Ch 11
The learning curve is based on
the commonly recognized principle that one becomes more proficient with experience
The process of attempting to determine all cost elements such as acquisition price, purchasing administration, follow-up, expediting, inspection and testing, rework, scrap, downtime, lost sales and customer returns is called
total cost ownership
Activity based costing attempts to
turn indirect costs into direct costs by tracking the cost drivers behind indirect costs
When cost analysis is applied to a suppliers price, the buyer focuses on identifying an overall cost reduction target with little insight into specific cost elements
False
when developing a negotiation strategy, the negotiator should assess the positions of strength of both (all) parties to
a b & c decide if negotiation makes sense establish negotiation points avoid setting unrealistic expectations
Target pricing may result in companywide cost reductions in
a b & c design to cost manufacture to cost purchase to cost
sources of sustainable competitive advantage include
a b & c product differentiation low cost a combination of product differentiation and cost leadership
Total cost of ownership (TCO) can be used to:
all of the above (highlight cost reduction opprotunities, compare suppliers in a supplier selection decision, prepare for negotiation, assess the reasonableness of a suppliers prices.)
In portfolio analysis, the goal when purchasing strategic goods or services is to
assure continuous supply at lowest cost of ownership
In portfolio analysis, the goal when purchasing leverage items is
assure continuous supply at lowest total cost of ownership
when developing a negotiation strategy, the negotiator should assess the positions of strength of both (all) parties to
decide if a negotiation makes sense; establish negotiation points; avoid setting unrealistic expectations.
When a supplier offers a lower price for a larger quantity, the buyer should
determine the return on investment
Although associated with a number of factors, the learning curve normally is most closely identified with the analysis of
direct labor costs
Activity based costing can be used by the buyer to
eliminate nonvalue-adding activities; reduce activity occurrences, and reduce the cost driver rate
When estimating the costs of a manufacturing supplier
equipment depreciation is typically the largest single cost element in overhead
The zone of negotiation
indicates the feasibility of negotiation and the likelihood of agreement
In portfolio analysis, the goal when purchasing non-critical of routine spend is to
minimize acquisition time and cost
In portfolio analysis, the goal when purchasing bottleneck items is
reduce or eliminate customization
Target Pricing
starts with the selling price of an organization's end product minus the operating profit to establish the target cost
An externally focused process of analyzing costs in terms of the overall value chain is called
strategic cost management
Which tool will focus everyone in the organization on cost management
target pricing
Value engineering (VE) and value analysis (VA) refer to the same process, but VE is applied to the design stage and VA is applied to redesign
True
Value methodology is a systematic approach to analyzing the functions of a product, part, service, or process to satisfy all needed quality and user requirements at optimum total cost of ownership
True
A unique cost model is one that applies to a variety of common supply situations
False
Activity based costing primarily is an accounting process that has little practical value for buyers
False
Besides price determination, there are very few areas in supply management where negotiation is a useful and cost effective tool
False
Educating suppliers about buying organizations operations is an example of a transaction
False
If the goal of negotiation is performance, the the process and tactics used during the negotiation are important because they have a great impact on the intention to perform
True
In negotiation, a fact is any piece of information on which the buyer believes he or she can negotiate an agreement with the supplier
True
In planning for negotiation, a factor or item of information over which disagreement is expected is known as an issue
True