Supply Chain HW #3, ch. 5-6

If you wanted to obtain the most information

Multiple suppliers

E-procurement

b2b purchase and sale of supples and services over the internet

If wanted to develop strong supplier relationships, you would choose?

Single supplier

If you want to create transportation economies you would choose?

Single suppliers

Bottleneck Items:

Unique procurement problems. Supply risk is high and availability is low. Small number of alternative suppliers.

cost to understand suppliers need and operations

pre-transaction cost

cost for replacing defective finished goods

post-transaction cost

cost of warranty repairs

post-transaction cost

Cost for a site visit to qualify a new supplier

pre-transaction cost

Strategic Items:

strategic items and services that involve a high level of expenditure and are vital to the firms success

Spend Analysis Definition

Categorizing and analyzing expenditure data for the purpose of decreasing costs, improving efficiency, and monitoring compliance

Supplier Co-location

An arrangement where a representative of the supplier is embedded in the buyer's purchasing group to forecast demand, monitor inventory, and place orders

Non-critical items:

Routine items that involve a low percentage of the firms' total spend and involve very little supply risk

Ethical Sourcing definition

attempts to take into account the public consequences of organizational buying, or to bring about positive social change through organizational buying behavior

vendor managed inventory

suppliers directly manage buyer inventories to reduce the buyers inventory carrying costs and avoid stockout for the buyer

If you have a temporary capacity constrain in your company's operations, your sourcing decision should be

Buy/Outsource

If you want to take advantage of a particular brand name or reputation, your sourcing decision would be?

Buy/outsource

The Profit-Leverage Effect

A decrease in purchasing expenditures directly increase profits before taxes (assuming no decrease in quality or purchasing total cost)

Item D is low value, low risk, and there are lots of potential suppliers

Non-critical sourcing category

Sustainability as it relates to supply chain

ability to meet current needs of the supply chain without hindering the ability to meet future need sin terms of economic, socially and environmental challenges - integration of social, ethical, environmental performance factors into the process of selecting suppliers

cost for closing out the purchase order

transaction cost

Item C is high value, high risk, and there are few suppliers, but they are excellent

Strategic sourcing category

Total cost of Ownership definition:

Sum of all the costs associated with every activity in the supply stream of a product (quality + service + delivery + price)

Co-managed inventory

An arrangement where a specific quantity of an item is stored at the buyer's location. Once the inventory is used, the item is replaced by the supplier, with the full knowledge and approval of the buyer

Leverage items:

commodity items where many alternatives of supply exist and supply risk is low spend is high potential procurement savings

cost to transport purchased materials

transaction cost

Item B is low value, high risk, and there are a small number of alternative suppliers

Bottleneck sourcing category (bottle, slim thick, low value, high risk)

If you have idle capacity available in your operations, your sourcing decision should be?

Make

If you want to have more control over transportation and/or warehousing costs, your sourcing decision should be?

Make

Strategic items sourcing strategy:

build and strengthen supplier relationships, increase the frequency of communications, foster innovation, seek integration, and ensure the availability of supply

Item A is high value, low risk, and there are multiple potential suppliers

leverage sourcing category (high value, leverage over low risk)

ch.5 Request for Proposal (RFP):

A detailed capabilities document used to determine a supplier's capability and interest in the production of a product or service purchasing term

Non-critical items:

Reduce the numbers of suppliers being used, simplify and streamline the purchasing and ordering process, and assign the buying responsibility to non-purchasing personnel

return on assets equation:

net income/total assets = percentage

payment for the purchased materials

transaction cost

Bid bond

The term used to describe a debt secured by a bidder for the specific person of providing a guarantee that the successful bidder will accept the contract once awarded, is known as :

Bottleneck items:

Maintain a higher level of safety stock, develop contingency plans in case of a shortage, and search for alternatives

If you are concerned about controlling lead-time, your sourcing decision should be?

Make

If you want to protect your company's proprietary technology, your sourcing decision should be?

Make

cost associated with investigating the need for a purchased material

pre-transaction cost

ch. 5 Request for Quote (RFQ)

A document used to solicit bids (ex. price and delivery) from interested and qualified suppliers for goods or services that the organization needs to obtain a purchasing term

Strategic Sourcing

a comprehensive approach for locating and sourcing key suppliers, so that an organization can leverage its consolidated purchasing power to find the best possible values in the marketplace

PURCHASING PROCESS STEPS

1) a need is identified 2) purchase requisition is issued 3) authorization is obtained as necessary 4) potential supplier are identified and evaluated 5) the supplier selection is made 6) a purchase order is created and delivered to the selected supplier 7) The supplier confirms the Purchase Order to the buyer 8) The Purchase Order is fulfilled by the supplier 9) The goods are received by the buyer 10) The supplier prepares and issues the invoice to the buyer 11) the buyer reconciles the invoice with the purchase order and receipt of the goods 12) the buyer issues payment to the supplier 13) the buyer closes out the purchase order in the purchasing system 14) the buyer performs an analysis to ensure that the procurement process is efficient and accurate.

Total Cost of Ownership cost category:

- pre-transaction - transaction - post-transaction

If you want to reduce risk of supply disruption

multiple suppliers

General Sourcing categories:

- strategic items - bottleneck items - non-critical items - leverage items

cost associated with a late delivery

transaction cost

cost associated with the loss of customer goodwill

post- transaction cost

Company Sourcing decisions:

Make or Buy/Outsource

Leverage Items

consolidate the volume of purchases among fewer suppliers to negotiate reduced costs

Reverse Auction Definition

A sourcing technique where pre qualified suppliers enter a website and at pre-designated time and date, and try to underbid to win the buyer's business

Reverse auction

A sourcing technique where pre-qualified suppliers enter a website and at pre-designated time and date, and try to underbid competitors to win the buyer's business

If holding too much inventory is a concern, your sourcing decision should be?

Buy/Outsource

If the item that you are considering is not a strategic item, your sourcing decision should be?

Buy/outsource

If you do not have the appropriate expertise your sourcing decision should be?

Buy/outsource