Chapter 5

.Tariffs.

- Duties, taxes, or customs imposed by the host country for imported or exported goods.

Bid

A . Proposal or quotation . submitted in response to a solicitation from a contracting authority

Request for Proposal (RFP) -

A detailed capabilities document used to determine a supplier's capability and interest . in the production of a product or service.

Purchase Requisition

A document that defines the need for goods and/or services an internal document

Supply Management

A newer term that encompasses all acquisition activities. beyond the simple purchase transaction.

Import Merchants

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

Contracting -

A term often used for the acquisition of services.

Purchasing Contributes to These Objectives by:

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

Pre-transaction costs

Activities carried out . . . Prior to . the actual buy and sell transaction

Import Brokers

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

Many companies have a .................. as part of their executive leadership team.

Chief Procurement Officer

Competitive Bidding

Competitive bidding aims at obtaining goods and services at the lowest prices by .stimulating competition . , and by preventing favoritism.

The Primary Objectives of Purchasing is....

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

Industrial Buyers -

Individuals within an organization who purchase raw materials for conversion into products, and/or purchase services, capital equipment, and MRO supplies.

Countertrade.-

International trade by exchange of goods rather than by currency.

. Centralized Purchasing

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

Forward Vertical Integration

Refers to a company acquiring one or more of their .customers

Backward Vertical Integration

Refers to a company acquiring one or more of their .suppliers.

In-sourcing:

Reverting to . In-house production . when external quality, delivery, and services do not meet expectations

Poor supplier Quality costs related to defective finished goods must also be considered. Costs such as:

Scrap Rework Recycling Recovery of materials Warranty administration Repair costs

Administrative Expenses associated with the procurement activity itself such as:

Screening potential suppliers Negotiation Order preparation Order transmission

. Value-added Services. may be offered such as:

Special delivery Special packaging Preparation of promotional displays Subassembly operations in a supplier's plant.

Merchants

Wholesalers and retailers who purchase for resale.

Bidders are generally required to furnish ............. as an incentive to ensure that the successful bidder will fulfill the contract awarded

bonds

Purchase Order (PO) is a

commerical document . It is the official offer issued by a buyer to a seller to acquire goods or services. Becomes a legally binding contract only when accepted by the supplier.

Purchasing

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

Automation Provides

increased visibility of all purchases.

Quantitative Factors

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

Cash Discounts

may be offered for prompt payment of invoices

.Inventory turnover

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

Purchasing can usually be described as.....

the .transactional function of procurement for goods or services.

Bid Bond

is a 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.

Performance Bond .

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

Payment Bond .

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

Total Cost of Ownership (TCO) is the sum of all the costs associated with every activity in the supply stream of a product.

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

e-Procurement

is the 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, including:

Quanitity Discounts

may be offered to encourage buyers to purchase larger quantities.

Government sector purchasing and non-profit sector purchasing is somewhat different from private industrial purchasing as the public requires ............................... since it is the public's money that is being spent.

openness , . visibility . and . accountability.

Purchasing is the.....

process of how goods and servies are ordered from an external third party.

.Non-Tariff Barriers .-

Quotas, licensing agreements, embargoes, laws and regulations imposed on imports and exports.

International Purchasing - Reasons for Global Sourcing

The opportunity to improve . quality , . cost , and . Delivery. . performance To exploit global . Efficiencies

Request for Quote (RFQ) -

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

Competitive Bidding

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

Post-transaction costs

Activities carried out . . . following . the actual buy and sell transaction

Transaction costs

Activities carried out as . . . Part of . the actual buy and sell transaction

Trading Companies

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

Decentralized Purchasing

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

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.

Make -vs- Buy is a.....

Strategic decision

Co-sourcing

The . Sharing of a process or function . between internal staff and an external provider. Using dedicated staff at an external provider that works exclusively under your control and direction

Procurement

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

Procurement is concerned with...............

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

Qualitative Factors

are more subjective and include control over quality, the reliability and reputation of the potential suppliers (internal or external), and the impact of the decision on customers and suppliers.