Purchasing test 1

Benefits of EDI

- reduced labor - reduction in document handling - more time for data analysis - higher quality information due to a reduction in data entry errors improved supplier-buyer relations

advantages of RFID

- reduced labor costs - simplified business processes - improved inventory control - increased sales - reduced shrinkage

purchasing roles

- supporting the need of the organization with supply of goods and services - keeping the organizations safe through optimizing financial resources - minimizing or eliminating contractual and financial risks

Advantages of Centralized Purchasing

-concentrated volume -leveraging purchase volume -avoid duplication -specialization -lower transportation costs -no competition within units -common supply base

purchasing department objectives:

1. Spend corporate funds wisely 2. Operate in a professional manner 3. Purchase a. The right materials b.The right quantities c.At the right time and price d.From the right source 4. Practice the highest level of ethical standards to ensure confidence among all parties

purchasing main functions

1. determine the supplier 2. negotiate the actual price 3. determine the delivery date

What are the two major purchasing categories?

1. direct materials - directly related to the production of the finished goods 2. Indirect materials - not directly involved in the production of finished goods. (MRO)

Reasons prices go up

1. material shortages 2. synthetic materials complex, high-value products

Three sets of Lewin-Schein theory

1. unfreezing 2. moving 3, refreezing

What are the two big questions for a purchasing department?

1. where should the purchasing function be located in the organization 2. what level of authority should the purchasing function have?

reverse auctions

A sourcing technique where pre-qualified suppliers enter a website and at pre-designated time and date, and try to underbid competitors to win the buyer's business.

materials management vs supply chain management

MM is focused on product to plant SCM is focused on product to plant to customer

Best use of e-procurement

MRO (indirect materials)

auto-create

computer automatic order 'releases' from established contracts by SKU via EDI

centralized purchasing

coordinating all purchasing activities for the entire plant/company through one central location

Disadvantages of decentralized purchasing

duplication of efforts for buying, receiving, inspections and accounts payable local manager may bypass negotiated agreements

e-procurement implementation

*PEOPLE HATE CHANGE* 1. start with noncritical items 2. bring all internal stakeholders on board 3. improve the process before expanding it externally 4. leverage your system once it's running 5. aggregate buyers within your organization 6. incrementally expand your system 7. move on to the manufacturing operations

disadvantages of centralized purchasing

- can cause delays - not as sensitive to department needs - can not have much input from engineering

factors influencing purchasing decisions

- economic and political environment - emerging technology vs labor - changing nature of purchasing

Traditional purchasing

- excessive time - excessive documentation - excessive cost - non value added clerical actions

RFID areas of concern

- item environemnt - system environment - data requirements - tag structure - software support functions

required conditions for a successful reverse auction

- lots of bidders - low impact on supplier-buyer relationship

Supply chain functional areas:

- purchasing - inventory control - traffic - production control - stores

three phases to unlocking sourcing value

1. Leveraging volume discounts 2. Focusing on value 3. Continuous improvement

problems with e-procurement

1. Multiple platforms available that don't all speak to each other 2. strong tendency of Maverick buying (buying off contract)

Procurement Cycle Steps

1. Need recognition 2. Specific need 3. source options 4. price and terms 5. purchase order 6. delivery 7. expediting 8. receipt and inspection of purchases 9. invoice approval and payment 10. record maintenance

EPOS

Electronic point of sale

outsourcing v subcontracting

Outsourcing is permanently assigned (bought) previously internal processes whereas Sub-Contracting is providing for short-term added (external) "capacity" to meet Customer Satisfaction

Three way match

The activity within the procurement process that ensures that the data on the invoice matches the data on the purchase order and the goods receipt. - invoice - purchase order - good receipt/ receiving document

E-procurement

The electronic purchase and sale of goods and services, usually through an Internet-based platform.

materials management

a concept whereby all materials and equipment procurement functions are combined under one management function, including contracting, purchasing, quality assurance, inspection and expediting, trafficking and receiving.

P-cards (procurement cards)

a form of company charge card that allows goods and services to be procured without using a traditional purchasing process

Profit Leverage Effect

a term used to describe the effect of $1 in cost savings increasing pretax profits by $1. Increased sales do not have the same effect.

Total Cost of Ownership (TCO)

all of the costs incurred before, during, and after a purchase

RFID (radio frequency identification)

any technology that uses radio waves to identify and track items.

decentralized purchasing

authority and responsibility for supply-related functions are disposed throughout the organization.

hybrid purchasing system

centralized purchasing for larger organization-wide contracts, but gives business units autonomy to make small purchases for their department.

Systems contracting

entails a contract with a supplier where the supplier holds onto your inventory for you, and they guarantee that it will be available. If it is not, then they will buy it for you. - No purchase order - Invoicing is done weekly or monthly - Price protection (usually for a year) - The company will look at what you needed last year and create an inventory for you that they think you will need. They will also look out for new products for you that could help your company.

MRO

maintenance repair and overhead

the global economy has evolved from exclusively ______ to ______

manufacturing / services

Advantages of Decentralized Purchasing

more streamlined procedure since the department managers purchasing needs and thus decisions can be made immediately.

Where does systems contracting save money?

o Issuing of purchase order o Inventory holding o Expediting o Receiving time o Price protection You don't have to do it yourself!

PIC

production inventory control

RFI (request for information)

screening document for gathering vendor information and narrowing the list of potential vendors. Can help manage the selection of vendors by focusing on project requirements that are crucial.

SMED

single model exchange of dyes

SKU

stock keeping unit

order cost

the cost to place an order

supply chain management

the design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer.

EDI (electronic data interchange)

the direct computer transmission of orders and other transaction information

integrative materials management

the planning, acquisition and conversion of raw materials and component parts into finished goods

phantom bidding

unethically inserting phony bids to motivate bidding by suppliers