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