SCM EXAM 2 Ch 2,5
Supply Management
a newer term to describe the expanded set of responsibilities of purchasing professionals
Qualitative forecasting methods
are based on intuition or judgmental evaluation and are generally used when data is limited, unavailable, or not currently relevant.
Cyclical variations
are wavelike movements that are longer than a year and are influenced by macroeconomic and political factors.
CPFR relies heavily on? a. Firms retaining information b. Firms acting independently c. Firms acting in their own best interest d. Firms sharing information
d. Firms sharing information working closely together and are willing to share information and risk through a common set of processes
Payment Bonds
protection against 3rd party liens not fulfilled by bidder
Industrial buyers
purchase raw materials for conversion, services, capital equipment, and MRO supplies
Public Procurement or Public Purchasing
purchasing and supply function for government and non-profit sector
Which type of forecasting technique would a firm likely use when launching a new product and historical data does not exist? a. Associative b. Time Series c. Qualitative d. Quantitative
Qualitative
Potential Challenges on Global Sourcing
Requires additional skills and knowledge to deal with international suppliers, logistics, etc
A(n) _______________ performs transactions for a fee, and does not take title to the goods. Instead, title passes directly from the seller to the buyer. a. Keiretsu b. Second-tier-supplier c. Leverage buyer d. Import broker
d. Import broker (sales agent)
decentralized-centralized (Large multiunit org)(hybrid)
decentralized corporate and centralized at business unit
Purchasing Organization
dependent on many factors, such as market conditions and types of materials required
the purchasing process-manual purchasing
each are documents
Offset
exchange agreement for industrial goods or services as a condition of military-related export
Supply Base
list of suppliers a firm uses to acquire its materials, services, supplies and equipment
Reasons for Global Sourcing
opportunity to improve quality, cost and delivery performance
Contracting
term often used for the acquisition of services
Purchasing typically includes
the added activities of specifications development, value analysis, negotiation, expediting, contract administration, supplier quality control, some logistics activities.
Performance Bonds
work will be on time and meet specifications
The primary goals of purchasing
-Ensure uninterrupted flows of materials and services at the lowest total cost -Improve quality of the finished goods produced -maximize customer satisfaction
the purchase order
A written offer to a supplier to buy specified items. if initiated by supplier it is a sales order -Uniform Commercial Code (UCC) document in U.S.
Bid bonds
incentive to fulfill contract
Data Set A1 Period Actual Sales Volume 1 10,000 2 11,400 3 14,550 4 15,050 5 17,250 6 18,500 Using Data Set A1, what would be the forecast for period 6 using a four period simple moving average? (Choose the closest answer.) a. 16,625 b. 16,338 c. 17,100 d. 14,563
(11,400 + 14,550 + 15,050 + 17,250)/4 = 14,563.
Buy American Act
(1933) US government purchases and 3rd party purchases using federal funds must buy if the US good is not more than a certain differential above the foreign good
Federal Acquisition Streamlining Act
(1994) removed restrictions on bids less than $100,000
Advantages of e-Procurement
- time savings - cost savings - accuracy - real time use - mobility - trackability
Reasons for favoring multiple suppliers:
-Need capacity -Spread risk of supply interruption -Create competition -Information -Dealing with special kinds of business
Factors that firms should consider while selecting suppliers include:
-Process and product technologies, -Willingness to share technologies and information, -Quality, -Cost, -Reliability, -Order system and cycle time, -Capacity, -Communication capability, -Location, -Service.
The complexity and costs involved in selecting foreign suppliers and dealing with
-duties;. -tariffs; -custom clearance; -currency exchange; and -political, cultural, labor, and legal problems present sizeable challenges for the international buyer
break-even analysis -- can be helpful:
-new products -make v. buy decisions -make v make decisions
The purchasing and supply management function in the government and nonprofit sectors, such as educational institutions; hospitals; and federal, state, and local governments is called: a. Public spending b. Public procurement c. Transactional procurement d. Competitive buying
. Public procurement
The benefits of CPFR include the following:
1) Strengthens partner relationships, 2) Provides analysis of sales and order forecasts, 3) Uses point-of-sale data, seasonal activity, promotions, new product introductions, and store openings or closings to improve forecast accuracy, 4) Manages the demand chain and proactively eliminates problems before they appear, 5) Allows collaboration on future requirements and plans, 6) Uses joint planning and promotions management, 7) Integrates planning, forecasting, and logistics activities, 8) Provides efficient category management and understanding of consumer purchasing patterns, 9) Provides analysis of key performance metrics.
Countertrade can include
1. Barter 2. Offset 3. Direct Offset 4. Indirect Offset 5. Counterpurchase
Reasons for buying or outsourcing
1. Cost advantage 2. Insufficient capacity 3. Lack of expertise 4. Quality
The primary goals for purchasing are:
1. Ensure uninterrupted flow of raw materials 2. Improve quality of the finished goods produced 3. Maximize customer satisfaction
E-Procurement Steps
1. Material user enters a purchase request 2. its approved and transmitted electronically to buyer 3. buyer reviews 4. buyer reviews closed bids and selects a supplier
Reasons for Making
1. Protect technology 2. No competent supplier 3. Better quality control 4. Lower Cost
Period Actual Sales Volume 4 15,050 5 17,250 Assume the forecast for period 4 is 14000. Use a smoothing constant of α = 0.4
14,000 + 0.4(15,050 - 14,000) = 14,420. forecast + a(period 4 + forecast)
Fm-Fb/Cb-Cm
Fm=fixed make Fb= fixed buy Cb=variable buy Cm=Variable make
Inventory Turnover Effect
Increased inventory turnovers indicate optimal utilization of space and inventory levels, increased sales, avoidance of inventory obsolesce
Return on Assets Effect
Indicates how efficiently management is using its total assets to generate profits. High ROA suggests management is capable of generating large profits
The four common qualitative forecasting models include:
Jury of executive opinion, Delphi method, Sales force composite, Customer surveys.
ROA=
Net Income/Total Assets
Supply Base Rationalization
Reduction in the supply base to the lowest number of suppliers possible without increasing risk top of triangle /OTD on time delivery strategic /98% preferred /95% approved 90%
Profit-Leverage Effect
a decrease in purchase spend directly increases profits before taxes (assuming no decrease in quality)
Using the actual demand shown in the table below, what is the forecast for June (round to whole number) using a 3-month weighted moving average and the weights 0.2, 0.3, 0.5 (remember how to apply them)? Dec. Jan. Feb. Mar. Apr. May 39 36 40 44 48 50 a. 48 b. 52 c. 54 d. 46
a. 48 F(t) = 0.5(50) + 0.3(48) + 0.2(44) = 48.2. Rounding = 48.
Proper demand forecasting enables _____________________ for businesses to be competitive. a. Better planning and utilization of resources b. Stockouts and good responsiveness to market dynamics c. High inventory costs and increased profits d. Low inventory costs and increased costs of obsolescence
a. Better planning and utilization of resources
In 2016, ___________ was the leading market for U.S. exports. a. Canada b. China c. Mexico d. Japan
a. Canada mexico was second
In forecasting, a tracking signal is used to: a. Determine if the forecast bias is within the acceptable control limits b. Measure the underlying changes in demand c. To route the products on a different mode of transportation d. Estimate the demand for the next period
a. Determine if the forecast bias is within the acceptable control limits
The real value of CPFR comes from: a. Firms exchanging forecasting information b. Sophisticated forecasting algorithms c. Centralized purchasing and forecasting relationships d. Reverse logistics programs
a. Firms exchanging forecasting information
The impact of poor communication and inaccurate forecasts along the supply chain can cause: a. Material shortages b. Consumer's risk c. Reverse Logistics d. Economies of scale
a. Material shortages
Petty cash is being phased out in favor of: a. Kanban b. Venmo c. P-cards d. Bitcoin
c. P-cards
forward vertical integration
acquiring customers =suppliers to customers
backward vertical integration
acquiring sources of supply =customers to suppliers
Which of the following is an advantage of decentralized purchasing departments? a. Lower transportation costs b. Better knowledge of unit requirements c. Use of common supply base d. Avoids duplication
b. Better knowledge of unit requirements
A(n) ____________ purchase order is negotiated for repeated supply over a fixed time period, such as quarterly or yearly. a. Automatic b. Blanket c. Invitation for bid d. Blank check
b. Blanket -covers a variety of items
One of the primary goals of purchasing is to: a. Facilitate the processes of knowledge transfer between individuals and between organization b. Ensure uninterrupted flows of raw materials at the lowest total cost c. Maximize stockholder wealth d. Help build the organization's public image and reputation
b. Ensure uninterrupted flows of raw materials at the lowest total cost
Two methods have been used to produce the following forecasts over the past four months. Which forecast is the best one? Demand /Forecast A /Forecast B 150 /130 /180 200 /170 /180 220 /184 /180 190 /195 /180
b. Forecast A Correct. Forecast A using MAD: (|20| + |30| + |36| + |-5|) /4 = 22.75 and Forecast B using MAD: (|-30| + |20|+ |40| + |10|) / 4 = 25.
Which of the following is NOT used to calculate total transportation cost when using the Total Cost of Ownership concept? a. Weight per unit b. Gas prices c. Distance to factory d. Number of units
b. Gas prices Total Transportation Cost = distance X quantity X weight /unit X rate/ton-mile
More than a dozen presidential executive orders requiring federal purchasing officials to include environmental considerations and human health when making purchasing decisions can be attributed to a concept called: a. Hybrid Purchasing b. Green Purchasing c. Buy America Act d. Counter Purchasing
b. Green Purchasing
Which of the following is NOT a benefit of CPFR? a. Allows collaboration on future requirements and plans b. Improved corporate image among regulators c. Provides analysis of sales and order forecasts d. Strengthens partner relationships
b. Improved corporate image among regulators
Which one of the following is NOT a type of qualitative forecasting? a. Consumer survey b. Naïve method c. Delphi method d. Jury of executive opinion
b. Naïve method sales force composite
Which of the following is a reason that single sourcing is considered risky/bad? a. It is easier to establish a mutually beneficial strategic alliance b. Poor supplier performance could result in plant shutdowns c. Volume of order may be too small d. Firms cannot take advantage of transportation economies
b. Poor supplier performance could result in plant shutdowns
The total cost of ownership for Supplier 1 is $1,670,000. The total cost of ownership for Supplier 2 is $1,750,000. The total cost of ownership for Supplier 3 is $1,690,000. Using Total Cost Analysis, it will be more cost-effective to use a. Supplier 3 b. Supplier 1 c. Supplier 2 d. Cannot be determined.
b. Supplier 1 Supplier 1 has the lowest Total Cost of Ownership so it is more cost-effective
What component of a time series is based on increasing or decreasing movements over many years and are due to factors such as population growth, population shifts, cultural changes, and income shifts? a. Cyclical Variations b. Trend Variations c. Random Variations d. Seasonal Variations
b. Trend Variations
PQ=F+CQ
breakeven point= solve for Q ticket price = solve for P fixed cost = F variable cost = C
Making all the purchasing decisions, including order quantity, pricing policy, contracting, negotiations, and supplier selection and evaluation are the key characteristics of a. Decentralized Purchasing b. Single stage replenishment c. Centralized Purchasing d. Logistics Management
c. Centralized Purchasing
A company is conducting forecasting that revolves around the global recession and real estate crises. This type of forecasting can be referred to as what component of a time series? a. Seasonal Variations b. Trend Variations c. Cyclical Variations d. Random Variations
c. Cyclical Variations
Which of the following is NOT a benefit of better forecasts? a. Smoother production plans b. Reduced stock outs c. Improved corporate image among regulators d. Improved customer service
c. Improved corporate image among regulators
Which of the following is NOT a reason for favoring multiple sourcing? a. Encourages competition among suppliers b. Spreads the risk of supply interruption c. Less quality variability d. Increases information about new processing technologies
c. Less quality variability
If a firm manages to lower its purchase spend on materials by $10,000 then: a. Stockholders equity increases 20% b. Cost of goods sold increases by $10,000 c. Profits before taxes increase by $10,000 d. Return on investment increases by 10%
c. Profits before taxes increase by $10,000
According to the text, which of the following is NOT one of the top three challenges for CPFR? a. Trust b. Cost c. Sophisticated forecasting algorithms d. Difficulty making internal changes
c. Sophisticated forecasting algorithms
Barter
complete exchange of goods or services of equal value without the exchange of currency
The formula for forecast error is calculated by using the equation: a. Actual demand for period t plus the forecasted demand for period t b. The average of Actual demand for period t and forecasted demand for period t c. Actual demand for period t divided by the forecasted demand for period t d. Actual demand for period t minus the forecasted demand for period t
d. Actual demand for period t minus the forecasted demand for period t
Which of the following is a potential challenge for global sourcing? a. Dealing with duties b. Currency exchange c. Political problems d. All of these choices are correct.
d. All of these choices are correct.
Which of the following is an advantage to utilizing an e-procurement system? a. Mobility b. Cost savings c. Time savings d. All of these choices are correct.
d. All of these choices are correct.
Which forecasting method would use the size of the advertising budget as a variable in the forecasting technique? a. Business cycle forecasting b. Random variation forecasting c. Time series forecasting d. Cause-and-Effect forecasting
d. Cause-and-Effect forecasting Cause-and-effect forecasting assumes that one or more factors are related to demand and, therefore, can be used to predict future demand.
Which of the following is NOT a factor to consider when selecting suppliers for important materials? a. Reliable product quality level b. Supplier's distance from the manufacturing facility c. Supplier's willingness to share technologies d. Number of customers with which the supplier currently has contracts
d. Number of customers with which the supplier currently has contracts
Countertrade
goods and services of domestic firms are exchanged for goods and services of equal value
Non-tariff barriers
import quotas, licensing agreements, embargoes, laws and other regulations imposed on imports and exports
decentralized purchasing
individual, local purchasing departments, such as plant level, make their own purchasing decisions
Direct Offset
involves coproduction, or a joint venture and exchange of related goods or services
Indirect Offset
involves exchange of goods or services unrelated to the initial purchase
Purchasing
key business function for acquiring materials, services, and equipment
poor communication and inaccurate forecasts
results in the bullwhip effect causing stockouts, lost sales, high costs of inventory and obsolescence, material shortages, poor responsiveness to market dynamics, and poor profitability.
Import Broker
sales agent who performs transactions
centralized purchasing
single purchasing department located at the firm's corporate office makes all purchasing decisions
materials requisition/purchase requisition
stating product, quantity, and delivery date -may originate planned order release in MRP -traveling requisition in recurring orders
Bid or Surety Bonds
successful bidder will accept contract
Counterpurchase
the original exporter agrees to sell goods or services to a foreign importer and simultaneously agrees to buy specific goods or services from the foreign importer
Green Purchasing
variety of federal, state, and local initiatives to include environmental and human health considerations when making purchases
Merchants
wholesalers and retailers who purchase for resale
Advantages of Decentralization include:
1) Better knowledge of unit requirements 2) Local sourcing 3) Less bureaucracy.
Request for Quotation (RFQ)
Buyer identifies suppliers & issues a request for quotation (RFQ) for routine items or (know how many you want) -a Request for Proposal (RFP) for highly technical products. -Supplier Development is used to develop supplier capabilities.
Inventory Turnover Ratio
cost of goods sold/average inventory Average inv = ending -begining
single sourcing
a risky proposition. current trends favor a few sources no other sources
Incoterms
also known as International Commercial Terms uniform rules that simplify international transactions of goods with respect to shipping costs
Tariff
an official list showing the duties, taxes, or customs imposed by the host country on imports or exports
The benefits of better forecasts
are lower inventories, reduced stock outs, smoother production plans, reduced costs, improved customer service.
outsourcing
buying materials and components from suppliers instead of making them in-house
Important merchants
buys and takes title to the goods and resells them to a buyer
Given the following information, find the break-even quantity using Break-even Analysis. Costs /Make Option/ Buy Option Fixed Cost/ $100,000 /$5,000 Variable Cost /$12 /$15 a. 25,000 units b. 33,333 units c. 31,667 units d. 35,000 units
c. 31,667 units 100000-5000/15-12 or 100,000 + 12x = 5000 + 15x
If actual demand for a period was 108 and the forecast for that period was 103, what is the forecast error for the period? a. -5 b. 0 c. 5 d. Forecast error cannot be determined by the information given.
c. 5 108-103
According to the text, for long-term forecasts, it is recommended that which type of forecasts be used? a. Qualitative b. Quantitative c. Combination of both qualitative and quantitative d. Forecasts cannot be developed for the long term
c. Combination of both qualitative and quantitative
Purchasing activities include all the following EXCEPT: a. Logistics considerations b. Contract administration c. Franchising services d. Negotiations
c. Franchising services
centralized- decentralized (large organization w/ centralized control)(hybrid)
centralized large national contracts at corporate level and decentralized items specific to business unit