Mid-Term S&P
Know the advantages and disadvantages of purchasing from overseas suppliers.
-Advantages: Cost/Price Benefits, Access to Technology, Quality, Access to the Only Source Available, introduce competition to domestic suppliers, react to buying patterns of competitors, Establish a market presence in another country - Disadvantages: Lack of Skills, Resistance to change, Longer Lead times, Customs languages and culture, currency fluctuations, increased supply risk
Know the advantages and disadvantages of a centralized purchasing structure.
Advantages: 1) Reduced duplication of purchasing efforts 2) Leverage purchase volumes to receive a cost advantage 3) Coordination of purchasing strategies and plans 4) Development of specialized expertise Disadvantages: 1) Delay in receiving materials from the centralized store by other departments. 2) In case of an emergency, materials can not be purchased from local suppliers. 3) Defective materials can not be replaced timely
Know what the term "entry qualifiers" for suppliers means.
Entry qualifiers are the basic components that suppliers must possess before they proceed to the next phase of the evaluation and selection process. Typical qualifiers include: (1) financial strength; (2) proven manufacturing or service capability; (3) capable and supportive management; (4) adequate facilities; and a (5) skilled professional and technical staff.
Know what "Incoterms" are used for in international trade.
Incoterms are internationally recognized commercial terms that describe the responsibilities of the buyer and seller in the arrangement of transportation. They are used in conjunction with a sales agreement or other method of transacting the sale. The buyer and seller have an array of terms from which to choose, depending on the extent to which each party wants to be involved with the transportation and insurance.)
Know what the term "expediting" means.
Is the process of personally or electronically contacting suppliers to determine the status of past-due or near-past-due shipments. In smaller groups often part of the purchasing function. In larger orgs, expediters often report to a separate materials control department.
Know what the term "risk" means in a business context.
The possibility that a company will have lower than anticipated profits, or that it will experience a loss rather than a profit. Business risk is influenced by numerous factors, including sales volume, per-unit price, input costs, competition, overall economic climate and government regulations.
Know what the term "supply base optimization" means.
The process of determining the appropriate number and mix of suppliers to maintain. Often referred to as rightsizing, it usually refers to reducing the number of suppliers used. Suppliers who are not capable of achieving world-class performance may be eliminated from the supply base. Process is continuous, because the needs of the business unit are always changing. EX: General Motors was ready to eliminate 160 suppliers worldwide that it considered poor performers in 2003 and 2004.
Know the components of an integrative strategy development process.
•Company Objectives •Cross-Functional Business Objectives •Purchasing and Supply Chain Goals •Purchasing and Supply Chain Strategies •Performance Measurement System •Performance Measurement Review •Continuous Improvement
Understand the terms "offshoring,""re-shoring,""outsourcing," and "nearshoring."
1) "Offshoring - Involves contracting with independent supplies located outside geographic boundaries of the United States for goods and services. 2) Re-shoring - Bringing offshored products, goods or services back to the country of origin 3) Outsourcing - Involves contracting with independent suppliers outside of the organization to provide products or services that were performed inside the organization. 4) Nearshoring - Relocating sourcing to countries geographically closer to the United State
Be able to discuss the advantages of a rationalized and optimized supply base
1) Buying from a world class suppliers, b/c of the strong correlation between supplier performance and supply chain success, it is not difficult to see why choosing and maintaining only the best suppliers supports higher performance thoughout the supply chain. 2) Use of full-service suppliers, the remaining suppliers in a rationalized and optimized supply base are often larger on average and more capable of offering a broader range of value-adding services. 3) Reduction of supply base risk, if buyers select suppliers carefully and develop close and collaborative working relationships with fewer suppliers, supply risk can acutally decrease. 4) Lower supply base administrative cost, highly qualified suppliers often require fewer problem related interactions with the buyer. 5) Lower total product cost, supply base rationalization and optimization provides the opportunity to achieve lower total product costs by awarding larger volumes to fewer, more capable suppliers. 6) Ability to pursue complex supply management strategies, the need for more complicated collaboration and interaction with suppliers requires a smaller supply base because of higher levels of two way interactions between a buyer and seller on both tactical and strategic issues.
Know the definition of a supply chain
A supply chain is a set of three or more organizations linked directly by one or more of the upstream or downstream flows of products, services, finances, and information from a source to a customer. It is important to acknowledge that anytime business is conducted a supply chain will exist. (The book says a supply chain is a subset of the value chain but the professor comments that he is not convinced that they are different)
Know what the term "sustainability" means in a business context.
Business sustainability is often defined as managing the triple bottom line - a process by which companies manage their financial, social and environmental risks, obligations and opportunities. These three impacts are sometimes referred to as profits, people and planet. Building that strategy begins with looking closely and thoughtfully at the business, then using what is learned to operate for long-term success meeting the company's current needs in ways that help ensure that future generations can meet theirs. Ultimately it is the ability to maintain or support an activity or process over the term. It is the continued development or growth, without significant deterioration of the environment and depletion of natural resources on which human well-being depends.
Be able to discuss the purchasing/supply management job tasks.
Buying, expediting, inventory control, transportation, value analysis,
Be able to name the four types of categories in a portfolio analysis, give an example of each one, and discuss the proper strategies for dealing with each type.
Critical: Examples: assemblies, gear boxes, engines and optics Strategy: Form Partnerships with Suppliers. Tactic: Increase role of selected suppliers. Actions: Heavy Negotiation, supplier process management, prepare contingency plans, analyze market/competition, use functional specifications. Bottleneck: Examples: natural flavors, vitamins, and pigments Strategy: Ensure Supply Continuity Tactic: Decrease uniqueness of suppliers, Manage supply Actions: Widen specification, Increase competition, Develop new suppliers, Medium-term contracts, Attempt competitive bidding Leverage: Examples: steel plate and wires Strategy: Maximize Commercial Advantage Tactic: Concentrate Business, Maintain competition Actions: Promote competitive bidding, exploit market cycles/trends, procurement coordination, use industry standards, active sourcing Routine: Examples: standard office supplies, and consumables Strategy: Simplify Acquisition Process Tactics: Increase role of systems, reduce buying efforts Actions: Rationalize supplier base, automate requisitioning, Stockless procurement, minimize administrative costs, little negotiating
Know what the term "collaboration" means in a business setting.
Defined as the process by which two or more parties adopt a high level of purposeful cooperation to maintain a trading relationship over time to achieve specified goals. Relationship is bilateral; both parties have the power to shape its nature and future direction over time. Mutual commitment nad balanced power are essential to the process.
Understand the methods used for prevention of supplier quality problems.
Different principles and tools of TQM include: 1) Six Sigma - Focuses on quantitative results to the bottom line through a disciplined application of statistical tools for management decision making and problem-solving, as well as creating sustainable infrastructure that positively affects the organizational culture. 2) ISO 9001:2008 - Is a series of quality management system standards. There are 5 main sections contained in this standard: 1.Quality Management System 2.Management responsibility 3.Resource Management 4.Product Realization 5.Measurement, analysis, and improvement It follows a process-based approach to quality management that stresses planning, acting, analyzing results, and making improvements. 3) ISO 14001:2004 - Is designed to promote environmental awareness and protection as well as pollution prevention. The standards cover a broad perspective of environmental disciplines, ranging from the organizations environmental management system to addressing labeling, performance evaluation, life cycle analysis, communication, and auditing. 4) MBNQA - Malcolm Baldrige National Quality Award - In 1987, US President Ronald Reagan signed the MBNQA which established the national award to recognize quality improvement among manufacturing, service and small business organizations.
5. Know the objectives of the purchasing function
Objective 1: Supply assurance, purchasing must perform a number of activities to satisfy the operational requirements of internal customers. Objective 2: Manage the Sourcing Process Efficiently and Effectively, purchasing has limited resources available to manage the purchasing process and must continuously work toward improved utilization of these resources. Objective 3: Supplier Performance management, one of the most important objectives of the purchasing function. Deals with the selection, development, and maintenance of suppliers. Objective 4: Develop aligned goals w/ Internal Stakeholders, purchasing must communicate closely with functional groups that represent their internal customers. Objective 5: Develop Integrated Supply Strategies That Support business Goals and Objectives
Know the terms and characteristics of the various supplier measurement and evaluation systems
Organizations typically use three common types of measurement techniques or systems when evaluating supplier performance: 1.Categorical - Easiest and most basic, but most subjective in measuring supplier performance. Assignment of a subjective rating score for each category. 2.Weighted-Point System- weighs and quantifies relative scores across different performance categories. Usually features higher reliability and moderate implementation costs 3.Cost-Based System - Most thorough and least subjective. Seeks to identify and quantify the total cost of doing business with a given supplier. Uses a supplier performance index. Study the advantages and disadvantages table on pg. 327 of the book. Gives a good overview of the characteristics of each system
Know what a "portfolio analysis" is used to accomplish.
Portfolio analysis is a tool to structure and segment the supply base and is used as a means of classifying supplies into one of four types. The premise of portfolio analysis is that every purchase or family of purchases falls in a quadrant: 1.Critical 2.Routine 3.Leverage 4.Bottleneck Once the portfolio analysis is completed, the team must then dive into the category and evaluate individual suppliers as to their suitability.
Know what the term "process capability" means in terms of manufacturing
Process Capability - is the ability of a process to generate outputs that meet engineering specifications and/or customer requirements and "refers to the normal behavior of a process when operating in a state of statistical control." A state of statistical control exists when only variation occurs naturally and randomly from how the process was designed.
Know the pros and cons of a cross-functional sourcing team approach.
Pros: Reduced Time to Complete a task Increased Innovation Joint Ownership of Decisions The need to build internal relationships through teams. Cons: Team Process Loss Negative Effects on Individual Members Poor Team Decisions
Be able to discuss the reasons why purchasing is important to organizations.
Purchasing process has a major impact on organizational competitiveness. The purchasing process is used to identify user requirements, evaluate the user needs effectively and efficiently, identify suppliers who can meet that need, develop agreements with those suppliers, develop the ordering mechanism, ensure payment occurs promptly, ascertain that the need was effectively met, and drive continuous improvement.
Know what the term "sole supplier" means.
Sole Supplier - When one and only one supplier is specified and there are no other approved suppliers of the product or service that the firm will accept.
Know what "supply risk management" encompasses.
Supply risk management encompasses management of events of supply chain disruption that have the potential to reduce a firm's agility and profitability. Supply risk management involves the management of parts shortages, lack of response to customer-requested changes, production problems, ramp-up problems, and quality problems.