Supply Chain Management: Exam 2: Chapter 5

purchasing process steps

1. a need is identified, a purcahase req is issued 2.obtain authorization 3.identify and evaluate potential suppliers 4. make suppliers selection (competitive bidding process); request for proposal and request for quotation 5. purchase order is created and delivered to the supplier 6.supplier confirmation of the purchase order 7.fufillment 8. receipt of goods 9.invoice and reconciliation 10.payment 11. close out the purchase order 12. analysis

purchasing contributes by

1. actively seeking reliable suppliers 2. working with the expertise of strategic suppliers 3.involving suppliers and purchasing personnel in new product design and development efforts

e-procurement process

1. purchase requisition and/or purchase order 2. an invoice 3. a payment (authorization and reconciliation)

primary objectives of purchasing

1. uninterrupted flow of materials and services at the lowest total cost. 2. improve the quality of the finished goods produced. 3.optimized customer satisfaction.

Request for Information (RFI)

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

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.

merchants

Wholesalers and retailers who purchase for resale.

profit-leverage effect

a decrease in purchasing expenditures directly increases profits before taxes.

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.

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.

return on assets (ROA) effect

a high ROA indicates managerial prowess in generating profits with lower spending

contracting

a term often used for the acquisition of services.

purchase order

an external commercial document; official offer issued by a buyer to a seller to acquire goods and services; becomes a legally binding contract only when accepted by the supplier.

purchase requisition

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

supply management

encompasses all acquisition activities beyond the simple purchase transaction; the "identification, acquisition, access, positioning, and management of resources an organization needs, or potentially needs, in the attainment of its strategic objectives."

inventory turnover effect

increased inventory turnovers indicate optimal utilization of space and inventory levels, increased sales, avoidance of inventory obsolesce

industrial buyers

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

four elements of cost

quality, service, delivery and price (QSDP)

e-procurement

the business-to-business purchase and sale of supplies and services over the internet.

procurement

the process of selecting and vetting suppliers, negotiating contracts, establishing payment terms, and the actual purchasing of goods and services (the overall umbrella term for purchasing).

total cost of ownership

the sum of all the costs associated with every activity in the supply stream of a product (purchase price is only one part of the TCO)