Exam One

Can you have a supply strategy in public procurement? Why or Why not?

Clearly the answer to this question is yes. Public sector organizations spend a significant amount of money each year at the municipal, state/provincial and federal levels. A sound supply strategy can help ensure value for funds spent. As stated on page 32, in the public sector, the term competitive edge usually may be interpreted to mean strong performance in achieving program objectives.

How can the supply manager determine which cost-reduction strategies to pursue?

Cost reduction strategies are covered on page 32. Understanding total costs of ownership, including the laid-down cost of what is acquired or the total cost of acquisition and use—life-cycle cost—is essential. Furthermore, cost reduction strategies must consider the competitive environment, such as with changes in technology, alternatives may be available to reduce an organization's overall operating costs through changes in materials, sources, methods, and buyer-supplier relationships.

What type of data would supply need to contribute to an organization's strategic growth? How might supply obtain such data?

Figure 2-1 shows the relationship between supply objectives/strategy and organizational objectives/strategy. Figure 2-2 shows the relationship between current/future need and markets. Both are relevant for this question. Understanding the relationship among these is critical if the supply function is to maximize its contribution to organizational success. Data from corporate strategic business plans, including sales growth and budgets is a good starting point.

How can supply sell itself more effectively internally?

For example, helping top management achieve corporate goals and strategies versus helping the V.P. of operations achieve his or her operational objectives for cost and quality through the timely delivery of goods and services that comply with specifications.

Why should a supply manager consider hiring an employee without any supply background

For example, the ability of someone with an engineering background to discuss technical requirements of a purchase with a supplier. Or, a person with an accounting/finance background to analyze total the cost of ownership of a product or service. The supply strategy questions summarized in Figure 2-4 on page 36 can be used to discuss the range of activities and why a supply manager may want to hire a person without a formal supply background, presumably to leverage their skills in other areas. Notwithstanding, there is still a need to and develop staff, regardless of their background, on sound supply management practices. The issue of background (e.g., supply versus non-supply) of senior supply executives, including the chief purchasing officer (CPO), is covered in Chapter 3.

What can supply do to assist in minimizing a firm's risk of product liability lawsuits?

Risk management is covered on pages 32-35. Product liability is one of the many potential risks that an organization might face. Student should be asked to consider the type of risk product liability lawsuits represent - operational, financial, reputational, or some combination. The issues of supplier quality (pages 36-37) are also relevant for this question.

What role can (should) supply play in determining a firm's strategy in the are of social and environmental issues and trends?

The issue of social and environment sustainability is raised on pages 30-31 and page 39. It is also covered throughout the textbook, including a section in Chapter 17. As stated in the textbook, sustainability performance must not only comply with legal obligations but also meet the values and standards of the organization's stakeholders, including employees, shareholders, government organizations and customers. Therefore, sustainability has economic, risk management and legal considerations. Supply can and should play a central role in this area. It has a significant impact on the sustainability performance of the supply chain through its selection and management of suppliers. Poor supply decisions can expose to the organization to operational, financial and reputational risks.

What do you believe to be the most difficult obstacles to making a supply function strategic?

The question does not specify to whom supply can sell itself. Top management? Other functions? For example, helping top management achieve corporate goals and strategies versus helping the V.P. of operations achieve his or her operational objectives for cost and quality through the timely delivery of goods and services that comply with specifications.

What factors have caused the current interest in, attention to, strategic purchasing and supply planning

This is an opportunity to bring current events, beyond the scope of the text, into the discussion. Examples might include geopolitical events, GDP growth or contraction, supply shortages, etc. The major challenges in setting supply objectives is covered on page 31, and the six categories of supply strategy are on pages 31-32.

Why would supply be concerned about the balance sheet?

This question addresses the "how much' versus "what price" on pages 37-38. Student should be able to demonstrate an understanding of assets and liabilities (balance sheet) as distinguished from revenues, costs and profits (income statement). Most organizations tend to worry about cost savings and the cost of supply (income statement), versus opportunities to free up working capital and generate cash (for example inventory reductions). The section on "how much" on page 37, describes opportunities for reducing inventories and tradeoffs between pursuing lower prices through volume discounts as opposed to purchasing smaller volumes at higher prices and keeping inventories low. Also see Chapter 10, Price, and Chapter 11, Cost Management.

What is a service triad? What unique challenges and opportunities does a service triad present for supply?

a buyer contracts with a supplier to deliver services directly to the buyer's customer - the buyer is dependent on the supplier for fulfillment of customer demands the buyer is excluded from the service encounter service supplier and customers are the coproducers of the service

Why might an organization decide to outsource? Can you give an example?

cut costs and free management time - a company whose employees clean the building may decide to hire a janitorial firm to provide this service

Why would an organization outsource its logistics? Engineering? Marketing?

firms focus on these industries specifically and sometimes it is more efficient and costs less rather than spending money on employees within

If you were the sole owner of your own company, would you favor making or buying? Why?

making, I would be in control of the quality and quantity produced if i could produce at a lower cost than buying

What is subcontracting? How does subcontracting differ from a typical purchase order (PO)?

prime contractors bidding out part of the work to other contractors - involves more definite actions to close out the job

In the public sector, what name is frequently used for outsourcing? What are some major advantages to outsourcing in the public sector?

privatization - improved process compliance and control, optimized working capital, and improved process efficiency

What is insourcing? How might one make the decision to insource an activity or not?

reversing a previous buy decision - by looking at current costs and analyzing whether or not the company would be better off producing in-house

what role is expected of supply once an outsourcing decision has been made?

supply is involved in providing a comprehensive/competitive process, identifying opportunities for insourcing or outsourcing, identifying potential relationships issues, developing/negotiating the contract, and ongoing monitoring/management of the relationship

Why is the make or buy decision considered strategic?

the make or buy decision can improve the quality, quantity, delivery, cost, service, lower risk, and enhance competition

What is the gray zone in make or buy? What are its implications?

the range between 100% make and 100% buy - useful for testing and learning both sides of supply without fully committing

Why should an organization switch from buying to making?

when it makes a company more competitive or increases productivity