Purchasing & Supply Chain Management

Explain how firms would buy in on central led organizational design?

Direct contacts for information on critical issues to the business unit leader.

How long does it take to move from stage 1 to stage 4 of the supply management strategy development?

Due to learning curve to set up a strategy of effective supply management it will take a few years get from stage 1 to 4.

Why is it important to have a policy that outlines origin and scope of purchasing authority.

It provides guidance to delegate certain assignments to certain divisions.

Why is it important to discuss results with a supplier survey or visit?

It shows the strengths and weaknesses of a supplier, supports the organization to build a dedicated supply chain, Helps supplier improve key processes.

Why has purchasing been involved with transportation and other non-purchasing areas?

Its an important kind of buying dealing with logistics providers and suppliers. This includes assembly, packaging, and warehouse production items.

Why should a buyer be concerned with monitoring and managing supplier quality performance?

Its essential because any lapse would tarnish the hard earned reputaion of even the world best companies or brands.

What are the risks of backdoor maverick buying why are purchasers interested in controlling this?

Its the buying and selling of good without competitive bidding. They control this because these types of investments are high risk.

What is 3 elements of lean supply chain?

Lean Supply, Lean Transportation, Just in Time Kanban systems.

Discuss reasons for using a third party for worldwide sourcing?

Lesser cost, marketing potential, increase entire supply capacity, easy utilization of domestically unavailable resources, alternative supplier or vendor source to raise competition.

Discuss some of the sources of information a buyer can use to identify potential offshore sources of supply.

Letters of Credit, Dock Receipts, Multiple Bills of Landing, Commercial invoices, packing lists.

What are three types of bench-marking which is the most common?

Strategic, operational and support activity bench-marking. It will depend on the requirement of the company.

Which Barrier of supplier development is hardest to overcome?

Supplier specific barrier. It is when a barrier is caused due to lack of cooperation from the suppler's side.

Black Box Approach

Suppliers are provided with certain functional specification and are requested to complete certain technical aspects.

Why has supply management traditionally not been a part of corporate strategic planning function?

Supply Chain for a product is not a great concern for a company it is just an action.

How can a buyer utilize (MBNQA)

increases overall quality of suppliers, planning and enhancing performance of company, An internal assessment to ensure quality.

Financial Risk Management

the continual monitoring of the strength of suppliers' financial condition to insure their ability to meet the purchaser's performance requirements for products or services

Sustainable supply Management (SSM)

the extent to which supply management incorporates environmental, social, and economic value into the selection, evaluation, and management of its supply base

Discuss several reasons why managers neglect true cost of physical inventory? What has changed their minds?

The major impact of holding more inventories is the effect on a firms working capital. Ordering and carrying inventory has more costs with physical space mandatory for carrying excessive inventory.

Why is control for maintenance, repair and operating inventory difficult for companies?

This is difficult because it the items support production and operations. These items are not apart of the items but are critical for constant operation. Time and cost of maintenance cant be recovered.

What conditions might you consider single sourcing an item in the leverage category of a portfolio matrix?

This is used to create a strong relationship with a supplier.

What is the logic for physically separation strategic and operational buyers?

To give specialized and adequate attention for each of them. The skills needed for strategic focus differs from operational focus.

Why is it important to make a document describing a commodity strategy?

To have a clear idea of objectives and ways to achive it.

Why does supply base optimization occur before long term agreements?

To identify the correct supplier who can deliver a high level service and quality products consistently as expected.

What is the logic behind co-locating purchasing personal with internal customers?

To lower cost and enhance services, reduces cycle time, reduces conflicts.

Why is the purchasing profession sensitive to ethics?

Transparency, Fairness, Confidentiality.

How is purchasing directly and indirectly involved in control of a firms inventory investment?

Unit Costs, Ordering Costs, Carrying Costs, quality costs.

Gray Box Approach

Where engineers and suppliers of buying company work together to design a project.

Statement of Work (SOW)

Work that has been completed and when it is needed the type of service which was required.

What are the main characteristics of a lean supply system, What are the barriers?

Zero defects, electronic data, stable production, buyer/sellers relationships. Barriers include inconsistencies in deliveries, no close relationships, quality issues.

Operational Risk Management

focuses on the continued ability of the supplier's human, intellectual and physical capital to meet the buying firm's requirements with respect to quality and delivery.

Describe how you would develop a bench-marking program.

5 Phases: Planning, Analysis, Integration, Action, maturity.

Operational Buyer

A buyer who normally purchases goods and services without considering additional value.

Cross-Functional Sourcing Team

A class of people formed into a business unit to achieve integration in supply chain.

Why do you think a hands on approach is best for supplier development?

A combination of different methods will address the different areas of supplier development.

Corporate Strategic Planning

A disciplined and well designed process of organizational effort is aimed at specifying the complete strategy of an organization.

What are the benefits of total cost associated with physical inventory?

A financial estimation that helps owners and buyers identify direct and indirect costs is total cost of ownership. Benefits are: planning and budgeting allocated funds, managing asset life cycle, prioritizing a capital acquisition proposal, selecting a vendor, and purchasing decisions.

What is the purchasing performance evaluation system and why would a company perform this?

A formal approach to purchaser evaluates effectiveness and efficiency measures. It helps make informed decisions, performance of the team, effectively utilizes team and motivates employees.

Competitive Bidding

A method adopted by an organization that helps select an appropriate supplier for procurement.

Sourcing Team Leader

A person appointed by management who are the strongest forecasters of team achievement.

Organizational Purchasers

A person who buys goods and services in order to make a profit.

Benchmarking

A process of continuously measuring system results, comparing those results to optimal system performance (benchmark values), and identifying steps and procedures to improve system performance

What is the difference between a purchase order and a blanket order. What are the advantages of a blanket order?

A purchase order is viable document with the price, quantity and type of product. Blanket order is an open order that is open and only covers a repeated purchase. Blankets make the process more efficient and effective. Can be canceled at anytime.

Bill of Landing

A record of the quantity of goods delivered to a facility.

Supplier Performance Index (SPI)

A score given to each potential suppliers based on their performance. Used to find the best supplier.

Buyer-specific Barrier

A situation where the buying company does not engage supplier development unless senior management recognizes a need for it.

Full service Supplier

A supplier who is capable of providing a wide range of activities including access to design, research and development, suppliers engineering, testing ect...

Why is functions placement in the hierarchy important?

Accountability, direction, communication, career development.

What are the advantages/disadvantages of E-Procurement tools?

Advantage: No paperwork, time reduction, error reduction, communication improvement, reductions in costs. Disadvantage: push back from users, frictions and resistance, communication gap.

Discuss advantages/disadvantages of an optimized based strategy?

Advantages: Buyer can focus on delivering quality products and services, lowers risk of supply base since there is less suppliers, Cost of supply chain is low, advantages of using complex supply management strategies. Disadvantages: few suppliers increases dependency on company, single location supply can lead to supply disruption, overaggressive supply can lead to a substantial increase in demand which cant be fulfilled existing suppliers.

Category Strategy

Aligns supply capabilities and demand requirements.

Strategic Buyer

An individual who is usually willing to pay a premium in order to obtain value out of a purchase.

How is anticipating a requirement or a need through purchasers involvement on new product development different than reacting to a purchase need?

Anticipating a material requirement will increase cycle time, better evaluation of suppliers. When a firm is required to decrease cycle time it would help analyze and fulfill requirements of purchasing.

Describe various classifications of cost of quality.

Appraisal, failure and prevention cost.

What are barriers to integration how can they be overcome?

Barriers: level of competency, ability to adopt new ideas, low prices and cost, legal requirements, confidentiality. Ways to overcome: buyer/seller relationships, communicate ideas to employees, identity and adpot new ideas, legal aspects.

Why are human and labor rights involved in today's supply chain?

Because the supply chain is able to standardize the work week while monitoring employees for environmental wellness.

What changes occur when a lean system is implemented to a ordering and transportation system between a buyer and seller?

Better coordination for transportation and the avoidance of traffic problems.

What are the benefits of comprehensive policy and procedure manual?

It provides direction, gives job descriptions, avoids conflict.

What is the difference between capital equipment and routine supplies?

Capital equipment is a capital expenditure, profits can be earned only in the future, requires lump sum to buy. Routine Supplies is a revenue expenditure profit earned immediately, requires less to purchase.

What are important benefits of centralized and decentralized purchasing authority?

Centralized purchasing: bargaining power increases when purchases made in bulk, link between suppliers and intermediaries eliminate frequent purchases. Decentralized purchasing: decisions can be made faster, moral and commitment increases, improvement of skills.

Why is the Honda approach to suppler development and improvement not wide spread among the U.S. Firms?

Challenges and barriers, Low success rate, lack of required workforce, lack of training and development.

Discuss cross functional teams in purchasing/supply management both internally and externally.

Collaboration, productivity, better decision making.

Global Sourcing

Combination of similar items, materials, designs, processes, and suppliers operating worldwide.

Which central lead enablers would be easiest to utilize without using resources?

Consortium and group lead organizations, corporate steering committees, lead division buying, global sourcing counsels.

What is the difference between cost-reduction and cost-avoidance?

Cost avoidance measures actual price paid and potential high price. cost-reduction focuses on reducing price to obtain resources.

Category Management

Cross functional process of segmented good/services used by an organization into discrete groups of similar products/services based on function.

What is required to establish a balanced scorecard to measure purchasing and supply performance?

Customer satisfaction perception, viewpoint on operational excellence, Innovation and financial perspective.

Why did the total quality management efforts in North America not succeed as expected during the 1980's?

Economic downturn of the country due to competition, Absence of structured procedures to perform manufacturing operations efficiently, Lack of quality policies and quality department, lack of proper training and development, trail and error process affected TQM.

What is the difference between efficiency and effectiveness measures?

Effectiveness measures refer to the level a particular course of action at which management could set goals. Efficiency measures rfers to the action and planned sacrifices made made by an organization to achieve goals.

What are the most important factors of integrating a new product development, how does this contribute to success?

Elements to success: Targets, timing, ramp-up, innovation, training, resource.

Why should a medium size company spend financial resources on a supplier measurement system?

Helps find the best suppliers in the business, streamlines the process between buyers/sellers, reduces overall operating costs, obtains a desired quality of goods and services, increases the procurement performance.

What are 4 enablers of purchasing and supply excellence?

Human Resources, organizational design, information technology, measurement.

Why does the collective behavior of supply managers have such an impact on economic trends?

If similar goods are ordered the price will be affected. Since supply managers have control of the price they have control of economic trends.

What are the advantages of a system wide approach to control inventory investments? What are the disadvantages?

Increased savings, easier and less time consuming, reduced risk. Disadvantages is the non price issues will affect inventory management.

Provide reasons why most firms do not have an adequate supplier measurement system?

Increases overall operation time of the company, difficult for a company to have all the criteria, overall lost of time and costs, It is considered a non core activity.

Explain how social sites have an effect on future organizational structures.

Influence on buying behavior of customers, informed purchasing decisions, a formulation on how structure and operate successfully.

How do international sourcing and global sourcing differ?

International sourcing is purchases between buyers and sellers at various locations. Global sourcing is coordination between materials and services required across counties and businesses in common terms of technology, design, suppliers and practices.

Cross-Functional

Involves purchasing, engineering, supplier quality assurance, the supplier and other related functions working together as a team.

What is performance bench-marking and why is it used for purchasing performance?

Is a process of establishing the firms target plans, action plans, and strategic plans. It determines area for opportunists, manage changes to performance, increased quality of products.

What is the role of the Q adjustment factor in the SPI calculation?

Is the normalization factor that eliminates high dollar lot bias.

Reverse Supply Chain

Is to rapidly identify and return these tainted products back through the supply chain.

Why is it critical to have a smaller supply base before committing to a supplier management development program?

It allows them to optimize their supply system and improve overall quality.

What are the benefits to a supplier to being certified to the buyer and supplier?

It assures the buyer the quality of the product delivered by the supplier.

Why is goal setting important to the sourcing team process?

It establishes a benchmark for evaluating progress, giving feedback and performance awards as well as a more efficient business.

How does just in time purchasing and production system reduce the need for certain purchasing documents?

It gives a continuous amount of supply of product or inventory to reduce documentation. Documents regarding warehouse and transportation are not needed.

Why must organizations develop suppliers and is the long term supplier just a fad?

It helps build a long term relationship with suppliers increasing the level of credibility and competitiveness.

Many US firms begin worldwide sources on a reactive basis what does this mean?

It is a reaction that occurs contradictory to the trading policies. This is used to gain a competitive advantage and demand for the product.

Why is it important for a buyer to be a good customer?

It is difficult to maintain a mutual trusting relationship when the buyer do not enjoy doing business with the buyer.

Why is sometimes advantageous to benchmark performance against a non-competitor?

It is easier to agree to accept the value of a non-competitors way of performing business as compared to competitors.

What do you think the reason is why there are few stage 4 companies?

It is the final and most advanced stage, it is difficult for companies to automate their processes.

What is the perfect order? Why do so few companies measure it?

It is the perfect balance of supply and demand across the supply chain. It is not measured because few companies have a perfect order.

What problems do overcasting/undercasting supply chains make?

Many firms fail to recognize what inaccurate forecasting has on volume and velocity in which inventory moves. Over forecasting: High inventory volumes, High carry charges, excessive safety stock levels. Under forecasting: work in process inventory, Higher cost, poor customer service.

Describe the types of information and data that supply management may share with different internal and external functions.

Market, New product information, cost of suppliers, product and forecast schedules, requirement and plans.

What it the logic behind maintaining multiple suppliers for each purchased item?

Not having a dependence on a single supplier.

Do you think organizational purchasers should behave like entrepreneurs?

Organizational purchasers should behave like entrepreneurs to enhance company profit margins and growth because of the responsibility for profit and loss of business.

Discuss role of Deming's 14 point in supply quality.

Serves as a basis for expressing views on achieving performance excellence.

List the areas that are typically within purchasing span of control.

Spend Analysis, demand management and specifications, category management, contract management, cost management and supplier management.

What is the most important criteria to consider of when a supplier should be involved in a new product development effort?

Past performance, meeting requirements, quality system, stability of finance, Tech Support, handling cost with supplier, Assessment of total cost.

Triple Bottom Line (TBL)

Philosophy of people, planet, and profit.

Supply Chain Activities

Planning, Reporting, process of procurement, logistics and warehousing, excursion of manufacturing process.

What are major sources of supply base risk? What can be used to mitigate this risk?

Political, Market, sourcing, financial risks, supplier company level. Multiple sourcing, third party intermediaries, scenario analysis, currency hedging, insurance.

What does it mean to say higher inventory levels disguise underlying problems?

Poor Turnover, Higher Cost, Damage or loss, Strategic Planning time.

supply integration

Professionally managing suppliers and developing close working relationships with different internal groups.

List documents which are covered by E-procurement tools.

Proper purchasing document, cost free document, other supporting documents.

What is the difference between purchasing and supply management? What is the difference between supply chain orientation and supply chain management?

Purchasing management is a functional group, it maximizes the organization and is a process of managing purchase functions. Supply management is a process of managing resources, its the present and future needs of the company, strategic/cross functional approach of nature. Supply chain orientation is the managing of operating activities. SCM is the managing the flow of the goods.

Describe how purchasing becomes aware of purchasing requirements?

Quality guarantee, reasonable pricing, on-time delivery, safety, maintenance and service.

What are some of the factors which might influence how important purchasing is to the success of the business?

Quality of good and service, availability of resource, availability of alternative resource, level of competition.

What principals of Total Quality Management do supplier measurement systems satisfy?

Quality of management and services considering customers and their requirements, focuses on the very beginning instead of removing the defects, focuses on improvement, objective analysis instead of subjective.

What are the issues or questions purchasing needs to address when evaluating if a supplier is worth a long term relationship?

Quantity of materials, Capacity, Delivery Time, consistence of service quality.

Malcolm Baldrige National Quality Improvement Act

Recognized quality improvement among small businesses and service.

What are barriers to world wide sourcing confronted by firms?

Rise in supply risk, Currency Fluctuations, Different business customs, Longer lead times, resistance to change, lack of knowledge and skills to global sourcing.

Why are more top managers recognizing the importance of purchasing/supply management?

SCM improves relationship building and innovation, improves reputation, time, competitive advantages, and operating cost of company.

How can the involvement of external suppliers positively affect the teams effort?

Satisfaction of information sharing, high confidence of suppliers, less problems, greater aspect on team project.

What are the actions purchasing can take when reducing uncertainty?

Supply Quantity: quantity discounts, reduce inventory investment. Supplier Delivery: order cycle time, global sourcing agreements. Inaccurate demand forecasts: uncertainty affecting inventory, safety stock levels. Extended material pipelines: long distance between supply chains.

What is the difference between supply chain and value chain?

Supply chain is the process of transfers material information from one place to another, packaging and marketing not required, organizational orientated. Value Chain creates a value and competitive advantage for company, storage and transportation not required, involved packaging and marketing and is customer orientated.

Which function of physical inventory will purchasing be directly involved in?

Support of production requirement because the key reason is to hold up production requirements and evade supply disruptions.

What are the differences between TQM and six sigma?

TQM: Is a planned approach focuses on maintaining as well as improvement, Cultural collaboration among overall quality, Quality is internal, importance to improve operations within unrelated business. Six Sigma: focuses on new level of quality improvement, is for different processes in the organization, improve by minimizing flaws, developing all business operations.

Name 3 effective performance measure characteristics.

Team conflicts, detailed information, different departments and different employees.

Buyer/Supplier interface barriers

The barrier caused by misunderstanding or lack of trust between buyer and supplier.

Discuss reduce number of multiple suppliers?

The buyer can focus on selected number of suppliers, A lower risk, Lower overall cost, competitive advantage,

Early Supplier Design Involvement (ESDI)

The buyers new development project that focuses on the selection of the supplier and designing process.

Carrying Cost

The cost of capital, cost of obsolesce, and deterioration.

What does purchasing is not free mean?

The cost of collecting and generating data will not outweigh the potential benefit.

What does there is no way to measure purchasing performance mean?

The data performance cannot be accurate. At times assumptions are made to measure performance.

What is a closed loop transportation system?

The delivery of good on a repeatable schedule will go from the supplier to the buyer back to the supplier again.

How can early supplier design involvement efforts contribute to higher levels of product quality?

The early involvement helps in simplifying a product or process design, anticipating and starting pre-production work, building a mutual understanding between buyer and supplier.

Who are purchasing internal customers?

The employees of the organization and internal users of the product.

Backdoor buying/selling

The illegal practice of buying and selling goods or services that excludes competitive bidding.

Globalization

The integration of ideas, products, and various cultures.

Organizational Design

The method of restructuring the role and structure of the organization to achieve the goal and objectives of supply management.

What are some possible indicators of a supplier that will make you question if the supplier is best in class?

The negotiation seeking attitude of the company, disclosing information regarding production procedure to fit the supply cycle, Quality of service, delivery time, capacity and strategy.

Span of Control

The number of subordinates reporting to the supervisor.

What form of counter trade appears to offer the most purchase flexibility?

The offset method is when the selling firm is allowed to purchase directly from a country for a period time in respect to their business requirements.

Integration

The practice of integrating different groups or organizations either officially or unofficially depending on the purpose or situation.

Supply Management

The process of recognizing, obtaining, and controlling the products or resources required to operate a business.

Discuss a situation in which a purchaser might select a supplier that is having financial difficulties.

The purchasers trust of the supplier.

Supplier Performance Management (SPM)

The selection of development, and maintenance of suppliers.

Why do organizations commit the time and resources to evaluate suppliers before making a selection?

The service rendered by the supplier will not be the same all the time. The chances of deterioration in the level of service over time are high.

Discuss the reason why suppliers are sometimes reluctant to provide cost information with suppliers especially early on.

The suppliers are not sure that buyer would continue to service them, They do not want competitors to take advantage of their cost strategy.

portfolio analysis

The tool used to structure and segment the supply base as well as classify suppliers into four types: Bottleneck, Routine, Critical, Leverage.

Why are supply base innovation and risk management two future area that will consume more of the supply managers day?

They are challenging tasks which require detailed planning and time.

What are the roles of consortiums and group purchasing organizations?

They facilitate the purchase of products and services. They create a strategy for corporate purchasing.

Why is top management essential to supplier management and development?

allocation of capital, human and other resources, approval of top management, proficient knowledge.

Why would a firm want to measure supplier performance what measures can be performed?

competitive advantage, supplier capabilities, reduced operating cost. revenue, quality, time of delivery, Technology, environmental, efficiency and performance measures.

What types of information a supplier can provide regarding new product development?

cost reduction ideas, improving quality, material dispatch, production technology, time reductions.

Describe different types if integration that supply management should be actively involved in.

cross-functional, internal, external, customer, supplier, technology and planning integration.

What do you think is the importance of purchasing supply management when a firm organizes under a structure?

develops effective communication, informed decisions and eliminates non-value items, enhances the efficiency of the company.

Why is it important to measure and monitor supplier performance improvement?

ensure performance initiatives, manage purchasing of good and services, identify opportunities and purchasing trends, support future purchasing decisions.

What are different uses a manager for purchasing and supply chain performance data?

establish strategic goals and objectives, utilize data to predict sales, enable a company to asses market demand and gain a competitive advantage.

vendor or supplier-managed inventory

have the representative assist in managing the inventory of materials or services provide technical support and in some cases even aid in assembling and producing the product or service

What is the benefit of having performance measures which focus on cost rather than purchase?

helps company reduce cost, cost gives data on accurate price and market price, gives informed decision on cost.

What factors contribute to an increasing importance of purchasing within the organization hierarchy?

history, industry type, value of goods and services.

What are the most important reasons for pursuing Worldwide sourcing?

improvement in quality, price and cost benefits, Access available resources, Access product and process technology, competition against domestic suppliers.

What should a policy statement have for purchases?

provides guidance to employees, institution for business decisions, act in a consistent manner.

What knowledge and skills are required for a purchasing professional?

knowledge of supplier and company, purchasing strategies, time management to be efficient, negotiation skills for prices.

Why has measuring and evaluating purchasing performance had limitation or certain problems?

large information without description, information used is inappropriate at times, problems for medium and small firms which are short term instead of long term focused. Measures drive individual behavior.

Why do firms no longer rely on competitive bidding when awarding purchase contracts?

less suppliers in market, requires early procurement materials, cannot determine risks and costs.

Factors which influence wither a firm centralizes or decentralizes.

management philosophy, total purchase, overall business strategy, similar purchases.

What are some operational problems that excessive work in process inventory might indicate?

materials waiting to be progressed to a different process, capacity bottleneck or breakdown, elongated process.

Discuss the contributions a purchasing department can make to the corporate strategic planning process.

procurement of materials, price evaluation, compliance of policy.

Is choosing an organizational design simple if so why would a company change this?

more responsive to individual customers in different markets, to gain leverage, structure changes to purchase expenditure.

How can an effective purchasing department affect organization appearance?

optimal amount of purchasing will increase bargaining power which will reduce cost, reduces defective goods, maintains minimal inventory.

Technology Roadmap

plan that project the specification of performance for group of projects. This is an outline for efficient technology.