for the time period. Multiple time periods would be chained together and the line would indicate the average trend.

Exponential smoothing - using the moving average model and adding weight factors to certain areas or time periods which may be more important.

Trend projections - using historical data that is consistent to track trends over given periods of time. Trend projections would be difficult to use when the historical data show is seasonal or dependent or contain uncontrolled factors.

Question 39

Casual methods

Answer 39

Multivariate regression - using the data and analyzing the information to see if there are variables that affect the outcome. These variables would then be combined with any formulas to try to predict future outcomes. This is typically used on a micro level for businesses, local industry or local government offices.

Econometric models - these models use complex equations consisting of multiple variables to model the sectors of the economy. The multivariable’s would be entered into a formula with an exponential factor to create a forecast. This is typically used on Macro economics level, involving state and Federal governments.

Note – forecasting is only as good as the model used and the information entered. Even so, forecasting will not tell you exactly what will happen in the future. It will only give a general idea of what might happen to be better prepared.

Example – just because the housing prices have been increasing at the rate of 5% per year, does not mean that it will continue to do so.

There are various factors that affect the availability of the product.

1. Factory utilization – how much of the factories available capacity is being used. If the factory utilization rate is high, then the lead-time for the product will be longer.
2. Lead-times – the overall length of time to produce the product. If all the capacity down the supply chain is being used, then the lead-time for the product will stretch longer and longer.
3. Inventory levels – the amount of inventory that a business keep on hand to satisfy their customer’s needs. If the amount of inventory is high, then product is readily available. However, there are times, as in recent months, that many businesses are trimming their inventory levels, which means the product may not be readily available.
4. Supply chain issues – when suppliers down the chain are having problems, which prevent them from delivering a product as needed. This can be based upon a variety of factors and issues, such as material allocation, financing, and supply of employees.

As mentioned before, a strategic supply plan creates a baseline, which can be compared and matched to the organizations goals. These are not static plans. These plans are dynamic, needing review and revising when a situation presents itself. For example, a product line changes, or a production process is found to more efficient than that currently being used.

Question 40

Elements of a strategic supply plan include the following

Answer 40

1. Periodic review of the strategies.
2. Organizing and prioritizing the use of the resources to maximize the benefits received.
3. Improvement programs involving suppliers to add value to the product or service.
4. Project management to direct supply improvements.
5. The use of cross-function teams in performing value analysis on existing products or processes.
6. Develop strategies with supplier to shorten lead times, and improve product reliability.
7. Develop budgets based upon supply forecasts.
8. Develop supplier performance benchmarks and use these benchmarks to improve the existing supply chain.

Question 41

Budget

Answer 41

a set of financial plans that establishes a set of funding levels and provides financial backing for an established set of actions. Financial Resources are allocated based upon achieving a plan or goal. The financial resources allocated in the budget can include monetary funds, amount of worker time, or materials used. Examples would include the cost of labor to paint a house, or even using your weekly paycheck and the amount of money set aside for food, clothing, housing and etc.

Question 42

Control

Answer 42

is the act of assuring a set of actions is within an established set of limits. Control is the act of measuring the current situation against a set of standards.

Question 43

Benchmarking

Answer 43

the comparison of how you company performs the various tasks and processes against that of other organizations. It is the search for the best practices and standards, used by other companies in the same industry, that can be used by your company.

Question 44

Best Practice

Answer 44

the searching for efficient and effective techniques and processes by examining leading edge companies and discovering how they are doing what they are doing. It is finding those companies who are the best in what they do, and comparing it to your own operations.

Question 45

KPI - Key Performance indicators-

Answer 45

these are measurements that a company considers to be critical in the performance of the business of process. These indicators are compared to an established set of standards. Any difference between the set of expected standards and the actual performance level must be reconciled. Any negative performance would be evaluated, analysis performed, and corrective action would be taken to prevent the incident from re-occurring. (exam hint)

Question 46

Before-the-fact

Answer 46

These are measurable controls put in place establishing a before-the-action occurs benchmark. These include plans, budgets, forecasts, procedures and policies. (exam hint)

Question 47

During-the-fact

Answer 47

These typically relate to timing of activities. Various tools are used to measure key performance indicators. These tools include: quality assurance which measures product, business continuity, processes or services against stated standards; statistical quality control which checks key process indicators; and scheduling which checks the forecasted delivery dates against the schedule to verify delivery performance.

Question 48

After-the-fact

Answer 48

Reviews the actual performance against established benchmarks. These include audits, procedure reviews and periodic timeframe reports.