Chapter 5 - Chapter 9 Supply Chain

LEAN's History

1990's SCM combined 1. Quick Response 2. Efficient Consumer Response - increase the level of services through relationships 3. Just in Time 4. Keiretsu Relationships - companies remain independent but work closely together

Supplier Recognition Programs

A program to recognize suppliers who achieve the high performance standards necessary to meet customer expectations.

Which of the following is the best description of a Preferred Supplier?

A supplier who best meets all of your company's overall purchasing requirements

Which of the following new technologies can improve supplier selection and increase the effectiveness of supplier relationship management?

Artificial intelligence

What are the three pillars make-vs-buy decision?

Business Strategy Risks Economic Factors

What are Trading Companies?

Buy products in one country and sell them in different countries where they have their own distribution network.

Benefits of Outsourcing

Concentrate on core capabilities Reduce staffing levels Accelerate reengineering efforts Reduce internal management problems Improve manufacturing flexibility

Advantages of Centralization

Concentrated volume Leveraging purchase volume Avoiding duplication Specialization Lower transportation costs No competition within units Common supply base

Quantitative Reasons for Buying or Outsourcing

Cost Advantage Inventory Considerations

What are the 8 quality management principles the ISO 9000 is based off of?

Customer focus Leadership Involvement of people Process approach Systems approach to management Continual improvement Factual approach to decision making Mutually beneficial supplier relationship

Who is W. Edwards Deming?

FATHER OF TQM create of Plan Do Check Act model

ISO 14000 is a widely accepted management and quality certification standard.

False

What are the benefits of an ISO certification?

Greater market potential Compliance to procurement bids Improved efficiency and cost savings Higher level of customer service Heightened staff moral and motivation

Continuous Flow Production

High Capital investment, dedicated to one single product highly automated ex. cement, chemicals, refining oil

Decentralized Purchasing

Individual, local purchasing departments, such as at the plant level, making their own purchasing decisions

The keys to developing successful supply partnerships include all of the following EXCEPT?

Individualized Objectives

Inventory turnover effect pt 2

Inventory turnover represents the number of times the company sold through inventory in a given time period.

What is Early Supplier Involvement?

Key suppliers become more involved in the internal operations of the buyer's company, particularly with respect to new product and process design, concurrent engineering, and design for manufacturability.

The operating philosophy that focuses on waste reduction and value enhancement is known as?

Lean

What are functional products?

MRO items and other commonly low profit margin items with relatively stable demands and high levels of competition

Measuring performance

Measures related to quality, cost, delivery, and flexibility are used to evaluate suppliers. USE SMART OBJECTIVES

What company originated the concept of Six Sigma?

Motorola

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

Non - Critical

What is the process utilized in continuous improvement called?

Plan, Do, Check, Act

What are the benefits of a strategic alliance?

Potential to increase revenue and profits increase revenue and profits for both parties. Potential to create a competitive advantage or block a competitor from gaining market share. Mitigate risks and ensures continuity of supply. Position the partners for future strategic opportunities.

What are preferred suppliers?

Preferred Suppliers are those that best meet your company's overall purchasing requirements

What is regarded with purchase price relation to TCO?

Procurement professionals recognize that although the purchase price of an item remains very important, it is only one part of the total cost of ownership.

What is the term for an internal document that defines the need for goods and/or services?

Purchase Requisition

What does E-Procurement automate?

RFI, RFP, RFQ, execution and analysis, Reverse Auction capabilities

What are benefits of the Supplier certification program?

Reduce amount of time and labor needed for buyer to conduct inspections of product Building long term relationships Recognizing excellence DECREASING the supplier base

In sourcing

Reverting to in house production when external quality, delivery, and services do not meet expectations

Co sourcing

Sharing of a process or function b/t internal staff and an external provider

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

Strategic

Managing a firm's external resources in ways that support the long-term goals of the firm can be referred to as?

Strategic sourcing

An organization's process for evaluating the quality systems of key suppliers in an effort to eliminate incoming inspections can be referred to as?

Supplier Certification

If you understand the Total Cost of Ownership (TCO) then you know:

That you need to consider all the related costs over the life of the product

A purchase order is legally binding only after it is accepted by the supplier.

True

Backward Vertical Integration refers to a company acquiring one or more of their sources of supply.

True

Forward Vertical Integration refers to a company acquiring one or more of their customer organizations.

True

The Weighted-Criteria Evaluation System is typically used to select a supplier or to evaluate the performance of a supplier?

True

What are merchants?

Wholesalers and retailers who purchase for resale

Is Single‐source risky?

YES

What is LEAN?

an operating philosophy of waste reduction and value enhancement improves supply chain flow by eliminating waste

What is Job Shop/ Project Production?

custom product for each customer one unit at a time/high customization undertaken by specialist businesses ex. ship builders, road builders, architects

Risks

lower quality, reliability, and predictability of outsourced solutions as compared with in-house manufacturing or services, as well as risks inherent in the process of identifying and selecting the right supplier and structuring a workable ongoing relationship.

What is operations management?

refers to managing the process to convert resources into goods and services, in alignment with the company's business strategy as efficiently and effectively as possible

What does small batch scheduling do?

reverse bullwhip effect through smaller batches creating a more even and smooth workload increases flexibility

What is the goal of Six Sigma?

to attain less than 3.4 defects per million opportunities

What do preferred suppliers provide?

-Product and process technology, and expertise. -Product development and value analysis. -Information on latest trends in materials, processes, or designs. -Capacity for meeting unexpected demand. -Cost efficiency due to economies of scale.

How does purchasing contribute to the primary objectives?

1. Actively seeking reliable suppliers 2. Working with the expertise of strategic suppliers to improve quality and materials. 3.Involving suppliers and purchasing personnel in new product design and development efforts.

What are the seven tools of quality control?

1. Check Sheets 2. Histograms 3. Pareto Analysis 4. Cause & Effect Diagrams 5. Flow Diagram 6. Control Charts 7. Scatter Diagrams

In what order would you put all the manufacturing strategies related to time, with one being the least and last being the longest?

1. MTS 2. ATO 3. MTO 4. ETO

The key characteristics to consider in the development and implementation of a Supplier Relationship Management System, include all of the following, EXCEPT?

Detachment

Which of the following are described as Agents licensed by the governmental regulatory authority to conduct business on behalf of importers, for a service fee?

Import Brokers

Advantages of Decentralization

Knowledge of local requirements Local sourcing Less bureaucracy

Which one of the following is NOT part of the seven (7) tools of Quality Control?

LEAN Layouts

What three components is LEAN composed of?

LEAN Manufacturing Respect for People Total Quality Management

What are other factors beyond purchase price for TCO that must also be considered?

Quantity Discounts Cash Discounts Value added Services Ex. Special delivery Administrative expenses Poor supplier Quality

Forward Vertical Integration

Refers to a company acquiring (i.e., buying) one or more of their customers

Backward Vertical Integration

Refers to a company acquiring (i.e., buying) one or more of their suppliers

What are Distributive Negotiations?

Refers to a process that leads to self-interested, one-sided outcome

The process of requiring pre-qualifying suppliers to enter a website and at pre-designated time and date to try to underbid one another is known as?

Reverse auction

What is the goal of supplier development?

Supplier development is all about providing suppliers with what they need to be successful in the supply chain.

Vendor Managed Inventory

Suppliers directly manage buyer manage buyer inventories to reduce the buyer's inventory carrying costs and avoid stockouts for the buyer

What is outsourcing?

The traditional def involves purchasing an item or service externally, which had been produced using a company's own internal resources previously.

What are the elements of LEAN manufacturing?

Waste Reduction Lean Layouts Inventory, Setup Time, & Changeover Time Reduction Small Batch Scheduling and Uniform Plant Loading LEAN Supply Chain Relationships Workforce Empowerment Continuous Improvement

What is the main challenge of Make to Stock?

avoid having excess inventory

What does International Organization for Standardization certificate mean?

certification is highly sought after as it represents achieving and maintaining a standard of excellence verified by an independent third party organization.

What are innovative products?

characterized by short product life cycles, volatile demand, high profit margins, and relatively less competition

Why are ISO certified suppliers preferred by procurement departments?

conform to defined set of standards easier to qualify and audit more open to sharing supply chain info certification done by third party have formal processes in place for continuous improvement welcome to building relationships firms have to be recertified every three years

What is a Request for Quote (RFQ)?

document used to solicit bids from interested and qualified suppliers for goods or services that the organization needs to obtain

What is Make to Order?

manufacturing starts only after a customer's order is received

What is Make to Stock?

means manufacture products for stock based on demand forecasts Push System

Respect for people

ordinary workers given greater responsibility work through cross functional team

prevention costs

related to the design, implementation, and maintenance of the quality management system. They are planned, and experienced before actual products or materials are acquired or produced

The Make versus Buy decision

the act of deciding whether to produce an item internally or buy the item from an outside supplier. THIS IS A STRATEGIC DECISION

What is Purchasing defined as?

the action of obtaining merchandise, capital equipment, raw materials, services, or maintenance, repair, and operations(MRO) supplies in exchange for money, or its equivalent.

What is the Total Cost of Manufacturing?

the complete cost of producing and delivering products to your customers generally expressed as cost per unit includes 1. Manufacturing and Procurement Activities 2. Inventory and Warehousing Activities 3. Transportation Activities

What is a supply base?

the group of suppliers from which a company acquires goods and services.

What is value?

the inherent worth of a product as judged by the customer and reflected in its selling prices and market demand

Corporate Social Responsibility (CSR)

the practice of business ethics

What is sourcing

the process of identifying a company that provides a needed good or service

What is Procurement?

the process of selecting and vetting suppliers, negotiating contracts, establishing payment terms, and the actual purchasing of goods and services.

What can Purchasing be described as?

the transactional function of procurement goods.

What is the changeover time?

time is taken to adapt and modify the manufacturing equipment and systems to produce a different product or a new batch of the same product nonvalue added operation

What is the setup time?

time taken to prepare and format the manufacturing equipment and systems for production

How is Key Supplier Selection conducted?

typically conducted by a cross functional team using evaluation forms or scorecards.

What is an intermittent processes?

used to produce large variety of products with diff processing requirements in low volume

What is an repetitive processes?

used to produce one, or few, standardized products in high volumes

What is waste in SCM?

wait times, inventories, material and people movement, processing steps, variability, any other non-value-adding activity.

Acceptance sampling

when a shipment is received from a supplier, a statistically significant representative sample is taken and measured against the quality acceptance standard.

Purchasing Process Steps

1. A need is identified, and a Purchase Requisition is issued 2. Obtain authorization as necessary 3. Identify and evaluate potential suppliers 4. Make supplier selection 5. Purchase Order (PO) is created and delivered to the supplier. 6. Supplier confirmation of the Purchase Order 7. Fulfillment 8. Receipt of Goods 9. Invoice and Reconciliation 10. Payment 11. Close out the Purchase Order 12. Analysis

What is the basic e-procurement process?

1. An electronic purchase requisition and /or purchase order 2. An invoice 3. A payment

What re the 5 key characteristics to consider in developing a SRM system?

1. Automation is meant to handle routine transactions 2. Integration spans multiple departments, processes, and software applications 3. Visibility of information and clear and concise process flows 4. Collaboration through information sharing 5. Optimization of processes and decision making

What are the 10 keys to developing successful strategic partnerships?

1. Building Trust 2. Having a Shared Vision and Objectives. 3. Developing Personal Relationships 4. Establishing Mutual Benefits and Needs 5. Gaining Commitment from Top Management 6. Managing Change 7. Information Sharing and Lines of Communication 8. Understanding and Influencing Capabilities 9. Continuous Improvement 10. Measuring Performance

What are the three attributes of Supplier Recognition Programs?

1. Companies should recognize and celebrate the achievements of their best suppliers 2. Award winners exemplify true partnerships, continuous improvement, organization commitment, and excellence 3. Award winning suppliers serve as role models

What are the primary objectives of Purchasing?

1. Ensure an uninterrupted flow of materials and services at the lowest total cost. 2. Improve the quality of finished goods produced. 3. Optimize customer Satisfaction

In which item category would the sourcing strategies of maintaining safety/strategic stocks, developing contingency plans, strengthening relationships, and searching for alternatives, be appropriate?

Bottleneck items

Quality is Defined by the Customer

CUSTOMER ARE PRODUCT SERVICES DEFINE QUALITY

Lean is a disciplined, statistical-based, data-driven methodology for identifying and removing the causes of defects and minimizing variability in manufacturing and in business processes

False

Supplier Relationship Management is 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

False

Total Quality Management is the term used in business to describe the in-depth process of capturing internal and external customer's expectations, preferences, likes, and dislikes

False

What are two ISO standards commonly used for supplier certification?

ISO 9000 And ISO 14000

How does strategic sourcing work?

Identifies suppliers Cultivates Relationships Continuously improving skills understanding and embracing possibilities

What are types of service providers for the global market?

Import brokers Import Merchants Trading Companies

Why do companies implement strategic sourcing initiatives?

Improve long-term financial performance Increase customer focus Improve Product quality Reduce the cost of materials Reduce delivery lead times Optimize the # of global suppliers Deliver more innovative products in less time and less expense than competitors.

What are the goals of strategic sourcing?

Improve the value to price relationship Understand the category buying and management process Examine supplier relationships across an entire org Develop and implement multiyear contracts Leverage the entire orgs spending

What are the general sourcing categories?

Non‐Critical - routine items that involve a lower percentage of the firm's total spend and involve little risk Bottleneck - risk high availability low, small # of alt suppliers Leverage - commodity items where many alt of supply exist, and risk are low. Spend is high and potential for procurement savings Strategic items and services that involve a high level of expenditure are vital to the firm's success.

When does a Purchasing Order become a legally binding contract?

Only when accepted by the seller

The goal of a good supplier performance evaluation system is to provide metrics that are:

Understandable, easy to measure, and focused on real value-added results

Business Ethics

Utilitarianism: an ethical act is that which creates the greatest good for the greatest number of people, and should be the guiding principle of conduct Rights and Duties: some actions are just right in and of themselves, regardless of the consequences.

A key supplier's activities to help the buyer's company reduce cost, improve quality and reduce new product development time beginning with the initial design phase, are known as?

Value Engineering

What is root cause analysis?

a collective term that describes a wide range of approaches, tools, and techniques used to uncover causes of problems.

What is the Profit-leverage effect?

a decrease in purchasing expenditures directly increases profits before taxes Money for Money

Return on Assets(ROA) effect

a high ROA indicates managerial prowess in generating profits with lower spending

Supplier Co‐location

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

What is E-procurement?

a term used to describe the automation through web-enabled tools, of the non-strategic and transactional activities that would otherwise consume the majority of a buyer's time.

What is Procurement concerned with?

acquiring all of the goods, services and work that is vital to an organization.

Ethical Sourcing

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

What is a strategic alliance?

an agreement between a buyer and a supplier to pursue some agreed upon objectives, while remaining independent organizations.

Purchasing order(PO)

an external commercial document that is the official offer issued by a buyer to a seller to acquire goods/services

Purchase Requisition

an internal document that defines the need for goods/services BUT does not constitute a contractual relationship with an external party may also contain authorization to continue with the purchase

appraisal costs

associated with the evaluation of purchased materials, processes, products, and services to ensure that they conform to specifications

What is Kabans(small batch scheduling)?

authorize production or movement of materials to next workstation could be through ERP system

What is a bid bond?

debt secured by a bidder for the purpose of providing a guarantee that the successful bidder will accept the contract once awarded. If not, the bond would be forfeited.

What is a Performance Bond?

debt secured by a bidder for the purpose of providing a guarantee that the work will be on time and meet specifications

What is a payment bond?

debt secured by a bidder for the purpose of providing protection against 3rd party liens not fulfilled by bidder

What did Joesph Juran do?

defined quality as "fitness for use". He developed the concept of the cost of quality. Quality planning Quality Control Quality Improvement

What is Purchasing also commonly used to represent?

department in a company

Purchasing Organization

dependent on many factors, such as market conditions and types of materials required

what is the Voice of the Customer?

describe the in depth process of capturing internal and external customer's expectation, preferences, likes and dislikes

What is a Request for Proposal (RFP)?

detailed capabilities document used to determine suppliers capability and interest in the production of a product or service

What is Supplier Relationship Management?

discipline of strategically planning for, and managing, all interactions with the third party organizations is that supply goods or services to an organization, in order to maximize the value of those interactions.

What is Six Sigma?

disciplined, data-driven methodology for identifying and removing causes of defects and minimizing variability in manufacturing and in business processes. improves supply chain process by reducing variation

What is NOT the goal of respect for people?

educe the number of people in an organization, it is to use use people resources more wisely.

What is the definition of Supply Management?

encompasses all acquisition activities beyond the simple purchase transaction

Reasons for a Single Supplier

establish a good relationship less quality variability lower cost transportation economies proprietary product/process volume to small to split

What are government purchases?

expenditures made in the private sector by all levels of government.

What are nonprofit purchases?

expenditures made in the private sector by all types of non-profit organizations.

What is Line Flow/Mass Production?

for standardized products w/ limited variation assembly line production ex. cell phones

What should sustainable sourcing programs try to do?

grow revenues reduce costs go green manage risks build intangible assets

Sustainability

he ability to meet current needs of the supply chain without hindering the ability to meet future needs in terms of economic, social, and environmental challenges.

What is value engineering?

help the buyer's company to reduce cost, improve quality and reduce new product development time beginning with the initial design

What is the point of benchmarking?

identify internal opportunities for improvement.

A sound strategic sourcing strategy can...

improve corporate image, increase sales and market share, and reduce costs

Economic Factors

include the impact of outsourcing on capital expenditures, return on invested capital capital expenditures, return on invested capital, and return on assets, as well as the possible savings achieved through outsourcing.

Business Strategy

includes the strategic importance to the company of the product or service that is being considered for outsourcing, as well as the process, tech, or skills required to make the product or deliver the service.

Quantitative Factors

incremental costs of either making or purchasing the item, such as the availability of manufacturing facilities needed resources, and manufacturing capacity.

Matching production plan to follow demand exactly leads too..

inefficient and waste, including excess inventory and or shortages of inventory

Who is Philip Crosby?

introduced the concepts of zero defects, and the focus on prevention not inspection 1. Quality is conformance to requirement 2. The system of quality is prevention 3. Performance standard is zero defects 4.The measure of quality is the price of price of nonconformance

Supplier Development

is the technical and financial assistance given to existing and potential suppliers to improve quality and/or delivery performance.

What is LEAN not?

laying off employees by buss load delivering less or working harder outsourcing and offshoring cost reduction set of tools automation or ERP system

Effective procurement managers consistently...

locate best quality materials at the lowest possible cost from the most reliable suppliers.

What is total quality management?

management philosophy that every employee must be committed to maintaining high standards of work in every aspect of company's operation

What is Batch Production?

manufacturing of a small fixed quantity of an item in a single production run aims to have better use of equipment good quality and more economical ex. bakeries, textiles, furniture

Qualitative Factors of make vs buy

more subjective and include control over the quality, reliability, and reputation

Reasons for multiple suppliers

need more capacity spread risk of supply disruption create competition more sources of information dealing with special kinds of business

Internal Failure Costs

occur when the product or service does not meet the designed quality standards, are identified before the product is delivered to the customer

External Failure Costs

occur when the product or service does not meet the designed quality standards, but is not detected until after the product or service is delivered to delivered to the customer

International Purchasing - Reasons for Global Sourcing

opportunity to improve quality, cost, and delivery performance exploit global efficiencies respond to insufficient domestic capacity achieve access to better process and product tech due to a change in domestics business environment take advantage of reciprocal trade and countertrade arrangements.

Uniform plant loading...

plans up to capacity in earlier time periods to meet demand later

Benchmarking

process of measuring the performance of a company's products, services, or processes against those of another business considered to be the best in the industry, aka "best in class."

What is manufacturing?

process or make raw materials or components into a finished product

After waste is removed....

processes are more streamlined, resulting in more satisfied customers. You'll also save your organization time and money

What is insourcing?

producing goods or services within an organizations internal resources?

What is Engineer to order?

product is designed, engineered, and built to the customer's specification after receipt of the order unique product every time

What is assemble to order?

products ordered by customers are produced quickly and are customizable to a certain extent hybrid strategy combining benefits of MTS and MTO Ex. Dell Computers

What kind of suppliers is SRM paired with?

provide high volumes of product/service provides lesser quantities of a crucial product serve many business units of a company

What happens when a company finds a excellent supplier?

purchase costs become RELATIVELY less important excellent suppliers should be able to drive costs out

What is Six Sigma??

quality management process focuses on improving quality of process outputs by identifying and removing the causes of defects

What do strong supplier partnerships entail?

require a strategic perspective opposed to a tactical one involves a mutual commitment over an extended time to work together to the mutual benefit

Co‐Managed Inventory (CMI)

s an arrangement where a specific quantity of an item is stored at the buyer's location.

What are the FIVE S's?

sort set in order shine standardize sustain

What is a Request for Information (RFI)?

standard business process whos purpose is to collect written info about capabilities of various suppliers

Total Cost of Ownership (TCO)

sum of all costs associated with every activity in the supply stream of a product.

What is Contracting?

term used for the acquisition of services

Strategic sourcing is a specialty area whose potential and profitability is just beginning to be realized.

True

Successful supplier relationships involve equal decision-making control between both the buyer and the supplier.

True

What is the approach to supplier development?

1. Identify critical products and services 2. Identify the suppliers of those critical products and services 3. Form a cross-functional team internally to work with the supplier 4. Identify what issues or gaps exist and what specific improvements need to be made 5. Meet with the top management at the supplier to get their support and involvement 6. Define details of the agreement and the action plan 7. Monitor the status of the projects / action plan and modify strategies as necessary

What are the three foundational aspects of Six Sigma?

1. Quality is Defined by the Customer 2. The Use of Technical Tools 3. People Involvement

What are some of the top competencies in making the most of a company's strategic sourcing decision making process?

1. Recognizing and accessing key issues, opportunities, strategies, and techniques to have a competitive advantage 2. Identify internal and external challenges that affect the sourcing strategy 3. Define issues involved in global sourcing, e-procurement, negotiations, and ethics 4. Apply problem-solving skills to determine the best course of action pertaining to the above strategy areas

The Weighted-Criteria Evaluation System

1. Select the key dimensions of performance mutually acceptable to both customer & supplier. 2. Monitor & collect performance data. 3. Assign weights to each of the dimensions. 4. Evaluate performance measures between 0 & 100. 5. Multiply dimension rating by weight & sum of overall score. 6. Classify vendors based on their overall score: Unacceptable, Conditional, Certified, & Preferred 7. Audit & perform ongoing certification review.

What are the key areas of spend analysis?

1. Total historic expenditures and volumes 2. Future demand projections or budgets 3. Expenditures categorized by commodity and sub‐commodity 4. Expenditures by division, department, or user 5. Expenditures by supplier

What is a supplier certification program?

A certified supplier is a source that through prior experience and qualification can provide material of such quality that it needs little if any little if any receiving inspection or testing receiving inspection or testing before going into approved stock or into the product process.

What is 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.

What is the ISO 14000

A family of standards for environmental management. benefits include reduced energy consumption, environmental liability, waste and pollution, and improved community goodwill.

What does a high ROA indicate?

A high ROA indicates managerial indicates managerial prowess in generating profits with lower spending

What are import merchants?

A person or company engaged in the purchase and sale of imported commodities for profit.

What is supplier evaluation?

A process to identify the best and most reliable suppliers

Competitive Bidding

A procurement process in which bids from competing suppliers, for the right to supply right to supply specified materials or services, are requested.

What is the ISO 9000?

A series of management and quality standards in design, development, production, installation, and service. Companies wanting to sell in the global market seek ISO 9000 certification.

What is a Single‐Source?

A sourcing strategy where there are multiple potential suppliers available for a product or service, however, the company decides to purchase from only one supplier.

What are reverse auctions?

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.

What are import brokers?

Agents licensed by the governmental regulatory authority to conduct business on behalf of importers, for a service fee.

What are trends in supplier relationship management?

Alignment Supplier Relationship Management with Strategic Sourcing Focus on cross-functional engagement Focus on innovation Investment in people & "soft skills"

Cost of Quality

An approach that supports a company's efforts to determine the level of resources necessary to prevent poor quality, and to evaluate the quality of the company's products and services.

Costs incurred in the process of finding or discovering defects which includes testing, evaluating, and inspecting quality, are categorized as which of the following?

Appraisal Costs

In which type of manufacturing process would each individual item in the group go through one stage of the production process before the whole group moves on to the next stage?

Batch Production

A tender, proposal, or quotation submitted in response to a solicitation (i.e., RFP, RFQ) from a contracting authority is known as what?

Bid

What are Collaborative Negotiations?

Both sides work together to maximize the outcome or create a win-win result. Requires open discussions and a free-flow of information between parties

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

Bottleneck

What is spend analysis?

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

Centralized/Decentralized Purchasing (Hybrid Approach)

Centralized purchasing for products and services used throughout the corporation. Decentralized purchasing for products and services used only locally at each facility.

Which Statistical Tool of Six Sigma is used to determine the frequency of a specific problems?

Check Sheet

What are the two key methodologies of Six Sigma?

DMADV(for designing) Define Measure Analyze Design Verify DMAIC (for improving) Define Measure Analyze Improve Control

What did Kaoru Ishikawa do?

Developed one the first tools in the quality management process, the Cause and Effect Diagram, which is also called the "Ishikawa" or "fishbone" diagram.

Which Lean related process can be described as a strategy to increase the level of services to consumers through close cooperation among retailers, wholesalers, and manufacturers?

Efficient Consumer Response

A purchase order is legally binding once issued by the buyer.

False

Inventory turnover effect

Increased Inventory turnovers indicate optimal utilization of space and inventory levels, increased sales, avoidance of inventory obsolesce

What are the benefits for suppliers in Strategic Partnerships?

Increased operating efficiencies Greater visibility into buyer's purchasing plans Increased scope of business Opportunities to develop, pilot, and showcase innovative solutions Longer term buyer commitments; greater predictability of future business Sustainable competitive advantage

What are the benefits for buyers in Strategic Partnerships?

Increased operating efficiencies Preferred access to the supplier's best people Influence over supplier investments and technology Preferred access to supplier ideas Increased innovation from and with suppliers Sustainable competitive advantage

What are Industrial buyers?

Individuals within and org who purchase raw materials for conversion into products, etc.

In which sourcing category would an item typically be classified, if it is considered to be high value, low risk, and there are multiple potential suppliers?

Leverage

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

Leverage

In which item category would the sourcing strategies of consolidating volumes as a negotiation tool, using the competitive marketplace to reduce costs, and automating supplier interfaces to minimize process related costs, be appropriate?

Leverage items

What are 4 major manufacturing strategies?

Make to Stock Make to Order Assemble to Order Engineer to Order

Which one of the following Manufacturing Strategies has the shortest (i.e., fastest) Customer Delivery Cycle?

Make-to-Stock

What are the key principles of TQM?

Management Commitment Employee Empowerment Fact Based Decision Making Continuous Improvement Customer Focus

Benefits of Supplier Recognition Programs

Motivate suppliers Improve supplier loyalty Encourage Suppliers to Adapt to the company's culture Helps to Create entry barriers for competitors Encourages Supplier participation in product innovation

Where was the concept of Six Sigma originated?

Motorola documented 16 billion in savings as a result famous from Jack Welch

What is Lean Layout?

Move people and materials when and where needed, and as soon as possible

Qualitative Reasons for Buying or Outsourcing

Non-Strategic Insufficient Capacity Temporary Capacity Temporary Capacity Constraint Lack of Expertise Quality Multi Sourcing Strategy Brand Strategy

Quantitative Reasons for Making

Overall lower costs Control of transportation and warehousing costs

Risks of Outsourcing

Potential loss of control Increased reliance on suppliers Increased need for supplier management

Qualitative Reasons for Making

Protect proprietary tech No competent supplier Control of lead-time Using existing idle capacity Better Quality control

What are two of the most important functions of a supplier development program?

Providing information about products, expected sales growth, etc. Suppliers need to become extensions of their customers. Training suppliers in the application of lean and six sigma / quality tools.

What is Multi‐Source?

Purchasing a good or service from more than one supplier. Companies may use multi-sourcing to create competition between suppliers in order to achieve higher quality and lower price.

Centralized Purchasing

Purchasing department located at the firm's corporate office makes all the purchasing decisions

What are the four elements of cost for TCO?

Quality, Service, Delivery, and Price (QSDP) TCO IS THE SUM OF THIS

What is Supply Base Rationalization?

Reduction in the supply base to the lowest number of suppliers possible without significantly increasing risk

Outsourcing allows the company that is outsourcing a product, to concentrate on core capabilities and increase staffing levels.

True

Products with low profit margin, relatively stable demand, and high levels of competition, are known as Functional Products.

True

Products with short product life cycles, volatile demand, high-profit margins, and relatively little competition, are known as Innovative Products.

True

What is buyers risk?

The buyer accepts a shipment of poor-quality units because the sample falsely provides a positive result against the acceptance standard (type II error)

What is supplier's risk?

The buyer rejects a shipment of good-quality units because the sample quality level did not meet the acceptance standard (type I error)

Supplier Relationship Management System

The reason for a system is to provide a more comprehensive and objective view of a supplier(s) performance

What are the advantages of e-procurement?

Time savings Cost savings Accuracy Real-Time communication Management Mobility Trackability Benefits to suppliers