SCM 301 FINAL CH 7

purchase order

a document that authorizes a supplier to deliver a product or service

total cost analysis

a process by which a firm seeks to identify and quantify all major costs associated with various sourcing options

profit leverage effect

a term used to describe the effect of $1 in cost savings increasing pretax profits by $1 and a $1 increase in sales increasing pretax profits only by $1 multiplied by the pretax profit margin

supply management

broad set of activities carried out by organizations, develop sourcing strategies, select suppliers, and carry out all the activities required to procure good and services

brand

description by _____ is used when a product or service is proprietary or when there is a perceived advantage to using a particular supplier's products or services

market grade

description by ______ _____ is used when requirements are well understood and there is a common agreement between supply chain partners about what certain terms mean

conduct supplier selection

fifth step in strategic sourcing process

assess opportunities

first step of strategic sourcing process

screen suppliers (and create selection criteria)

fourth step in strategic sourcing process

make v buy decision

high-level and often strategic decision regarding which products or services will be provided internally and which will be provided by external supply chain partners

strategic sourcing process

identifying ways to improve long-term business performance by better understanding sourcing needs, developing long-term sourcing strategies, selecting suppliers, and managing the supply base

ordering, follow up, receipt and inspect, settle and pay, record maintenance

procure to pay cycle steps

industry analysis

profiles the major forces and trends that are impacting an industry, including pricing, competition, regulatory forces, substitution, technology changes, and supply/demand needs

earnings/sales

profit margin =

COGS

purchased cost of goods from outside suppliers

bottleneck quadrant

quadrant in portfolio analysis where products/service have unique or complex requirements that can only be met by a few potential suppliers

routine quadrant

quadrant in portfolio analysis where products/services are readily available and represent a relatively small portion of a firm's purchasing expenditures

critical quadrent

quadrant in portfolio analysis where products/services have complex or unique requirements coupled with a limited supply base that can represent a substantial level of expenditure for the sourcing form

leverage quadrant

quadrant in portfolio analysis where products/services tend to be standardized and readily available and represent a significant portion of spending

RFI

request for information, an inquiry to a potential supplier about that supplier's products or services for potential use in the business

earnings/assets

return on assets =

profile (internally and externally)

second step of strategic sourcing process

procure to pay cycle

set of activities required to first identify a need, assign a supplier to meet that need, approve the specification or scope, acknowledge receipt, and submit payment to supplier

negotiate and implement agreements

sixth (and final) step in strategic sourcing process

cross sourcing

sourcing strategy where a company uses a single supplier for one particular part or service and another supplier with the same capabilities for a different part or service, with the understanding that each supplier can act as a backup for the other supplier

multiple sourcing

sourcing strategy where buying firm shares its businesses across multiple suppliers

single sourcing

sourcing strategy where the buying firm depends on single company for all or nearly all of a particular item or service

dual sourcing

sourcing strategy where two suppliers are used for the same product or service

portfolio analysis

structured approach used by decision makers to develop a sourcing strategy for a product or service, based on the value potential and the relative complexity or risk represented by a sourcing company

statement of work

terms and conditions for a purchased service that indicate, among other things, what services will be performed and how the service provider will be evaluated

spend analysis

the application of quantitative techniques to purchasing data in an effort to better understand spending patterns and identify opportunities for improvement

1. assess opportunities 2. profile internally and externally 3. develop sourcing strategy 4. screen suppliers, 5. conduct supplier selection 6.negotiate and implement agreements

6 steps of the strategic sourcing process

develop sourcing strategy

third step of strategic sourcing process

cost-based contract

type of purchasing contract in which price of a good or service is tied to the cost of some key inputs or other economic factors, such as interest rates

fixed price contract

type of purchasing contract in which stated price does not change, regardless of fluctuations in general overall economic conditions, industry competition, levels of supply, market prices, or other environmental chANGES