Week 1 - Introduction

Question 1

What is purchasing? (Weele, 2009)

Answer 1

Is the management of the companies external resources in such a way that the supply of all goods, services, capabilities and knowledge which are most necessary for running, maintaining and managing the company’s primary support activities is secured at the most favourable conditions

Question 2

What is procurement?

Answer 2

Procurement explores supply market opportunities and to implement resourcing strategies that deliver the best possible supply outcomes to the organisation, its stakeholders and customers

Question 3

What is supply chain management? (Christopher, 2005)

Answer 3

Is the management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to supply chain as a whole

Question 4

3 components of professional procurement

Answer 4

• Supplier relationship management
• Contract management
• Category management

Question 5

Roles of a buyer (8)

Answer 5

• Category management
• Supplier relationship management
• Contract management
• Stakeholder management
• Risk management
• Negotiation
• Project management
• Corporate social responsibility

Question 6

How has purchasing evolved since then 90s?

Answer 6

Many more factors/components in purchasing from being just about contract management to now being strategic sourcing, supply chain management and strategic world class

Question 7

What are the 3 phases of traditional purchasing?

Answer 7

• Identification phase
• Ordering phase
• Post-ordering phrase

Question 8

What happens in the identification phase? (2)

Answer 8

• A requisition is issued by the stores, stock control or a potential user
• A bill of materials issued by the drawing office, production control or equivalent department

Question 9

What happens in the ordering phase of traditional purchasing? (5)

Answer 9

• Enquiries or requests for quotation (RFQ)
• Quotations from suppliers
• Possible further negotiations
• Purchasing order placed
• Order acknowledgement by the supplier

Question 10

What happens in the post-ordering phase? (5)

Answer 10

• Order expedition
• Advice notice check
• Goods received check
• Invoicing
• Order files archiving

Question 11

What are the inefficiencies in traditional purchasing? (4)

Answer 11

• A sequence of non-value addicting clerical activities
• Excessive documentation
• Excessive time in processing orders both internally and externally
• Excessive cost of purely transactional activities

Question 12

How can inefficiencies in traditional purchasing be reduced?

Answer 12

By transforming excessive documentation into value-added processes by reducing, eliminating or combing steps whenever possible

Question 13

What 3 function influences changes in purchasing?

Answer 13

• Changes in management attitudes
• Changes in the nature of markets
• Changes in the nature of customers

Question 14

How can changes in management attitudes influence purchasing? (3)

Answer 14

• Recognition that purchasing is essential and strategic
• Identification of the high cost of procurement
• Increasing concerns about the risks in supply chain management

Question 15

How can changes in the nature of markets influence purchasing? (4)

Answer 15

• Fiercer competition
• Global operations
• Power
• Concentration of ownership

Question 16

How can changes in the nature of customers influence purchasing? (3)

Answer 16

• Growing emphasis on customer satisfaction
• More knowledgable and demanding customers
• More diverse customers

Question 17

Why is purchasing important? (3)

Answer 17

• A firm’s operation depends on the external materials and services acquired through purchasing
• Purchasing forms an essential link between organisation and gives the trigger for moving materials through supply chains
• Purchasing affects broader organisational performance

Question 18

What are the strategic roles of purchasing? (7)

Answer 18

• Due diligence
• Risk management of the supply chain
• Relationship management
• Continuous improvement of supplier performance
• Supplier’s investment in right first time
• Supplier’s investment in inventory
• Supplier’s investment in procurement expertise

Question 19

Examples of purchasing objectives (6)

Answer 19

• Support organisational goals and objectives
• Develop integrated purchasing strategies that support organisational strategies
• Support operational requirements
• Using purchasing resources efficiently and effectively
• Supply base management
• Develop strong relationships with other functions

Question 20

What components of an organisation enables good purchasing (4)

Answer 20

• Human Resources
• Organisational design
• Information Technology
• Measures of performance

Question 21

Which purchasing skills are needed in HR to enable good purchasing in organisations? (5)

Answer 21

• Supplier relationship management
• Total cost analysis
• Purchasing strategies
• Supplier analysis
• Competitive market analysis

Question 22

Outline the activities in the purchasing process (6)

Answer 22

• Define specification - Recognise user need for materials
• Select supplier
• Contract agreement - approve of terms
• Ordering
• Expediting - receive materials
• Evaluation - measure and manage supplier performance

Question 23

What are the elements and document in defining the specification? (purchasing process)

Answer 23

• Elements: Functional specification, technical changes, bringing supplier-knowledge to engineering
• Documents: Functional specification, norm/spec control

Question 24

What are the elements and document in selecting supplier in the purchasing process?

Answer 24

• Elements: Pre-qualification of suppliers, Request for quotation (RFQ)
• Documents: Supplier selection proposal

Question 25

What are the elements and document in contract agreement in the purchasing process?

Answer 25

• Elements: Contracting expertise, negotiating expertise
• Documents: contract

Question 26

What are the elements and document in ordering in the purchasing process?

Answer 26

• Elements: Develop order routines, order handling
• Documents: order

Question 27

What are the elements and document in expediting in the purchasing process?

Answer 27

• Elements: Expediting, trouble-shooting
• Documents: Exception report, due date listing, invoices

Question 28

What are the elements and document in evaluation in the purchasing process?

Answer 28

• Elements: Supplier evaluation, supplier rating
• Documents: Preferred supplier list, supplier ranking scheme