Chapter 12: The Purchasing Process

purchase order master data

.... .... .... .... is a compilation of open POs and includes the status of each item on order

economic order quantity (EOQ)

.... .... .... is a technique of analyzing all incremental costs associated with acquiring and carrying particular items of inventory

supply chain management

.... .... .... is the combination of processes and procedures used to ensure the delivery of goods and services to customers at the lowest cost while providing the highest value to the customers.

reorder point (ROP) analysis

.... .... .... recognizes that each item of inventory is unique with respect to the rate at which it is sold

paperless systems

.... .... eliminate documents and forms as the medium for conducting business

purchase order (PO)

.... .... is a request for the purchase of goods or services from a vendor

ABC analysis

.... .... is a technique for ranking items in a group based on the value, activity, sales, or other relevant metric for the items

purchase requisition

.... ....is an internal request to acquire goods and services

E-procurement

.... can improve SCM by lowering administrative costs associated with procurement by reducing the number of people and amount of time required for the procurement process

the purchasing process

.... handles the repetitive work routines of the purchasing and receiving departments by capturing and recording data related to the day-to-day operations of the departments

SCM software

.... helps an organization execute the steps in the supply chain.

purchasing process

.... includes the first three steps—requirements determination, purchase order (PO) processing, and goods receipt—in the purchase-to-pay process.

The purchasing process

.... is an interacting structure of people, equipment, activities, and controls that is designed to accomplish the following: • Handle the repetitive work routines of the purchasing department and the receiving department.1 • Support the decision needs of those who manage the purchasing and receiving departments. • Assist in the preparation of internal and external reports.

The purchasing process

.... prepares a number of reports used by personnel at various levels of management

radio-frequency identification (RFID)

....-.... .... is a system for sending and receiving data, using wireless technology, between an RFID tag and an RFID transceiver

supply chain

A .... .... comprises the connections from the suppliers of merchandise and raw materials through to an organization's customers

approve purchase requisition

An authorized individual, or several individuals, such as cost center or department management, should approve purchase requisitions to ensure that the purchase is within an applicable budget and that the purchase is desirable.

independent authorization to record receipt

Before a receipt can be accepted and recorded, the receipt data should be compared with the PO master data to determine that an approved PO, prepared by someone other than receiving personnel, is on file. Receipts that are not authorized may be paid for and not be needed.

compare input receipt data to PO data

Before a receipt can be accepted and recorded, the receipt data should be compared with the PO master data to determine that the correct goods have been received.

approve purchase order

Before being issued, the appropriate personnel should approve POs to ensure that an appropriate supplier has been selected and that the correct goods and services, for the correct amounts, are being purchased. Failure of this control will lead to financial loss if the goods are not needed and cannot be returned.

compare vendors for favorable prices, terms, quality, and product availability

Before executing a purchase, prospective vendors should be compared to determine that they are the optimal choice for the purchase.

vendor packing slip

In the case of inventory, the .... .... .... , which accompanies the purchased inventory from the vendor and identifies the shipment, triggers the receiving process

blind copy

It is not uncommon for the PO copy, or PO data in the enterprise database, available for the receiving department to be a .... .... , meaning that certain data is blanked out (i.e., blinded)

receiving report

Once annotated with the quantity received, the PO receiving notification becomes a .... ...., which is the document used to record merchandise receipts

independent vendor master data maintenance

Requires that there is a separation of duties between the personnel who create vendor records (to authorize purchases and payments) and those that create and approve POs, record accounts payable, and approve payments. Without this separation, a buyer could execute a purchase with a vendor with which there is some arrangement (e.g., kickback) or conflict of interest (e.g., ownership). Also, without this separation, accounts payable personnel could create a vendor account to facilitate the creation of an invalid/fraudulent invoice that would subsequently be paid, perhaps to an address or bank account that they created on the vendor record. One-time accounts might be created by accounts payable for one-time payments.

acceptance report

Some organizations use an .... .... (SAP calls this a "Service entry sheet") to acknowledge formally the satisfactory completion of a service contract

vendor master data

The .... .... .... contains a record of each vendor that is approved for use by the organization

receiving supervisor

The .... .... is responsible for receiving incoming goods, signing the bill of lading presented by the carrier or the supplier in connection with the shipment, reporting the receipt of goods,4 and making prompt transfer of goods to the appropriate warehouse or department.

purchasing manager

The .... .... usually performs major buying activities as well as the required administrative duties of running a department

SCOR (SUPPLY-CHAIN OPERATIONS REFERENCE-MODEL)

The .... model is a process reference tool that allows companies to benchmark their supply chain processes and identify how to make improvements in the processes and relationships that a given company has with its partners, suppliers, and customers.

bullwhip effect

The multiplication of these orders up the supply chain can cause wild demand and supply fluctuations known as the .... ....

purchase requisitions data

These are compiled in the .... .... .... store

e-procurement

These markets and exchanges are key elements of .... , which is the use of information technology to automate significant portions of the procurement process

inspect goods

To ensure that the correct goods are received in acceptable condition.

confirm purchase order to requesting department

To prevent duplicate purchase requests and to allow the requesting department to ensure that a PO is created, the requesting department should be informed when a PO has been issued in response to a purchase requisition.

use authorized vendor data

Vendors should be vetted to determine their suitability to provide the organization with goods and services. The screening process might include vendor financial viability and performance record. The vendor data includes payment terms, address, and bank account.

B2B marketplaces

Web spending tools and .... .... , which are particular Web sites or portals that may be used as sources of supply in the procurement process

purchase receipts data

the .... .... .... is an event data store with each record reflecting a receipt of goods and services

SCM

the goal of ... is to increase product availability while reducing inventory across the supply chain.