1st TEST

Reasons for Buying or Outsourcing

Cost advantage Insufficient capacity Lack of expertise Quality

Companies that lack internal expertise in a specific functional area would likely consider insourcing.

False

The bullwhip effect is the result of companies producing excessive defective products; defective items are whipped back from the end customer toward the manufacturer of the defect.

False

Green purchasing

-> is aimed at ensuring products or materials meet environmental objectives e.g. waste reduction, reuse and recycling

Advantages -Decentralization

-Closer knowledge of requirements -Local sourcing -Less bureaucracy

Advantages - Centralization

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

Risks associated with outsourcing

-Loss of control ->Production decisions & intellectual property -Increased reliance on suppliers -Increased need for supplier management

Reasons Favoring Multiple Suppliers

-Need capacity -Spread risk of supply interruption -Create competition -information -Dealing with special kinds of business

Reasons Favoring a Single Supplier

-To establish a good relationship -Less quality variability -Lower cost -Transportation economies -Proprietary product or process -Volume too small to split

Sustainable sourcing is a rather common practice among firms in many industries. What are THREE possible benefits companies practicing sustainable sourcing seek to achieve:

1 . Increased revenues via new and differentiated products 2 . Cost reduction gained via resource efficiency, noncompliance fines, and other operation efficiencies 3 . Managing risk by reducing damage to the brand, being compliant, and capturing socially responsible clientele. 4 . Building intangible assets − Improving brand and reputation by being more socially and environmentally responsible.

Provide THREE key advantages that can be achieved in manufacturing firms that allow suppliers to contribute then become involved early in the new product (or old product reengineering) design and development process.

1.Reduce Costs operational costs, costs associated with defects, costs associated with downtime, standard parts, fewer parts, less expensive materials 2.Improved Quality the sharing of information allows the best parts and processes to be designed and used in the manufacturing of the end item. Continuous improvement is practiced. 3.Reduced New Product Development Time making changes to the developing process is made much easier when auction bidding parties stay involved 4.Establishes a Level of Trust and Cooperation in this age of strategic alliances, establishing trust and cooperation early in the lifecycle product can pay dividends long into the future of the product's lifecycle

Provide TWO key differences between products that can be classified as functional vs. innovative. Also after providing your list of two, provide an example of a functional product and an example of an innovative product.

ANS:DIFFERENCES 1.Functional products tend to be low profit margin items, while innovative products tend to be high profit margin items. 2.Functional products tend to be items that have relatively stable demands, while innovative products tend to be items that have volatile demands. 3.Innovative products are characterized by short product life cycles, while functional products are more commonly characterized by long product life cycles. 4.Markets for Functional products are characterized by high levels of competition, markets for innovative products are characterized by a relatively low level of competition Functional Productlaundry detergent, bar soap, cereal, soft drinks, undershirts, plastic cups, garbage bags, trash cans, or any other type of item that might be found at Target or Wal-Mart. Innovative Productmost new high-tech products like HDTV and new personal digital devices

Reasons for Making

Protect proprietary technology No competent supplier Better quality control Use existing idle capacity Control of lead-time transportation, and warehousing cost Lower cost

Inventory Turnover can be calculated by:

Ratio of cost of goods sold over average inventory cost

The Purchasing Process - Manual Purchasing

Step 1- Material Requisition/Purchase Requisition- Stating product, quantity, and delivery date. May originate as a planned order release from the MRP system. Traveling requisition used for recurring orders. Step 2- The Request for Quotation (RFQ)- -Buyer identifies suppliers & issues a request for quotation (RFQ) for routine items or a Request for Proposal (RFP) for more demanding products. Supplier Development is used to develop supplier capabilities. Step 3- The Purchase Order (PO) -Is the buyer's offer & becomes a binding contract when accepted by supplier. When initiated by the supplier on their own terms, the document is a sales order. The Uniform Commercial Code (UCC) governs transactions in the U.S., except Louisiana.

e-Procurement Process

Step 1- Material user inputs a materials requisition Step 2- Materials requisition submitted to buyer Step 3- Buyer assigns qualified suppliers to bid Step 4- Buyer reviews closed bids & selects a supplier

On occasion, firms assist suppliers, new or old, to improve their processing capabilities, product or service quality, delivery effectiveness, and cost performance by providing the required technical and financial assistance. This is referred to as:

Supplier development

Successful modern supply chain management typically includes the practice of:

The sharing of information between supply chain partners

Companies that experience late deliveries or low product quality from their supplier may resort to insourcing.

True

Evaluating supplier performance can help companies identify supplier strengths and weaknesses and improve supplier communication.

True

In the context of Supply Chain Management, the acts of obtaining raw materials, services, maintenance, repair and operating supplies for money can all be defined as purchasing

True

Some strategic supplier agreements reward the highest performing suppliers with a share of the cost reductions resulting from supplier improvements, additional purchasing contracts, or contract extensions on existing contracts

True

Trucking companies, airfreight shipping companies, and information system providers can all be considered service providers to the supply chain.

True

Centralized-decentralized (large org w/centralized control)

centralized large national contracts at corporate level and decentralized items specific to business unit

Hard-bargaining sourcing departments focused on decreasing purchasing spend may experience which of the following from their suppliers? a.Lower levels of quality from their suppliers b.Lower levels of service from their suppliers c.Deteriorating buyer-supplier relationships d.All of these

d.All of these

Which of the following is important in developing successful relationships in a partnership? a.Commitment by top management b.Interpersonal relationships between employees of the companies c.Mutual/compatible needs that result in a win-win situation for the partners d.All of these

d.All of these

Decentralized-centralized(large multiunit org)

decentralized corporate and centralized at business unit

Decentralized Purchasing

individual, local purchasing departments, such as plant level, make their own purchasing decisions

Sustainability

is the ability to meet current needs of the supply chain without hindering the ability to meet future needs in terms of economic, environmental, and social challenges ->Considers worker safety, wages, working conditions, human rights

Centralized Purchasing

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