Week 8 Flashcards
What are the types of purchases that become part of the final product?
- Direct
- Bill-of-materials
- Product-related
What is the definition of purchasing and supply management (PSM)?
The design, initiation, control, and evaluation of activities within and between organisations aimed at securing inputs from suppliers at the most favourable conditions
What is the 6 step purchasing process from a supplier
It starts with an internal supplier
1. Then it goes to tactical purchasing which first include define specifications
2. Select suppliers
3. Contract suppliers
Once this is done, the contract is made
4. Then the operational purchasing occurs which starts with order
5. monitor and expedite
6. follow up and evaluate
What are the 3 large financial impacts of PSM?
- Revenue growth
-> new products/services, flexibility, improved quality - Cost management
->lower costs for different things - Asset utilisation
-> inventory managmenet
What are 3 major categories that affect procurement?
- digitialisation
- Global Trade dynamics
- Climate change
What is category sourcing strategy?
because firms have different supplies that have different importance and market conditions, they use category sourcing strategies to use different strategies for certain components
What is the kraljic matrix and what are the 2 factors
Kraljic matrix is used to plot a component/product category on the matrix.
The 2 factors are:
1. Profit impact -> this concerns spend of product, impact on profit, growth, customer experience
2. Supply risk -> number of potential suppliers, competition, entry barriers
What are the 4 categories in the Kraljic matrix?
- Strategic products -> high profit impact and supply risk. We should seek partnerships
- Leverage products -> high profit impact and low supply risk. Exploit purchasing power and minimize cost through competitive bidding
- Bottleneck products -> high supply risk and low profit impact. Ensure there is supply and search for alternatives
- Routine products -> low supply risk and profit impact.
Automate and use e-procurement solutions
What is the definition of outsourcing?
It means a company divests itself of resources to another company to focus more effectively on developing its own core competencies. The decision, transfer, and execution process of activities that was or could be carried out within the organisation
What are the main forms of outsourcing?
- Capacity outsourcing
- Knowledge outsourcing
What are the motives for outsourcing?
- Economies of scale and cost reduction
- Risk pooling
- Reduced capital investment -> higher returns
- Increased flexibility
- Improved quality
- Increased innovativeness
- Ability to focus on core competencies
Fundamental risk of outsourcing
- increased dependence and vulnerability to supplier
- loss of critical competencies and skills
- loss of internal synergy
- stickiness of knowledge
- Conflicting objectives
What is the make-or-buy framework?
It uses 2 factors:
1. Level of competitiveness relative to supplier
2. Strategic importance of competence
It looks at what to make or buy
What are the 4 decision points for the make-or-buy framework?
- Maintain / invest -> high competitive advantage but low strategic importance
- Outsource -> low importance and competitive advantage
- Inhouse / invest -> high competitive advantage and strategic importance
- Collaborate / maintain control -> low competitive advantage but high strategic importance.
What are the 2 major reasons for outsourcing for a framework for buy/make decisions by Fine and Whitney?
- Dependence on capacity -> firm has knowledge and skills required but outsources
- Dependence on knowledge -> firm doesn’t have skills or knowledge and outsources to access it
what are the 5 criteria for determining whether components should be outsourced based on Fine and whitney?
- Customer importance -> no means outsource
- component clockspeed -> slow means outsource
- competitive position -> no means outsource
- capable suppliers
- architecture of product (modular or integral)
What are the 4 types of markets?
- Value-added independent e-market -> e-markets with added services
- Private e-markets -> firms run private auction and negotiation
- Consortia-based e-markets
-> group of firms within industry have their own market - Content-based e-market
-> focus is on either MRO goods or industry-specific goods
