SCM 301 - Exam 2
Define Critical Items
A purchased input of relatively high importance / Spend volume, and relatively high supply market complexity
Define Leverage Items
A purchased input of relatively high importance / Spend volume, and relatively low supply market complexity
Define Bottleneck Items
A purchased input of relatively low importance / Spend volume, and relatively high supply market complexity
What does the term "Kaizen" mean?
A short, focused, continuous improvement project that takes place on the production line
Define Analytical Hierarchy Process (AHP)
A structured technique for organizing and analyzing complex decisions, based on mathematics and psychology
Consider Outsourcing when...
A supplier does something better than you do
SCOR Model (Supply Chain Operations Reference)
A supply chain framework that seeks to standardize and illustrate business processes, performance metrics, practices and people skills into a unified structure
Define Toyota Production System (TPS)
A system created to reduce waste through lean processes while meeting customer needs and utilizing employee talent
What is Six Sigma?
A systematic, data-driven approach to achieving zero defects
Define Strategic Sourcing Matrix (SSM)
A tool used to classify all purchased inputs according to relative value / spend volume and supply market complexity. Different categories suggest different approaches to supply management
Define Multi-Criteria Analysis
A valuable tool that can be applied to many complex decisions. It is most applicable to solving problems that are characterized as a choice among alternatives
Define Value Stream Mapping
A way to represent processes and flows in a supply chain or part of a supply chain that shows each step of a process as well as value added, time spent, and time during which value is added
Buying from a distributor gives you access to...
A wider bundle of products and emerging technologies
Define Contract
A written or spoken agreement between two parties. To be valid it must include an offer, an acceptance, and consideration
8 Wastes - Excess Processing Definition
Activities that the customer does not value and is not willing to pay for
Define Express Processing
Activities that the customer does not value and is not willing to pay for. One of the 8 wastes
Which quality of product dimension would you be assessing when asking the question "Does the product look, sound, taste, or smell the way it should?"
Aesthetics
Operating Expense
All the money an organization spends turning inventory into throughput
Goal of Theory of Constraints
Alleviate constraints
Supplier Selection Criteria - Quality
Almost universally used in the supplier selection process. Typically measured as parts per million defective
Lean Principle - Continuous Improvement
Always getting better, adapting to external demands and employee insight
Define Total Cost of Ownership (TCO)
An approach that goes beyond measuring price to consider all of the associated, and often hidden costs, of doing business with a particular supplier, or the cost of pursuing various options, such as using alternate processes, or insourcing versus outsourcing
Define Circular Economy
An economic system where everything we make and use is returned and reused and recycled. The idea is "to preserve and enhance natural capital by controlling finite stocks and balancing renewable resource flows."
Supplier Segmentation using the Strategic Sourcing Matrix occurs during which step of the strategic sourcing process? a) Reconcile and Pay b) Procure c) Plan d) Source e) Analyze
Analyze
The following are elements of what stage in the BP Process? - Close performance gaps - Repeat BP Process - Share BP Process upstream
Analyze Stage
What stage of the SSP do you develop a deep understanding of what you are buying, the market, the opportunities, and how you will manage the purchase?
Analyze Stage
BP Process - Plan
Analyze situation, make schedule, assign responsibility
Wasteful Activity (Muda)
Any activity that uses resources without creating value
8 Wastes - Defects Definition
Any work or product that is less than perfect
Define Defects
Any work or product that is less than perfect. One of the 8 wastes
What is Step 1 of the 3-step proven pat to employing the process improvement trio?
Apply Theory of Constraints to identify where you will get the most bang for your buck
A fast food restaurant is an example of a ______ product process
Assembly Line
Automobile production is an example of which process?
Assembly Line
Which Process Design has: - Connected Flow - Low Flexibility - Low Labor Expertise - Low-Moderate Variety - High-Moderate Volume
Assembly Line
You have high demand for a standardized product, you use a repetitive process. You often produce stock, using a fixed and paced sequence of activities. Equipment tends to be very specialized and workers tend to rotate among a small range of activities
Assembly line
Parallel Processing
Assign multiple workers to a single work station when a process takes more time than the desired Takt Time
Manufacturing Example of Assembly Line
Auto Production
Six Sigma Certification - Yellow Belt
Aware of six sigma principles and participate on projects
Service Example of Batch
Bakery
Which process design has: - Disconnected Flow - Moderate Flexibility - Moderate Labor Expertise - High-Moderate Variety - Low-Moderate Volume
Batch
You "Customize" basic models by offering a few unique options. Most products follow a similar flow, you need less employee and equipment flexibility
Batch
Supplier Selection Criteria - Management Strength
Because your goal is to build a great team, you want to assess suppliers' talent and worker capabilities
What SSP Stage do you get the supplier on contract, ready and able to perform?
Bid/Negotiate and Contract Stage
What stage of the SSP will require a different approach for different types of buys?
Bid/Negotiate and Contract Stage
Reasons for early supplier involvement is: a) To better train the supplier for the future b) To utilize the supplier's innovative ideas c) Because the most cost and functionality is determined during design d) Both B and C
Both B and C
This depicts how suppliers might perceive and categorize their portfolio of customers.
"Customer of Choice" Matrix
I have a purchasing department project that is projected to save $4,500,000. My company makes a 15% net profit. What additional level of sales would I need to equal the $4,500,000 in purchasing savings?
$4,500,000 / 0.15 = $30,000,000 I would need $30,000,000 in additional sales to generate $4,500,000 in additional profit
If you work an 8 hour long shift and need to produce 200 units, what is the TAKT Time?
(8 Hours * 60 Minutes) / 200 Units = 2.4 Minutes Answer = 2.4 Minutes
If you have an 8 hour work day and you need to produce 200 units per day, what is your Takt time?
(8 hours x 60 minutes) / 200 units = 2.4 minutes
What Time Frames are included in the Transactional Era?
- 1950s - Early 1970s - 1973 - Mid 1980s
What Time Frames are included in the Strategic Era?
- 1985-1995 - 1995-2005 - Tomorrow
A Poka-Yoke is:
- A system that helps you identify specific improvement opportunities - Mistake Proofing - A visual cue to avoid errors
Elements of Single Sourcing (1 supplier)
- Allows volume consolidation for best price and service - Encourages close relationship with supplier - Supplier brings you innovative product and process technologies - Only need to synchronize processes with 1 supplier per category - Lower freight costs on consolidated order shipments
What must a contract include to be valid?
- An offer - An Acceptance - Consideration
Cause/Effect - Examples of Measurements
- Bad Data - Wrong Measurements
Cause/Effect - Examples of Methods
- Bad Policies - Procedures
8 Wastes - Manufacturing examples of Overproduction
- Batching to meet "efficient" production rather than customer demand - Using a "push" production system
What Time Frames are included in the Clerical Era?
- Before World War II - WWII
What are the Benefits of Early Supplier Involvement (ESI)
- Better overall design and quality - Increased product manufacturability - Reduced overall development time - A fresh set of eyes to discover design and production efficiencies
What are the different categories in the Strategic Sourcing Matrix?
- Bottleneck - Critical - Leverage - Routine
8 Wastes - Personal examples of Excess Processing
- Buying a phone with 256GB of memory when you have never used more than 64GB - Getting the latest and greatest Fitbit when you really just want to know how many steps you walk per day
8 Wastes - Personal examples of Inventory
- Buying so much food that some of it spoils - Buying huge quantities of something that is on sale because it is a "good deal"
8 Wastes - Manufacturing examples of Inventory
- Carrying extra raw materials to buffer defective materials or scrap in production - Ordering more materials than needed to get discounts - Holding on to discontinued products or unused equipment
5S - Explanation of Sweep
- Clean and organize each day - As you use things, put them away
What are the 3 Eras included in the Evolution of Purchasing?
- Clerical Era - Transactional Era - Strategic Era
Buyer/Supplier Integration Continuum Stages
- Collaborative Forecasting - Vendor managed inventory - Insourced warehousing - Early supplier Involvement in NPD - Supplier-integrated manufacturing
Achieving Six Sigma Quality - Variance Reduction
- Common Cause Variation - Special Cause Variation
Elements of Multi-Sourcing (2 or more suppliers)
- Competition among suppliers ensures price and service - Risk mitigation - if 1 supplier fails, the other(s) can provide your needs - Avoids too much dependence on one supplier (or too much supplier dependence on one customer) - Better market scanning ability for new technologies or products - Possible synergies between multiple supplier can benefit their common buyer
Definition of Quality
- Conformance to specifications - Whether or not a product lives up to customer expectations
Elements of the Product-Process Matrix
- Continuous flow - Assembly Line - Batch - Job Shop - Project
5S - Explanation of Sustain
- Continuously follow this approach and implement it throughout your company
8 Wastes - Personal examples of Overproduction
- Cooking too much food so that some of it spoils - Turning in extra homework problems
Purchasing has a huge impact on what aspects of a firm?
- Cost - Quality - Delivery - Innovation - Agility - Etc.
Which of the 8 wastes contributes to a system of process?
- Cost - Time - Inventory
A long term contract and relationship with a supplier is best with _______ and _______ types of items
- Critical - Bottleneck
What are the 10 sources of supplier information?
- Current supplier - Purchasing database - Previous experience - Personal contacts - Purchasing consortiums - Directories - Trade publications - Trade shows - Sales representatives - Internet
What are ISO's Core Principles of Total Quality Management?
- Customer-focused - Leadership - Involvement of People - Process Approach - System Approach to Management - Continuous Improvement - Fact-based Decision making - Mutually beneficial supplier relationships
Cause/Effect - Examples of Materials
- Damaged in transit - Defective
Processes Inputs Examples
- Data - Materials - Energy - Money - People - Equipment
Relationships of Theory of Constraints Metrics - To increase profit you must __________ Inventory, _______ Operating Expense, and ________ Throughput
- Decrease - Decrease - Increase
Elements of the Customer of Choice Matrix
- Development - Core - Nuisance - Exploitable
8 Wastes - Personal examples of Not Utilizing Staff Talent
- Doing an entire team project yourself - Not asking the quiet person on a team project what they think
8 Wastes - Personal examples of Defects
- Doing homework incorrectly - Turning in homework late
5S - Benefits of Standardize
- Ease transitions between shifts - Support cross-training - Standardized work
5S - Explanation of Sort
- Eliminate unneeded items from the area - Store things not needed now - Organize always
What is meant by Lean and Quality go hand-in-hand?
- Eliminating waste requires you to improve quality - Quality is needed for lean to work properly, and lean process quickly reveal any quality problems
5S - Explanation of Standardize
- Employ standard procedures to maintain workplace order - Use standard processes to ease training new people
Which of the 7 rights of purchasing focus on availability
- For delivery to the right place - At the right time
5S - Benefits of Sort
- Free up work space - Reduce time looking for things - Understand the resources you have available
8 Wastes - Personal examples of Motion
- Going to 5 different supermarkets each week to buy on-sale items - Hub and spoke airline terminal systems that take you from Ohio to Atlanta to get to Los Angeles
5S - Explanation of Simplify
- Have a logical place where everything belongs - A place for everything and everything in its place
A larger supplier is likely to...
- Have the capacity to match your growth - The scale to offer a low price - Advanced R&D
What is the Nature of a Strategic Alliance
- High value co-creation potential - Interdependent - Long-term - Joint planning via teams - Share resources - Shared risks and rewards
These are the 4 steps of the Supplier Selection Process
- Identification - Evaluation - Approval - Monitoring
What are the 4 steps of the Supplier Selection Process?
- Identification - Evaluation - Approval - Monitoring
5S - Benefits of Sustain
- Improved employee performance, satisfaction, and engagement because their input affects how things are done
What are the 2 forms of supplier development?
- Increase supply options - Improve process capabilities
What are 2 ways to increase your attractiveness?
- Increasing how much you spend with a supplier - Changing your behaviors
Processes Outputs Examples
- Information - Services - Physical goods
Processes Flows Examples
- Information or physical materials move through processes
Multi-Criteria Analysis Aspects
- Intuitive - Quantifiable - Applicable - Discipline
What are the benefits of the Multi-criteria Analysis tool?
- Intuitiveness - Quantifiability - Applicability - Disciplined
The first step in the 5S process is important because:
- It allows you to understand the resources available for the job - It allows you to free up space by eliminating things that are not used on the job
The Make-or-Buy Decision Analysis tells us:
- It is not that important to the company's success to outsource items that are not strategic to our success - Before outsourcing a strategic item, we should seriously consider our own ability to successfully make that item
What are the 3 methodologies of Process Improvement?
- Lean Management - Six Sigma - Theory of Constraints (TOC)
These are the 4 different categories of the Strategic Sourcing Matrix (SSM)
- Leverage - Critical - Routine - Bottleneck
Cause/Effect - Examples of Environment
- Location - Temperature
What is the Nature of a Transactional Relationship
- Low value co-creation potential - Arms-length - Short-term, transitory - Minimal investments
Buying direct from a manufacturer helps you get
- Lower prices - Better service
8 Wastes - Manufacturing examples of Waiting
- Machine downtime waiting for repairs, delaying production - Shortage of needed materials, delaying processing
Causes of the Ishikawa Cause-and-Effect Diagram
- Machines - Methods - People - Measurements - Materials - Environment
5S - Benefits of Simplify
- Make it easier to identify when any tools are missing - Make is easy to find tools when put away properly
What are the Relationship Goals for a Strategic Alliance?
- Maximize value co-creation - Assure availability
What are the building blocks of total quality management (TQM)
- Measure - Analyze - Improve - Control - Define
What are the Relationship Goals for a Transactional Relationship?
- Minimize costs - Assure availability
8 Wastes - Manufacturing examples of Transportation
- Moving products to different locations for further processing - Moving materials or packaging to be used in production to get them out of the way
What are the different types of value-added processes?
- New product development - Engineering change orders - Supplier identification and selection - Negotiating contracts and building supplier relationships - Scheduling production - Developing equipment maintenance plans - Managing freight shipments - Responding to customer needs
Stage 4 - Test and Validate
- Offer suggestions on how to improve the product or process (tweak features)
Steps to Process Improvement
1) Apply Theory of Constraints to identify where you will get the biggest bang for your buck (identify the bottleneck) 2) Implement Lean techniques to reduce waste at the bottleneck 3) Once wastes are removed, employ Six Sigma to reduce process variation at the bottleneck and to control the process moving forward
Formulas for Days Inventory Outstanding =
1) Average inventory / COGS * 365 = DIO 2) Average Inventory / Annual Revenue * 365 = DIO
Formulas for Inventory Turns
1) COGS / Average Inventory = Inventory Turns 2) 365 / DIO = Inventory Turns
What are the 8 Types of Waste
1) Defects 2) Overproduction 3) Waiting 4) Not Utilizing Staff Talent 5) Transportation 6) Inventory 7) Motion 8) Excess Processing
What are the 5 steps in Process Mapping?
1) Define the Process 2) Identify the Process Trigger 3) Identify Key Activities 4) Show Flows 5) Define the Ending Point
These are the 2 Rules of Service Quality
1) Expectations Matter 2) Experience Matters
What are the stages included in Potential Supplier Contributions from ESI
1) Idea Generation 2) Screening/Scoping 3) Business Case Analysis 4) Development 5) Test and Validate 6) Launch
What are the 5 steps of Theory of Constraints?
1) Identify 2) Exploit 3) Subordinate 4) Elevate 5) Repeat
What are the 5 Elements of the Continuous Lean Journey?
1) Identify Customer Value 2) Map the Value Stream 3) Flow the Processes 4) Pull Demand through the System 5) Seek perfection through Continuous Improvement
Rules of Negotiation
1) If you don't ask, the answer is no 2) Information is power
List the 3 tools in the process improvement trio and describe the focus of each tool
1) Lean --> Efficiency / Waste Reduction, Quality 2) Six Sigma --> Reduce Variation 3) Theory of Constraints --> Alleviate Constraints
What are the 4 steps in the process for applying bottleneck analysis
1) Map the process 2) Calculate activity times 3) Determine target values 4) Determine bottleneck impact
What are the 7 Rights of Purchasing?
1) Obtaining the Right Material 2) In the Right Quantity 3) With the Right Service 4) For delivery to the Right Place 5) At the Right Time 6) From the Right Supplier 7) At the Right Total Cost
What are the 8 Dimensions of Product Quality?
1) Performance 2) Features 3) Reliability 4) Conformance 5) Durability 6) Serviceability 7) Aesthetics 8) Perception
Place the lost of cost of quality in order from least expensive to most expensive: - Appraisal Costs - External Failure Costs - Internal Failure Costs - Prevention Costs
1) Prevention Costs 2) Appraisal Costs 3) Internal Failure Costs 4) External Failure Costs
Steps in the 5S Methodology
1) Sort (Seiri) 2) Simplify (Seiton) 3) Sweep (Seiso) 4) Standardize (Seiketsu) 5) Sustain (Shitsuke)
What are the Dimensions of Service Quality?
1) Tangibles 2) Reliability 3) Responsiveness 4) Assurance 5) Empathy
What are the 5 Competitive Advantage Principles of Lean?
1) The Customer Rules 2) Low Inventory 3) Zero-Waste 4) Continuous Improvement 5) Respect for all employees
What are the steps of the Multi-criteria Analysis
1. Decide on criteria 2. Set weights 3. Define scoring system 4. Evaluate options 5. Calculate results
Calculate TAKT time in seconds for the following: - Available hours of production = 10 hours - # of units currently produced = 600 units - # of units required to meet demand = 500 units
Every 72 seconds
ISO Fact-based decision making principle
Evidence-based decision making is good business sense
The 8th waste is:
Excess Processing
8 Wastes - Inventory Definition
Excess materials that customers or manufacturing don't currently need
Supplier Selection Criteria - Technical Capability
If you need to be on the cutting-edge of technology, you need to verify that your suppliers are effectively investing in R&D - and that their people are tech-savvy
Define Motion
Inventory represents movement of people that does not add value. One of the 8 wastes
Description of Strategic Processes
Involve the business vision
Description of Operational Processes
Involve the mission (carrying out the vision) of the business
Description of Enabler Processes
Involved maintenance, control of other processes
Six Sigma Certification - Green Belt
Led a GB project and assisted with data collection
Supplier Development - Increase Supply Options
Need to secure sources of supply
8 Wastes - Not utilizing Staff Talent Definition
Not challenging employees or listening to and encouraging their ideas. If this is blatant, employees can actually undermine your efforts to improve on the other seven wastes
The definition of not utilizing staff talent in the 8 wastes refers to...
Not encouraging employee ideas or undermining their efforts
Customer of Choice Matrix - Low Attractiveness and Low Profitability
Nuisance
Customer of Choice Matrix - Development
Nurture relationship to grow the business
Assume that you work for a company that is developing a new technology to allow noise cancellation of loud parties, neighbors, etc. The supplier your company is working closely with on developing that technology should be a _____________ relationship: a) Transactional relationship b) Category management relationship c) Bottleneck relationship d) Strategic Alliance relationship
d) Strategic Alliance relationship
In the metaphor of the bottle for theory of constraints, which part of the bottle represents the constraint? a) The base b) The lid c) The bottle d) The neck
d) The neck
Which of the following is not a dimension of quality? a) Conformance b) Features c) Reliability d) Traceability e) Performance
d) Traceability
Which of the following characterizes how you should manage routine buys? a) They are unimportant b) You should outsource them to the supplier c) You should spend a lot of your own time working on the purchase d) Use P-cards and catalogs to outsource to the end user e) None of the above
d) Use P-cards and catalogs to outsource to the end user
Historically, businesses arranged activities by different functions, such as: a) Marketing b) Logistics c) Manufacturing d) Purchasing e) All of the above
e) All of the above
The 5S process helps support: a) Standard Work b) Multi-functional workforce c) Minimized set-ups d) Continuous improvement e) All of the above
e) All of the above
The benefits of a cross-functional workforce include: a) A broader knowledge base for participating in kaizen events b) Improved understanding of more processes by the work force c) Substitution when a worker is out d) A sense of achievement by the multi-skilled workers e) All of the above
e) All of the above
Under which circumstances do you need to search for a new supplier? a) New product or service introduction b) New suppliers have entered the market c) Your current supplier overpromised and is underperforming d) Testing the market e) All of the above f) A and B only
e) All of the above
What does process mapping do for you? a) Helps confront the brutal facts b) Makes the brutal facts visible c) Helps you hold fact-based conversations d) Helps conduct a blameless autopsy e) All of the above
e) All of the above
Which of the following is a "right" in the less formal definition of purchasing? a) Obtaining the right material b) In the right quantity c) At the right time d) For delivery to the right place e) All of the above
e) All of the above
Why do you need to put process mapping into your decision-making toolkit? a) To give everyone better understanding of the process b) To ask questions c) To share ideas that help solve problems d) To get better solution e) All of the above
e) All of the above
Which of the following statements are true about inventory? a) Inventory is a buffer b) It helps you avoid dealing with problems c) It may prevent you from understanding the true cause of problems d) Customers want you to have adequate inventory readily available for their needs e) All of the above are true
e) All of the above are true
Which of the following are stages (in order) in the strategic sourcing process? a) Plan, Source, Bid/Negotiate, Procure, Pay b) Plan, Analyze, Source, Make, Pay c) Analyze, Procure, Source, Pay d) Plan, Source, Make, Deliver, Return e) Analyze, Source, Bid/Negotiate contract, Procure, Reconcile and Pay
e) Analyze, Source, Bid/Negotiate contract, Procure, Reconcile and Pay
Which of the following is a poor match between buyer and supplier for all types of buys? a) Nuisance b) Exploitable c) Development d) Core e) Both A and B f) Both C and D
e) Both A and B
As part of supplier integration: a) You help finance the supplier's supply chain b) You share information on your plans with the supplier c) You communicate seamlessly d) You build in contractual yearly price reductions e) Both B and C
e) Both B and C
Research has shown that if you invest in which of the following activities, you will end up with an attitude of continuous and constant improvement: a) Respect every individual b) Focus of the process c) Seek perfection d) Look out for your own team e) Only A, B, and C
e) Only A, B, and C
Which of the following is not a step in the Strategic Sourcing Process? a) Reconcile and Pay b) Procure c) Source d) Analyze e) Plan
e) Plan
Which step in the multi-criteria analysis process helps you determine how important each criterion is? a) Calculate results b) Evaluate options c) Decide on criteria d) Define scoring system e) Set weights
e) Set weights
Defining clear key selection criteria help you to collect consistent and comparable data. Which of the following criteria are important to consider and compare? a) Price b) Reach/Scalability c) Management Strength d) Cultural Fit e) A and D only f) A, B, C, D
f) A, B, C, D
Which of the following are a good match for strategic buys? a) Nuisance b) Exploitable c) Development d) Core e) A and B f) C and D
f) C and D
Which of the following are NOT a value-added process? a) New product development b) Engineering change orders c) Scheduling production d) Managing freight shipments e) All of the above f) None of the above
f) None of the above
When might a supplier of choice legitimately determine you are NOT a customer of choice? a) If supplier's capacity is exceeded by market demand and you buy relatively low volume but require delivery in small, frequent quantities b) Your service requirements are so high that you are causing the supplier to lose money c) Your negotiations are so fierce that the supplier makes unprofitable concessions d) whenever they feel like it and want to pay you back for the way you treat them e) None of the above f) Only A, B, and C
f) Only A, B, and C
What are some of the consequences of choosing the wrong supplier? a) Production delays b) Lost profits c) Enhance firm's competitiveness d) Lower market share e) All of the above f) Only A, B, and D
f) Only A, B, and D
What is an example of a routine buy?
Office Supplies
To score big with suppliers, you have to win...
their hearts
Continuous Improvement (Kaizen)
Often used in conjunction with a kaizen burst or kaizen event, this is a concentrated effort to engage those involved in a process over one to a few days to focus on continuous incremental waste elimination, improving the flow and quality of the work
Supplier Selection Criteria - Price
You'll find this on 99.9% of selection criteria lists - and on performance scorecards. You will be judged on your ability to manage purchase price variance.
The Competitive Landscape influences what?
Your negotiating power
ISO Mutually beneficial supplier relationships principle
Your organization should build strong relationships with key suppliers
Profitability
Your service requirements are so high and your price negotiations are so fierce that a supplier can't meet your needs profitably
Supplier-Integrated Manufacturing Integration
Your suppliers establish manufacturing or assembly operations within your facilities. A close parallel involves co-locating a facility next to your plant to deliver materials more quickly direct to your assembly line
An a purchasing manager, you have to make many purchasing decisions. The organization's secretary comes to you asking what type of office supplies you want for your employees' desks. This purchasing decision would be considered a ______ item. a) Critical b) Simple c) Non-Critical d) Easy e) Obvious
c) Non-Critical
Most of the products cost and functionality is determined during: a) Manufacturing b) Supplier selection c) Product design d) Launch
c) Product design
During which step of the Strategic Sourcing Process would you identify potential suppliers? a) Plan b) Reconcile and Pay c) Source d) Procure e) Analyze
c) Source
In the SCOR Model, purchasing is represented by: a) Deliver b) Make c) Source d) Plan
c) Source
The most likely area that you will have lengthy supplier negotiations in purchasing is: a) Leverage items, because you spend a great deal of money b) Routine items, because the contracts are very long in duration c) Strategic items, because of their strategic nature d) All of the above
c) Strategic items, because of their strategic nature
In process mapping, each symbol denotes the following: a) That something is waiting b) That a process is moving c) That something has changed d) That something is in process
c) That something has changed
Which of the following emphasizes throughput accounting metrics? a) Inventory, Accounts payable, throughput b) Accounts payable, operating expense, Activity analysis c) Throughput, Inventory, Operating Expense d) Activity analysis, Throughput, Operating Expense
c) Throughput, Inventory, Operating Expense
Which of the following is true about critical buys: a) You want to automate and outsource supplier selection b) They represent about 80% of the buys within the organization c) You use a cross-functional category team d) They are managed by the end user
c) You use a cross-functional category team
During the analyze stage of strategic sourcing, you: a) Create a strategic sourcing matrix b) Select suppliers c) Identify suppliers d) Do your up-front homework to learn about the market, opportunities, and more
d) Do your up-front homework to learn about the market, opportunities, and more
Every Lean journey begins with: a) Eliminating waste b) Employee training c) Getting rid of excess inventory d) Keeping the customer in mind
d) Keeping the customer in mind
The Lean principle of an organized workplace is directly supported by which of the following? a) Kitting processes and root cause analysis b) Standard work and kitting processes c) Root cause analysis and poka-yokes d) Poka-yokes and standard work
d) Poka-yokes and standard work
____________ increased visibility of purchasing from the mid 70s to the mid 80s a) Television b) Internet c) Transportation d) Scarcity/Inflation
d) Scarcity/Inflation
Managers making decisions that help them achieve their short-term functional goals without taking into account other functions is called... a) Competitive advantage b) Demand-driven supply network c) Exception-based processing d) Silo mentality e) Continuous improvement
d) Silo mentality
Delivering to promise meant manufacturing has to interrupt operations to produce a rush order, causing operating costs to soar is an example of what? a) Excess and obsolescence b) Organizing by functions and fill rates by order c) Fill rates by order and silo mentality d) Silo mentality and organizing by functions
d) Silo mentality and organizing by functions
A routine buy has which of the following characteristics? a) High risk b) High potential price volatility c) Unique, value-added suppliers d) Straight forward competitive marketplaces
d) Straight forward competitive marketplaces
Processes Structure Examples
- Sequencing - Positioning - Scheduling - Linking
Process Improvement Trio - What contribution to total cost savings do Six sigma, Lean, and the Trio have?
- Six sigma = 7% - Lean = 4% - Trio = 89%
Strategic Choices that influence supplier selection process
- Size - International or domestic supplier - Manufacturer or Distributor - Buying from rival - Corporate social responsibility
What are the parts of the classifications of processes?
- Strategic - Operational - Enabler
Don't outsource...
- Strategic Activities - Activities that you do better than suppliers
What are the following statements examples of? - Making your bed - Preparing breakfast - Driving to work - Scanning the news
A process
High volume/value items that buy in complex, risky markets
Critical
Suppliers that dominate this segment possess something unique, like technical capabilities or a valued brand name that are hard for rivals to copy
Critical
These are sometimes called strategic items
Critical
You NEED these items to build competitive products, meet customer needs, and stay in business
Critical
You buy large volumes from complex, high-risk supplier markets is an example of Which SSM buy type?
Critical
SSM - High Importance and High Complexity
Critical Buy
This is executed by competitive bidding or negotiation
Critical Buy
An item with high complexity and high volume
Critical Item
5-10% of your buys are what type?
Critical buys
A customer with whom suppliers want to work
Customer of choice
True or False: A sensitivity analysis allows you to ask, "Does it matter?" for each scenario?
False?
True or False: Multi-criteria analysis is an effective way to justify a decision outcome that wish to see implemented (based solely on your intuition)
False?
Service Example of Assembly Line
Fast Food
Theory of Constraints (TOC)
Focuses your attention on the bottlenecks that affect your operations so you can improve throughput efficiently
Dimensions of Product Quality - Perception
For any dimension that cannot be observed directly, does the product seem like a high-quality product?
Six Sigma Certification - Black Belt
Full time project leader and trainer
Define Root Cause Analysis
Getting beyond the symptoms of a problem to the true underlying cause of the problem
What does GPS stand for?
Global Positioning System
Go See (Genchi Gembutsu)
Go and observe the situation for yourself so you can understand it
Define Waiting
Idle or wasted time when resources are not ready or available to use. One of the 8 wastes
The definition of Waiting in the 8 Wastes refers to...
Idle time when resources are not being used
8 Wastes - Waiting Definition
Idle/wasted time when resources are not ready/available to use
Supplier Selection Criteria - Financial Stability
If you are going to do the work to build a productive buyer/supplier relationship, you need to know that the supplier is financially healthy
8 Wastes - Transportation Definition
Movement of materials or information that does not add value
8 Wastes - Motion Definition
Movement of people that does not add value
Inventory
Represents all the money tied up by an organization in the things it intends to sell
Processes Resources Examples
- People - Equipment - Information systems - Money
The cause of Process Variation
- People - Machines - Methods - Environment - Measurement - Materials
8 Wastes - Manufacturing examples of Not Utilizing Staff Talent
- People idle in one work station while others are behind at another because they are not cross trained - Delaying production because the specialist who does a job is on vacation
What are the elements of Deming's 4-stage model (The BP Process)?
- Plan - Do - Check - Act
What are the 5 activities of the SCOR model?
- Plan - Source - Make - Deliver - Return
Cause/Effect - Examples of Machines
- Poor Maintenance - Wrong Equipment
Cause/Effect - Examples of People
- Poor Training - Fatigue
The total-cost-of-quality framework breaks out quality costs into which 4 categories?
- Prevention - Appraisal - Internal Failure - External Failure
To consistently achieve quality at the source, you should focus on...
- Prevention - Personal Responsibility - Standardization
What are the different costs of quality in order from least to most expensive?
- Prevention Costs - Appraisal Costs - Internal Failure Costs - External Failure Costs
Which of the supplier selection criteria are in almost every selection criteria list?
- Price - Quality - Delivery
Criteria for Supplier Selection
- Price - Quality - Delivery - Technical Capability - Responsiveness - Financial Stability - Cost Structure - Reach/Scalability - Management Strength - Cultural Fit
Examples of Prevention Costs
- Product or service requirements - Quality planning - Quality assurance - Training
Stage 5 - Launch
- Provide adequate capacity to support successful launch
Stage 2 - Business Case Analysis
- Provide cost and lead-time data to help assess viability - Refine concept to improve "doability"
Stage 1 - Screening/Scoping
- Provide feedback on technical feasibility of materials and processes - Suggest alternatives
Potential supplier contributions from ESI Include...
- Providing feedback on feasibility of materials and processes - Suggesting alternatives - Improve cost - Improve Lead time
In a lean environment, inventory is ______ through a system by ________
- Pulled - Demand
_____________ and __________ are almost certainly your organization's largest cost category
- Purchased Goods - Services
8 Wastes - Manufacturing examples of Motion
- Reaching or walking to get materials for each item rather than having materials come to you - Repetitive movements that can cause injury
5S - Benefits of Sweep
- Reduce time looking for things - Ease transitions between shifts - Support cross-training and standardized work
Early supplier involvement can lead to what?
- Reduced overall development time - Better overall design and quality - Increased product manufacturability
Stage 3 - Development
- Refine concept to improve "doability" - Provide critical components for (or even make) the prototype
Examples of External Failure Costs
- Repairs and Servicing - Warranty Claims - Complaints - Returns - Sales - Environmental Impacts
In effective and quality purchasing and supply management, you need to become an expert in which areas?
- Resources - Suppliers - Processes - Technologies
Which of the 7 Rights of Purchasing focus on what you are buying?
- Right Material - Right Quantity - Right Service
Of the 7 Rights of Purchasing, which 2 target Availability?
- Right Place - Right Time
Which of the 7 Rights of Purchasing focus on availability?
- Right Place - Right Time
Which of the 7 Rights of Purchasing focus on determining your success?
- Right Supplier - Right Total Cost
8 Wastes - Personal examples of Transportation
- Running errands without a route map so that you end up backtracking - Turning in paperwork to the university admissions office when you really needed to resubmit it to housing
8 Wastes - Manufacturing examples of Defects
- Scrap - Damaged parts - Parts that don't meet quality specifications
What are the 3 factors that Define Complexity?
- Supply Market Landscape - Risk - Technological Uniqueness
Examples of Appraisal Costs
- Verification - Calibration - Quality Audits - Supplier Rating
Who are the Quality Gurus?
- W. Edwards Deming - Joseph M. Juran - Armand V. Feigenbaum - Philip Crosby - Shigeo Shingo - Kaoru Ishikawa - Cenichi Taguchi
8 Wastes - Personal examples of Waiting
- Waiting in line, doing nothing at the grocery store - Continually trying to buy concert tickets on an overloaded, very slow website
Examples of Internal Failure Costs
- Waste - Scrap - Rework or Rectification - Failure Analysis
Six Sigma Certification Levels
- White Belt - Yellow Belt - Green Belt - Black Belt - Master Black Belt
Excess Inventory may cause...
- You not to notice how quickly various items are selling or not selling - You to lose money up and down the supply chain - Hidden problems in value-added processes
8 Wastes - Manufacturing examples of Excess Processing
- using more expensive materials that do not improve the product in the customer's eyes - Buying a high-tech machine and only using some of the features because the others aren't needed - Inspecting goods rather than doing it right the first time
What are the 5 steps in the Strategic Sourcing Process?
1) Analyze 2) Source 3) Bid/Negotiate and Contract 4) Procure 5) Reconcile and Pay
All weights should add up to...
1
How to determine if your Statistical Process Control (SPC) Charts are out of control
1) A single point plots outside the control limits 2) 2 out of 3 successive points are on the same side of the centerline and farther that 2 deviations from it 3) 4 out of 5 successive points are on the same side of the centerline and farther than 1 deviation from it 4) A run of 8 in a row on the same side of the centerline 5) Any consistent or persistent pattern tells you that your process includes systematic variation
Define Request for Information (RFI)
A formal invitation you send to potential suppliers, asking them to provide detailed information for a specific SKU
Define Merchant Category Code (MCC)
A four-digit number assigned to a business by credit card companies when the business first starts accepting one of these cards as a form of payment
When you execute a fair and efficient sourcing process, you invest in...
A good relationship with your suppliers and build credibility with your internal customers
Visual Signal or card (Kanban)
A means of visually communicating what is needed between various stages of production. It could be a card, an empty tray that needs to be filled to pull inventory through the system
If Average Inventory = $ 1,200,000 and Annual Revenue = $38,500,000 What is Inventory Turns?
365 / 11.38 = 32.08 OR 38,500,000 / 1,200,000 = 32.08 Answer = 32.08
When searching for a supplier - Consequences are huge
A bad choice can mean production delays, defective products, lost profits, and a lower market share
The 5S process is:
A continuous improvement approach for getting organized and staying organized
Six Sigma
A disciplined approach used to reduce process variation by employing DMAIC (Define, Measure, Analyze, Improve, Control)
Define Negotiation
A discussion between two or more parties who are attempting to reach an agreement through value claiming and possibly value creation
Reverse Auctions
A form of competitive bidding where you invite suppliers to bid for the contract online in real-time
Sometimes a ___________ is created by unexpected events
Bottleneck
Suppliers in which segment often have special expertise or technology that is hard to replicate?
Bottleneck
These are also known as unique items
Bottleneck
Which item doesn't represent a large dollar value but the complex supply market means you can never be sure of availability?
Bottleneck
You buy small volumes from complex, high-risk supplier markets is an example of which SSM buy type?
Bottleneck
You don't buy a lot of these items
Bottleneck
SSM - Low Importance and High Complexity
Bottleneck Buy
The more you spend, the more important the item is to your company's ______________
Bottom line
Multi-Criteria Analysis - Discipline
Brings discipline and visibility to selection process
Takt Time
Build a balanced process that produces at a pace so that output meets demand
Supplier Development - Improve Process Capability
Build a stronger, more competitive supply base
No company wins global competitive battles alone
Building the team
Bid/Negotiate and Contract - Routine Items
Buy at list price and avoid the contracting process altogether
If Average Inventory = $ 1,200,000 and Annual Revenue = $38,500,000 What is Days Inventory Outstanding (DIO)?
DIO = (1,200,000 / 38,500,000) * 365 = 11.38 Answer = 11.38
What is the maximum output your process can consistently produce over a period of time under normal operating conditions?
Capacity
Spend is a Key Measure of what?
Category Importance
The following are elements of what stage in the BP Process? - Gather performance data - Compare "before/after" - Present results - Celebrate results
Check stage
Define Sweep (Seiso)
Clean, organize, and put things away each day as things are used. One of the 5 S's
BP Process - Act
Close gaps between "PLAN" and "DO." Standardize and repeat continuous improvement cycle
Which Buyer/Supplier Integration has the LOWEST stage of integration?
Collaborative Forecasting
A supplier of _______ size may have a compatible culture and have both the desire and capabilities to be a strategic partner
Comparable
BP Process - Check
Compare implementation results against the plan
Which quality of product dimension would you be assessing when asking the question "Does the product conform to design specifications?"
Conformance
The "Real" measure of Quality
Conformance to customer expectations
Managers define quality as...
Conformance to specifications
ISO Continuous improvement principle
Continual improvement should be an active business objective
The process design with continuous flow and very little variety
Continuous
Which Process Design has: - Continuous Flow - Very Low Flexibility - Very Low Labor Expertise - Low Variety - High Volume
Continuous Flow
Always getting better, adapting to external demands and employee insights describes which lean operation competitive advantage?
Continuous Improvement
Which process has the highest level of volume?
Continuous flow
Define Sustain (Shitsuke)
Continuously follow a specific approach/initiative, implementing it throughout a company. One of the 5 S's
During the sustain stage of the 5S process, you...
Continuously follow the approach and implement throughout the company
Customer of Choice Matrix - High Attractiveness and High Profitability
Core
Remedying defects discovered by customer
Costs failures that are detected after they are transferred to the customer
Preventing or avoiding quality problems
Costs of designing and maintaining the quality management system
Measuring and monitoring activities
Costs of evaluating produced or purchased information, processes, products, and services
Remedying defects before delivery to customer
Costs of failures that are detected before they are transferred to the customer
Lean Six Sigma was coined to refer to the...
Coupling of lean and total quality practices
Lean Principle - Respect for All Employees
Creates a positive work environment which reflects in employee longevity and the way that they interact with customers
What is Lean?
Creating more value for customers with fewer resources
Define Lean
Creating more value for customers with fewer resources, or elimination or activities (waste) in any process that do not add value to the final customer.
The pace of technological change affects what?
Decision-making certainty
ISO System approach to management principle
Decisions should be made holistically, recognizing that decisions have local as well as cross-disciplinary impacts
Purpose of Strategic Processes
Define and deploy business strategies
Purpose of Operational Processes
Deliver value to internal and external customers
The maximum output rate that a process can achieve under ideal conditions is...
Design Capacity
Customer of Choice Matrix - High Attractiveness and Low Profitability
Development
In process mapping, which symbol indicates a decision?
Diamond
True or False: There is a standard amount of inventory turns that is considered good, regardless of industry
False
The following are elements of what stage in the BP Process? - Situational analysis: Part 1 - Supplier orientation - Project selection - Baseline performance - Situation analysis: Part 2 - Set improvement goals - Generate ideas - Develop action plan - Implement plan
Do Stage
Dimensions of Product Quality - Conformance
Does the product conform to design specifications?
Dimensions of Product Quality - Reliability
Does the product consistently perform as it is supposed to over time?
Dimensions of Product Quality - Performance
Does the product do what you want it to do?
Dimensions of Product Quality - Aesthetics
Does the product look, sound, taste, or smell the way it should?
Dimensions of Product Quality - Features
Does the product possess the features you are looking for?
Lean Principle - Low Inventory
Don't have a hug amount of inventory tying up assets that you have to sell-off if the environment changes
In process mapping, the following denotes arrival into the process:
Double arrow
The quality dimension that describes how long the product will perform and under what conditions
Durability
The output rate of a process during normal conditions is...
Effective Capacity
Organized work is both...
Efficient and Flexible
Lean Principle - Zero-Waste
Efficient use of resource allows for lower prices to customer and/or higher margins, while maintaining excellent quality
Define Sort (Seiri)
Eliminate unneeded items from the area, organize and store the things that are not needed now. One of the 5 S's
Eliminating process waste includes...
Eliminating all activities that don't add value and increasing efficiency
Define Lean Practices
Eliminating all processes, steps, and materials that do not add value
_______ is/are an organizations most important asset
Employees
ISO Involvement of People Principle
Employees are your organization's most important asset, their engagement is key to success
Accounting is an example of what type of process?
Enabler Process
The following are examples of what type of processes? - Administration, accounting, call center, technical support
Enabler processes
Multi-Criteria Analysis - Quantifiable
Enables you to put value on subjective criteria
Manufacturing Example of Continuous Flow
Energy Plant
True or False: Caveat Emptor means let the seller beware
False - let the buyer beware
Negotiation is...
Expensive and Time consuming
Customer of Choice Matrix - Low Attractiveness and High Profitability
Exploitable
Reviewing the customer of choice matrix from a supplier perspective the _______ stage is one where you will keep the customer as long as profits stay high and service requests are minimal
Exploitable
Which of the following is the most expensive cost of quality?
External Failure Costs
True or False: A kaizen event is a one-time event for any given process
False
True or False: As a purchasing manager, you should spend the same amount of time and effort on each purchasing decision
False
True or False: As a purchasing professional you can trust your suppliers to bid you the right capabilities at the right costs
False
True or False: As an exploitable customer of routine buys you are confident in the supplier's pricing strategy
False
True or False: During the source stage of strategic sourcing, you select the source.
False
True or False: If we have more in inventory from one alternative vs. the other when considering outsourcing, that is irrelevant
False
True or False: If you don't want your supplier to be too dependent on your business, you might want to go with a smaller supplier
False
True or False: In the metaphor of the bottle for theory of constraints, to get water to flow out at a faster rate, you need to make the neck more narrow
False
True or False: Inventory should be used as an insurance policy in case something goes wrong
False
True or False: Lean principle is to always have extra inventory to make sure we never run out of product for our customer
False
True or False: Multi-criteria analysis is only helpful in supplier decision-making and not in other areas of the business
False
True or False: Quality must be defined by engineers. They are the only one who know what it means to be fit for use
False
True or False: Routine buys are not important
False
True or False: TCO analysis should be used for all purchase decisions
False
True or False: The most important thing to consider in a total cost of ownership analysis is the product cost
False
Supplier Selection Criteria - Cultural Fit
Good partners get along, assess fit and if you share common values and systems
Define Standardize (Seiketsu)
Have regulated processes and procedures to maintain workplace order, ease training of new people. One of the 5 S's
Define Simplify (Seiton)
Having a logical place where everything belongs - I.e., a place for everything and everything in its place. One of the 5 S's
Lean Management
Helps you maximize customer value by eliminating process waste, wherever it is found
You'll make better decisions if you think...
Holistically, identifying and comparing the key relevant costs
Service Example of Job Shop
House Repair
Dimensions of Service Quality - Reliability
How dependably can the service provider provide promised service?
Market Complexity Measures...
How difficult it is for you to guarantee a reliable, uninterrupted flow of supply at an affordable price
Takt Time tells us:
How frequently a finished unit needs to come off the line to meet our demand
Dimensions of Service Quality - Assurance
How knowledgeable and courteous are the service employees and how well do they convey trust and confidence?
Dimensions of Product Quality - Durability
How long will the product perform or last, and under what conditions?
Category Importance is based on...
How much impact the category has on your performance
Dimensions of Service Quality - Tangibles
How pleasing is the appearance of the physical facilities, equipment, personnel, and communication materials?
Define Value Proposition
How the company competes; that is, why do customers buy from you versus a competitor
Dimensions of Service Quality - Empathy
How well does the service provider provide caring, individualized attention to its customers?
Dimensions of Service Quality - Responsiveness
How willing, able, and promptly is the service provider to help you?
By investing in prevention and appraisal costs, your real goal is what?
Identify and eliminate the causes of problems before they occur
Supplier Selection Criteria - Responsiveness
If your needs change quickly, you need to assess suppliers' ability to act on your changing needs. You need to evaluate their commitment to you as a customer
BP Process - Do
Implementation of the plan
Standard work best describes...
Implementing the same best practices around the organization
The Following Options depict what? 1) Change the specification 2) Modify the process 3) Outsource
Improving Process Capability
Define Consideration
In order to meet the other conditions of the contract, something of value needs to be exchanged
Process Map Symbols - Double Arrows
Indicate arrival into process
Process Map Symbols - Single Arrow
Indicate process direction flow
Process Map Symbols - Triangles
Indicate waiting
Define Procure-to-Pay (P2P)
Integrated process from placing an order through receipt of goods/services to supplier payment
What does ISO stand for?
International Organization for Standardization
Competitive Bidding
Involves soliciting formal "bids" from potential suppliers. When bids are submitted, you analyze the bids and select the supplier that best meets your needs
Multi-Criteria Analysis - Intuitive
Is a great communication tool
Dimensions of Product Quality - Serviceability
Is the product relatively easy to maintain and repair?
Which process design has: - Jumbled Flow - High Flexibility - High Labor Expertise - High Variety - Low Volume
Job Shop
You produce distinct, low-volume orders. Each job follows a unique route through different processes, you need general purpose equipment and highly skilled and flexible employees
Job Shop
When searching for a supplier - Options may be confusing
Just as the gold and silver caskets display promising inscriptions, suppliers often promise what they think you want to hear
A ______ is a concentrated effort over a small # of days to focus on improving a process through waste reduction and quality improvement
Kaizen
A means of visually communicating what is needed between various stages of production. It could be a card, an empty tray that needs to be filled to pull inventory through the system
Kanban
Customer of Choice Matrix - Exploitable
Keep business as long as service requests aren't too high. Maintain premium pricing
KISS Principle
Keep it Simple and Straightforward
A valuable tools that can be applied to many complex decisions. It is most applicable to solving problems that are characterized as a choice among alternatives.
Multi-Criteria Analysis
What type of cost(s) is a subset of total cost of ownership analysis?
Landed costs
ISO Process Approach Principle
Leaders should focus on managing processes as well as the inputs and outputs that tie these processes together
The following are the steps to what? 1) Look through they eyes of the customer 2) Eliminate Process Waste 3) Eliminate Wasted Time and Space 4) Repeat
Lean Institute and Toyota Production System
This helps you maximize customer value by eliminating process waste, wherever it is found
Lean Management
The following are ways __________ help you: 1) Organize your operations 2) Discover the root causes of operating problems 3) Ideate and implement solutions 4) Eliminate Waste
Lean Processes
Strategic Era - 1985-1995
Lean management makes purchasing quasi-strategic
The supplier selection process helps you...
Narrow down your potential supplier pool to a small set of suppliers you want to buy from
A purchase where there are a large number of competitive suppliers and you buy a fairly large amount relative to the market would most likely be classified as...
Leverage
What items are a buyer's dream?
Leverage
What items do you buy in large volumes from stable supply markets?
Leverage
You buy large volumes from competitive, low-risk supplier markets is an example of which SSM buy type?
Leverage
SSM - High Importance and Low Complexity
Leverage Buy
Define Supplier Scorecard
Like a report card, it's a tool that measures and displays supplier performance along criteria that you select
Delivery is an order ________
Loser
Price is often an order ______ - if a supplier can't meet your needs, you disqualify it from further consideration
Loser
Quality is an order ________
Loser
Not having huge amount of inventory tying up assets describes which lean operation competitive advantage?
Low Inventory
Manufacturing Example of Job Shop
Machine Shop
Broken Equipment would fall under which of the causes of process variation?
Machines
In the SCOR Model, Lean Operations is represented by what?
Make
In the SCOR Model, Quality is referred to as...
Make
Lean is part of the _____ process category of the SCOR model
Make
On the SCOR Model, Process Design is represented as what? a) Plan b) Source c) Make d) Deliver e) Return f) Enable
Make
Supplier Selection Criteria - Cost Structure
Make sure your supply partners possess competitive structures if you're looking for a long-term partner
The definition of overproduction in the 8 wastes refers to...
Making more than the customer wants or than you have demand for
8 Wastes - Overproduction Definition
Making more than the customer wants or than you have known demand for
Define Overproduction
Making more than the customer wants or than you have known demand for. One of the 8 wastes
Define Lean Six Sigma
Management system aimed at removing waste (and improving performance) collaborative efforts
Constrained Capacity
Market demand exceeds a supplier's capacity
During WWII, ______ increased the emphasis on purchasing
Materials shortages
Clerical Era - WWII
Materials shortages increase emphasis on purchasing
Goal of Theory of Constraints
Maximize throughput while minimizing inventory and operating expense
What is the goal of theory of constraints?
Maximize throughput while minimizing inventory and operating expense
Appraisal Costs
Measuring and monitoring activities
What is a reason a company would have multiple suppliers?
Mitigate supply risk
Define Start-Up Costs
Money needed to get a new supplier on board to produce your products (also called switching costs)
A smaller supplier is ________ likely to be highly responsive to your needs
More
International suppliers are inherently ______ risky
More
Negotiation
More expensive than bidding. You do this when your buying scenario is more complex or uncertain, but only after you have narrowed your supplier pool down to a small set of high-performing suppliers
Working directly with each manufacturer requires you to invest ________
More resources in supplier selection and management
Moving the printer closer to my office chair is an example of reducing what waste?
Motion
What is The Institute for Supply Management (ISM)?
One of the oldest and largest professional associations for purchasing professionals
The following are examples of what type of processes? - Sourcing, innovation, quality, customer relationship management, demand management, production, etc.
Operational Processes
Which of the 3 processes involves carrying out the visions of the business?
Operational processes
Define Purchase Order
Order formally placed with external supplier. Typically comes from purchasing personnel - if not, it may be an example of maverick spend
ISO Leadership Principle
Organization should have clear objectives, employees should be actively involved in achieving them
ISO Customer-focused Principle
Organization should understand customers and seek to meet, and exceed, their expectations
As you decide what to make and what to buy, you determine your company's strategic capabilities - and its future
Organizational Scope
The act of obtaining goods or services from a supplier in place of internal sourcing
Outsourcing
Strategic Era - 1995-2005
Outsourcing makes purchasing strategic
In process mapping, what symbol indicates an input or output?
Oval
Supplier Selection Criteria - Reach/Scalability
You need to evaluate the supplier's network and if your supplier can scale its operations to meet your needs
Quality is typically measured as...
Parts per million defective
The _______ process is critical
Payment
Service Example of Continuous Flow
Phone App
The following are elements of what stage in the BP Process? - Identify opportunity - Overview BP Process - Define Supplier role: ~ Full-time project leader - Dedicated war room - 50/50 savings sharing - Project schedule
Plan stage
What is an Example of a Leverage Buy?
Plastic bottles for companies like Pepsi
Process and systems put in place to help prevent mistakes
Poka-Yoke
Prevention Costs
Preventing or avoiding quality problems
Define Landed Costs
Price paid, plus all the costs (transportation, duties, handling) to get the items to the location where you need them.
Manufacturing Example of Batch
Printing Shop
The following depict what: 1) Unbalanced lines, supplier quality problems 2) Pilferage, damage, internal quality problems 3) Mismatches between supply and demand, changing demand patterns
Problems hidden by inventory
What is a tool to create process validity?
Process Mapping
Today, more than half of business executives report that ___________- is critical to their firms' competitive success
Process management
Mistake-Proof (Poka-Yoke)
Processes and systems put in place to help prevent mistakes. These are often visual reminders, such as colored outlines around walkways in plants for safety reasons
During what SSP stage begins as the contract is finalized
Procure Stage
Internal Failure Costs
Remedying defects before delivery to customer
External Failure Costs
Remedying defects discovered by customer
This process links a product's life cycle to the operations and supply chain management capabilities needed to produce the product
Product-Process Matrix
Just-in-Time manufacturing
Products are produced exactly at the time and in the quantity needed to meet customer demand
Purchasing spends a huge portion of most organization's money procuring goods and services. Every dollar you save goes straight to the bottom line
Profit-Leverage Effect
Translates the cost savings in purchasing to the sales equivalent required to have the same profit impact
Profit-Leverage Effect
Building a one of a kind output is an example of which process?
Project
You are building a one of a kind output where the outputs are truly customized, you work closely with customers and use flexible equipment. You plan and manage each project individually and independently
Project
Customer of Choice Matrix - Nuisance
Provide minimal service- you don't care if you keep this customer
Customer of Choice Matrix - Core
Provide outstanding service- you want to keep this customer!
The system where you only produce product when you have demand
Pull System
Making product when you only have demand is an example of this step in the continuous lean journey
Pull demand through the system
Demand _____ Inventory through the system
Pulls
Value creation begins with what?
Purchasing and Supply Management
Transactional Era - 1950s - Early 1970s
Purchasing becomes a managerial function
Clerical Era - Before World War II
Purchasing viewed as a clerical function
Quality is considered an order _______
Qualifier
What does quality mean to you?
Quality is in the eye of the beholder
Plan (Kaikaku)
Rapid change event to focus on evolutionary or large improvements. Larger effort with bigger effects over a longer period than Kaizen event
Conductor's baton (Takt Time)
Rate at which units need to be completed to meet customer demand. Calculated as: Available time for production / Required units of production
Self-Reflection (Hansei)
Recognizing and taking personal responsibility for a problem (vs. a problem in the process)
What SSP stage is defined by " You aren't done until you receive what you ordered and verify that the items are in good condition and that the invoice price matches the agreed-upon price
Reconcile and Pay
Goal of Six Sigma
Reduce Variation
Define Visual Management
Refers to efforts for "seeing" and making sense of an activity or process. See "Poka Yoke"
Which quality of product dimension would you be assessing when asking the question "Does the product consistently perform as it is supposed to over time?"
Reliability
When designing a process ____ are needed to make the process run smoothly
Resources
Creating a positive work environment creating longevity in employee retention describes which lean operation competitive advantage?
Respect for all employees
Short Takt Times help you...
Respond to changes in demand or to disruptions in the marketplace
Which quality of service dimension would you be assessing when asking the question "How willing, able, and promptly is the service provider to help you?"
Responsiveness
You need to minimize ________ to assure continuous, on-time delivery
Risk
You want to develop contracts that clearly define...
Roles and responsibilities
Most of your buys are __________
Routine
What items do you not spend much money on and the supply markets are straightforward?
Routine
You buy small volumes from competitive, low-risk supplier markets would be an example of which SSM buy type?
Routine
SSM - Low Importance and Low Complexity
Routine Buy
This selection process is simple, efficient, and fair.
Routine Buy
80% of your buys are what type?
Routine buys
Effective Purchasing/Supply Management - Technologies
You need to know how new technologies can help you re-design the purchasing process as well as how they can help you work better with suppliers
Purchasing Savings / Net Profit % = ?
Sales Increase Required
Transactional Era - 1973 - Mid 1980s
Scarcity/Inflation increase purchasing's visibility
If your initial analysis suggests that outsourcing is a good idea, you should perform a...
Sensitivity Analysis
Acquired inputs are often 30-40% of COGS for whom?
Service Companies
Which quality of product dimension would you be assessing when asking the question "Is the product relatively easy to maintain and repair?"
Serviceability
Stage 0 - Idea Generation
Share new product ideas
Process Map Symbols - Ovals
Show input to start the process or output at the end of the process
Process Map Symbols - Diamonds
Show points in process where yes/no questions are asked or a decision is required
Process Map Symbols - Boxes/Rectangles
Show tasks or activity performed in the process
If you want to be six sigma certified, what do you need to do?
Show you are an effective project manager and have participated in quality-improvement projects
The quick change over goal is referred to as SMED. This means...
Single-Minute Exchange of Dies
Six Sigma Certification - Master Black Belt
Six sigma technologist and internal consultant
Removing unneeded tools from a workstation is an example of what 5S phase?
Sort
Supplier selection is part of the _____ process category of the SCOR model
Source
What Strategy is Purchasing a part of? - Plan - Make - Deliver - Source - Return - Enable
Source
During what SSP stage do you identify potential suppliers, consider the type of relationship you need to establish with suppliers, and understand the total costs associated with buying the item
Source Stage
Horizontal Deployment (Yokoten)
Spreading information and processes that lead to improved performance across the organization
Lean Principle - The Customer Rules
Stay up to date with the customers' changing tastes and demand patterns
Effective Purchasing/Supply Management - Processes
You need to know the purchasing process inside and out. You also need to understand production processes - and other processes used by your firm to create value
Effective Purchasing/Supply Management - Suppliers
You need to know who can meet your buying needs
A critical buy is an example of what type of relationship?
Strategic Alliance
During which era did outsourcing make purchasing strategic?
Strategic Era
The following are examples of what type of processes? - Strategic planning: marketing, marketing research, planning and monitoring objectives, review the business strategy, monitoring of competitors, evaluation of customer satisfaction
Strategic Processes
This step-by-step process is used by companies around the world
Strategic Sourcing Process
You calculate effective capacity by...
Subtracting the lost production from design capacity
Which Buyer/Supplier Integration has the HIGHEST stage of integration?
Supplier-Integrated Manufacturing
This focuses your attention on the constraints - often referred to as bottlenecks - that affect your operations. By targeting constraints, you can improve throughput very efficiently.
The Theory of Constraints
Define Outsourcing
The act of obtaining goods or services from a supplier in place of internal sourcing. Only doing this if you could have / used to produce the good or service internally, and are now choosing to source from outside the company
The identification, acquisition, access, positioning, management of resources and related capabilities the organization needs or potentially needs in the attainment of its strategic objectives
Supply Management
Strategic Era - Tomorrow
Supply chain integration invites purchasing to C-suite
Purpose of Enabler Processes
Support strategic and operational processes
Available minutes for production / Required units of production = ?
TAKT Time
What is used to reduce and balance cycle times?
TAKT Time
The pace where output meets demand
TAKT time
Available minutes for production / Required units of production =
Takt time
_______ is an example of an enabler process
Technical support
Supplier Selection Criteria - Delivery
The 3rd of the "Big 3" selection criteria. Often measured as percent on-time or in terms of lead time
Define Standard Work
The coping of what works (best practice) and spreading it to other areas of the organization. Like everything in lean, this is subject to continuous improvement
Define Cost of Goods Sold (COGS)
The cost to the company for goods that it sells, including purchased costs and internal value-added such as manufacturing labor and other manufacturing costs. For non-manufacturers, it is the amount that they pay for goods for resale
Staying up to date with the customers' changing tastes and demand patterns describes which lean operation competitive advantage?
The customer rules
Define Sensitivity Analysis
The formal process of asking the "what if..." questions in a decision-making scenario. Helps you identify the best option and make robust decisions; that is, decisions that are good across a variety of likely scenarios
Define Supply Management
The identification, acquisition, access, positioning, management of resources and related capabilities the organization needs or potentially needs in the attainment of its strategic objectives
Design Capacity
The maximum output rate that a process can achieve under ideal conditions
Capacity
The maximum output your process can consistently produce over a period of time under normal operating conditions
Insourced Warehousing Integration
You rely on the vast warehousing capabilities of companies like FedEx and UPS to flexibly manage distribution
When searching for a supplier - Things are not always what they seem
You too will need to look beyond the surface (beyond first impressions) to figure out each supplier's true capabilities
Define Days Inventory Outstanding (DIO)
The number of says of inventory you have on hand
Define Inventory Turns
The number of times per year you sell your inventory
Effective (Actual) Capacity
The output rate of a process during normal conditions
Define Not Utilizing Staff Talent
The practice of not challenging employees or listening to and encouraging their ideas. If this is blatant, employees can actually undermine a company's efforts to improve on the other 7 wastes. One of the 8 wastes
Define Supply-Base Rationalization
The process of (1) determining how many and which suppliers you should buy from as well as (2) defining the type of relationship you should build with each supplier
True or False: To calculate results you multiply the score for each criterion by the associated weight and add up the results
True
True or False: You need to evaluate services quality a little differently than you evaluate product quality
True
Throughput
The rate at which the entire organization generates money through sales for a product or service
Define Buyback Requirements
The requirement for the original seller to buy back its goods
Early Supplier Involvement in NPD Integration
The supplier is part of your NPD efforts n the very early stages, tapping into their expertise and optimizing product or service design
______ focuses on increasing throughput on bottlenecks
Theory of Constraints
The Real Place (Gemba)
They physical place where an activity is occurring, such as the shop floor
Your goal in the Procure Stage of the SSP is...
To effectively manage and measure the supplier
A smaller supplier might be ______ dependent on your business
Too
True or False: When a supplier continuously overpromises and underperforms, you should probably switch supplier for a more competitive option
True?
Purchasing Consortium
Two or more organizations that join together for the purposes of leveraging their combined spend volume to generate advantageous pricing and service conditions from suppliers
Collaborative Forecasting Integration
You work together with your supplier to develop a joint demand forecast, enabling both sides to plan better
An approach that goes beyond measuring price to consider all of the associated, and often hidden costs, of doing business with a particular supplier, or the cost of purchasing various options, such as using alternate processes, or insourcing vs. outsourcing
Total Cost of Ownership (TCO)
The international Organization for Standardization (ISO) built its quality certification ISO 9000 on which core principles?
Total Quality Management (TQM)
Lean was started as:
Toyota wanted to emulate Ford's efficiencies without huge inventory build-up it saw at Ford
A routine buy is an example of what type of relationship?
Transactional Relationship
Define Profit-Leverage Effect
Translates the cost savings in logistics to the sales equivalent required to have the same profit impact
In process mapping, which symbol indicates waiting?
Triangle
True of False: Prior to WWII, purchasing was primarily a clerical function in most organizations
True
True or False: A $ saved in purchasing cost cutting efforts goes directly to the bottom line
True
True or False: As a core customer you and a highly capable/desirable supplier are a good match
True
True or False: Constantly getting better through continuous improvement is an important step on the lean journey
True
True or False: Fixed costs represent costs that will remain even after we stop a particular process or activity
True
True or False: If a single point on a control chart is outside of the control limit it is considered out of control
True
True or False: If a supplier is better at making a particular product, you should consider outsourcing
True
True or False: Multi-criteria analysis is a tool that helps you compare "distinctly different" options
True
True or False: Multi-criteria analysis is an intuitive tool that helps you select the right supplier. One of the strengths of multi-criteria analysis is that is enables you to "quantify" qualitative decisions
True
True or False: Multifunction workers are generally more satisfied with their jobs than those trained to work on in a single job
True
True or False: Not all supplier relationships are of equal importance
True
True or False: Outsourcing just means that you are buying something instead of making it
True
True or False: Purchasing consortiums are a good way to aggregate buys and gain industry intelligence
True
True or False: Purchasing savings can have a huge impact on the firm's profit leverage
True
True or False: Quality has more influence on a company than any other value-added dimensions
True
True or False: Selecting the right suppliers is your most important job
True
True or False: Sensitivity analysis in the outsourcing decision can include both hard and soft costs
True
True or False: The Honda BP Program is a type of supplier development
True
True or False: The core objective in six sigma is to reduce variation in processes
True
True or False: The global market often offers more qualified suppliers
True
Purchased inputs are about 50-80% of cost of goods sold (COGS) for who?
Typical manufacturer
Six Sigma Certification - White Belt
Understand basic six sigma concepts
Multi-Criteria Analysis - Applicable
Use it in any situation where you have to compare alternatives
Bid/Negotiate and Contract - Strategic and Bottleneck Items
Use negotiation to help you and the supplier understand each other's needs and come to a better deal
How is the statistical concept of six sigma used?
Uses tools to help you identify which type of variation is present in your processes as well as how to address that variation to improve your process
This causes a process to produce defects, errors, and waste
Variability
Six Sigma is built on which very critical fact?
Variability in a process produces defects, errors, and waste
Which quality guru is responsible for the 4 step - Plan, Do, Check, Act - cycle that is used by almost every global manufacturer today?
W. Edward Deming
When searching for a supplier - Your decision process matters
You need to ask the tough questions and do your homework to get the right answer
Goal of Lean Management
Waste Reduction
Goal of TAKT Time
We need to produce at a pace that creates enough output to meet our demand
Facts (Genjitsu)
What is actually happening in a given location
Define Local Content
When a foreign company makes products in a country, this is the materials, parts, etc. that have been made in that country rather than imported. A minimum level of this is required to obtain favorable tariff/tax treatment
Wasteful Inconsistency (Mura)
When processes are not standardized, it creates muri waste due to inconsistent handling and variation in processes
Strategic Sourcing Process - Analyze Stage
Where you do your up-front homework
Real measure of Quality...
Whether or not a product or service lives up to customer expectations
Social Responsibility
Who you buy from and how you buy can make the world a better place
Vendor Managed Inventory Integration
You let your supplier take care of your inventory levels for their products (they decide when to reorder more)
Effective Purchasing/Supply Management - Resources
You need to "everything" about what you are buying - Where is it made? - Is supply available? - Are any new materials emerging? - What are the risks?
Statistically, six sigma performance produces fewer than ______ defects per million opportunities for an error for defect a) 3.4 b) 5.6 c) 4 d) 6
a) 3.4
When comparing costs for the outsourcing decision, compare ______ for the best results: a) Cost to make less fixed costs remaining after outsourcing vs. TCO b) Landed cost vs. Cost to make including freight c) Price vs. Internal cost to make d) Cost to make less fixed costs remaining after outsourcing vs. price
a) Cost to make less fixed costs remaining after outsourcing vs. TCO
As companies started to seek scale economies and efficiency, their goal was to take advantage of ________ in functional areas a) Deep skills b) Common costs c) Activity based costing d) ABC classification
a) Deep skills
A customer that is exploitable... a) Has to pay premium pricing b) Has relatively high value to the business c) Has high attractiveness to the supplier, particularly with a long-term perspective d) Is a good long-term partner
a) Has to pay premium pricing
During which step of the strategic sourcing process do you actually purchase items you have contracted for? a) Procure b) Reconcile and Pay c) Bid/Negotiate and Contract d) Source e) Plan
a) Procure
Which of the following processes has the highest degree of customization? a) Project b) Job Shop c) Continuous Flow d) Batch e) Assembly Line
a) Project
Your job is to constantly improve, aggressively removing one constraint and then moving on to the next. This describes which of the 5 focusing steps of Theory of Constraints? a) Repeat b) Elevate c) Subordinate d) Exploit e) Identify
a) Repeat
Which is NOT part of the 4-step process for applying bottleneck analysis? a) Run a diagnostic b) Calculate activity times c) Determine bottleneck impact d) Determine target values e) Map the process
a) Run a diagnostic
As a purchasing professional, what is your most important decision? a) Monitor inventory b) Choosing the right supplier c) Getting the lowest price d) Check deliveries for accuracy e) All of the above
b) Choosing the right supplier
Which of the following is not one of the 4 reasons to include a multi-criteria analysis in your toolkit? a) Disciplined b) Comprehensiveness c) Quantifiability d) Intuitiveness e) Applicability
b) Comprehensiveness
A strategic alliance is most likely in which spend category? a) Leverage b) Critical c) Routine d) Bottleneck
b) Critical
Which of the following is step 3 of the 30-step proven path to employing the process improvement trio? a) Apply the Theory of Constraints to identify where you will get the biggest bang for your buck b) Employ Six Sigma to reduce process variation at the bottleneck and to control the process moving forward c) Drive development of next-generation equipment d) Implement lean techniques to reduce waste at the bottleneck
b) Employ Six Sigma to reduce process variation at the bottleneck and to control the process moving forward
Which of the 3 processes involves maintenance or control over the processes? a) Operational processes b) Enabler processes c) Strategic processes d) Human processes
b) Enabler Processes
What type of cost might still remain after you outsource an item? a) Processing labor costs b) Fixed overhead costs c) Variable plant costs d) Materials costs
b) Fixed overhead costs
You are responsible for buying an item that has many capable and competent suppliers available and your spend is quite large for your company. How would this item be classified on the strategic sourcing matrix? a) Routine b) Leverage c) Critical d) Bottleneck
b) Leverage
Which of the following is not one of the 4 steps in the supplier selection process? a) Performance monitoring b) Negotiation c) Evaluation d) Approval e) All of these are steps in the process
b) Negotiation
In the SCOR Model, Supplier Selection is represented by: a) Plan b) Source c) Make d) Deliver e) Return f) Enable
b) Source
A leverage buy is one where there is: a) Unique, value-added suppliers b) You spend enough money to generate supplier competition for your business c) High risk d) You want to have the maximum number of suppliers possible in order to get competition
b) You spend enough money to generate supplier competition for your business
Which of the following are NOT part of the process-improvement trio? a) Lean Management b) Six Sigma c) ABC Classification d) Theory of Constraints
c) ABC Classification
Which of the following is NOT a process design? a) Job process b) Continuous process c) Bulk process d) Line process
c) Bulk process
An item that is purchased that has many supplier available and is of low importance to your organization should have the following selection process characteristics: a) Detailed b) Thorough c) Efficient d) Interactive e) None of the above f) All of the above
c) Efficient
Bottlenecks can usually be easily spotted. The are always busy, with no idle time. Work typically piles up in front of them. Subsequent activates are usually waiting on output from the bottleneck. This describes which of the 5 focusing steps of Theory of Constraints? a) Subordinate b) Repeat c) Identify d) Elevate e) Exploit
c) Identify
Which of the following is not a step in the supplier selection process? a) Supplier evaluation b) Supplier approval c) Identify procurement cycle d) Performance monitoring
c) Identify procurement cycle
"People" are what part of the process? a) Outputs and flows b) Resources and outputs c) Inputs and resources d) Flows and resources
c) Inputs and Resources
The reconcile and pay process: a) Is not a purchasing responsibility b) Is a highly manual process c) Is also called Procure-to-Pay d) May build in extended payment terms that the supplier loves
c) Is also called Procure-to-Pay
When it comes to negotiations, it is important to know that: a) Contracts are always very complex and time consuming b) They are never a win win situation c) Knowledge is power d) Getting the best price is paramount
c) Knowledge is power
Bid/Negotiate and Contract - Leverage Items
competitive bidding is appropriate, the buy is straightforward, and the risk is low
The Strategic Sourcing Matrix: a) Is used to segment purchases b) Is widely used in practice c) Considers the importance of the category and the complexity of the market to classify purchases d) All of the above
d) All of the above
To achieve quality at the source, you need to focus on which of the following? a) Prevention b) Personal Responsibility c) Standardization d) All of the above
d) All of the above
What factors should you evaluate when considering outsourcing? a) Whether the item is strategically important to you b) How good you are at making the item vs. how good suppliers are at making it c) The total cost of ownership of the item compared to the cost to make the item internally d) All of the above
d) All of the above
What is process? a) Set of activities b) Helps accomplish specific objectives c) Represents the way the organization executes work d) All of the above
d) All of the above
Which of the Process Improvement Trio should be employed first? a) Lean b) Six Sigma c) Theory of Constraints d) All of the above, you should employ them all at the same time
d) All of the above, you should employ them all at the same time
Critical Items are: a) You want to generate a high amount of market competition b) Are straightforward markets c) Suppliers are fairly interchangeable d) Also called strategic items
d) Also called strategic items
Bottleneck Buys: a) Are a food place to focus on cost reduction b) Have sudden price spikes or supply disruptions c) Represent a large dollar volume d) Are difficult to manage because there are few options
d) Are difficult to manage because there are few options
Leverage Purchases: a) High volume, High complexity b) Are an example of the KISS principle c) You don't have to worry about a sudden price strike d) Your best opportunity to really save money and a buyer's dream
d) Best opportunity to really save money and a buyer's dream
Market complexity is relevant to strategic sourcing because: a) It concerns risks in the market place b) It asks you to look at the competitive landscape of the supply market c) It is one step in the strategic sourcing process d) Both A and B
d) Both A and B
Reasons that those employed in purchasing need to understand processes is: a) To understand the purchasing process b) To understand the manufacturing process c) Understanding processes is over-rates d) Both A and B
d) Both A and B
Which of the following is one of the 7 rights of purchasing? a) Getting the right material b) Getting the right price c) Getting material from the right supplier d) Both A and C
d) Both A and C
Which of the following statements is correct? a) Landed costs include TCO b) TCO includes landed costs c) You should use landed cost analysis for all purchase decisions d) Both b and C
d) Both B and C
The number of meals served by a restaurant during lunchtime is an example of what? a) Hurdle Rate b) Infinite Loading c) Inventory d) Capacity
d) Capacity
Documenting each work station works relatively independent of the others and batching orders led to extensive work in process buffers between stations is an example of this step in the continuous lean journey
map the value stream