Intro to Supply Chain Rutgers Chapter 5

Request for Proposal

A detailed capabilities document used to determine a suppliers 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

Request for Quote

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

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

Accuracy

A reduction in errors. A virtual elimination of manual paperwork and paperwork handling

Time savings

A reduction in the time between need recognition and the release and receipt of an order

Request for Information

A standard business process whose purpose is to collect written information about the capabilities of various suppliers

Contracting

A term often used for the acquisition of services

Mobility

Access virtually anywhere

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

Import brokers

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

Trading Companies

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

Profit-Leverage Effect: A decrease in purchasing expenditures ________________ before taxes (assuming no decrease in quality or purchasing total cost)

Directly increases profits

Tariffs

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

The primary objectives of Purchasing

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

Real Time

Improved communication both within the company and with suppliers

Inventory Turnover Effect

Increased inventory turnovers indicate optimal utilization of space and inventory levels, increased sales, avoidance of inventory obsolesce. Inventory is an asset but it is also capital tied up .

Decentralized Purchasing

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

Industrial Buyers

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

Counter-trade

International trade by exchange of goods rather than by currency.

A purchase order becomes a _________________________ only when accepted by the supplier

Legally binding contract

Cost savings

Lower overhead costs in the purchasing area

Reason for buying or outsourcing

Non-Strategic,Cost Advantage, Insufficient Capacity, Lack of Expertise, Quality

Receipt of Goods

Once the item(s) arrives at the designated location, the Buyer will typically conduct some form of receipt process where the item(s) are checked to ensure that they conform to the details of the PO, including quality and quantity

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

Reasons for Making

Protect proprietary technology, No competent supplier, Overall lower cost, Better quality control

Centralized Purchasing

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

Management

Purchasing personnel spend less time on processing of purchase orders and invoices, and more time on strategic value-added purchasing activities

Non-tariff barriers

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

Trackability

Real-time status tracking

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

Purchasing Process Steps: _________________________ submitted to the Procurement/Purchasing organization for action. Typically initiated by a user within an organization

Request for goods or services

In-sourcing

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

Competitive bidding aims at obtaining goods and services at the lowest prices by _______________ and by preventing favoritism

Stimulating competition

Purchasing

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

E-procurement

The business-to-business (B2B) purchase and sale of supplies and services over the Internet.

Invoice and Reconciliation

The invoice may need to be reconciled to the purchase order and goods receipt before payment is made. Referred to as a "3-way match"

International Purchasing - Reason for global outsourcing

The opportunity to improve quality, cost , and delivery performance, To exploit global efficiencies

Procurement

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

Co-sourcing

The sharing of a process or function between internal staff and an external provider

Fulfillment

The supplier delivers the items to the buying organization as per the PO

Purchasing can usually be described as the ____________________ of procurement for goods or services.

Transactional function

Merchant

Wholesalers and retailers who purchase for resale

Procurement is concerned with ______________________ that is vital to an organization

acquiring all of the goods, services, and work

Qualitative

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

Administrative expenses

associated with the procurement activity itself such as: Screening potential suppliers, Negotiation, Order preparation

A Purchase Requisition may be routed to an _______________ (s) depending on the type of material or service being requested and/or the dollar value of the request.

authorized approver

A high turnover ratio is ___________ because it means the company is generating sales efficiently to sell inventory.

beneficial

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

bonds

Make supplier selection ____________________ may be initiated through the use of a Request for Proposal (RFP) or a Request for Quotation (RFQ)

competitive bidding process

Purchasing is also a term commonly used in business to represent the ____________ of, and the __________ for, acquiring materials, supplies, and services for an organization.

function, responsibility

Quantitative

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

Purchase Order (PO) is created and delivered to the supplier. To inform the supplier of the ________________________

intent to purchase

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

Purchase Order

is a offer to the supplier to acquire goods or services. It is the official offer issued by a buyer to a seller to acquire goods or services.

Total Cost Ownership

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

Cash Discounts

may be offered for prompt payment of invoices

Value-added services

may be offered such as: Special delivery, Special packaging, Preparation of promotional displays

Quantity Discounts

may be offered to encourage buyers to purchase larger quantities

Purchasing is the __________________________ from an external third party

process of how goods and services are ordered

Poor supplier quality costs

related to defective finished goods must also be considered. Costs such as: Scrap, Rework, Recycling

Make vs Buy is a __________ decision

strategic

A low turnover ratio is ____________ as it means the company is not selling through products efficiently. The company is likely making/buying too much inventory for demand and may end up throwing out expired or unsaleable products.

unfavorable