SCM 301 FINAL CH 7
purchase order
a document that authorizes a supplier to deliver a product or service
total cost analysis
a process by which a firm seeks to identify and quantify all major costs associated with various sourcing options
profit leverage effect
a term used to describe the effect of $1 in cost savings increasing pretax profits by $1 and a $1 increase in sales increasing pretax profits only by $1 multiplied by the pretax profit margin
supply management
broad set of activities carried out by organizations, develop sourcing strategies, select suppliers, and carry out all the activities required to procure good and services
brand
description by _____ is used when a product or service is proprietary or when there is a perceived advantage to using a particular supplier's products or services
market grade
description by ______ _____ is used when requirements are well understood and there is a common agreement between supply chain partners about what certain terms mean
conduct supplier selection
fifth step in strategic sourcing process
assess opportunities
first step of strategic sourcing process
screen suppliers (and create selection criteria)
fourth step in strategic sourcing process
make v buy decision
high-level and often strategic decision regarding which products or services will be provided internally and which will be provided by external supply chain partners
strategic sourcing process
identifying ways to improve long-term business performance by better understanding sourcing needs, developing long-term sourcing strategies, selecting suppliers, and managing the supply base
ordering, follow up, receipt and inspect, settle and pay, record maintenance
procure to pay cycle steps
industry analysis
profiles the major forces and trends that are impacting an industry, including pricing, competition, regulatory forces, substitution, technology changes, and supply/demand needs
earnings/sales
profit margin =
COGS
purchased cost of goods from outside suppliers
bottleneck quadrant
quadrant in portfolio analysis where products/service have unique or complex requirements that can only be met by a few potential suppliers
routine quadrant
quadrant in portfolio analysis where products/services are readily available and represent a relatively small portion of a firm's purchasing expenditures
critical quadrent
quadrant in portfolio analysis where products/services have complex or unique requirements coupled with a limited supply base that can represent a substantial level of expenditure for the sourcing form
leverage quadrant
quadrant in portfolio analysis where products/services tend to be standardized and readily available and represent a significant portion of spending
RFI
request for information, an inquiry to a potential supplier about that supplier's products or services for potential use in the business
earnings/assets
return on assets =
profile (internally and externally)
second step of strategic sourcing process
procure to pay cycle
set of activities required to first identify a need, assign a supplier to meet that need, approve the specification or scope, acknowledge receipt, and submit payment to supplier
negotiate and implement agreements
sixth (and final) step in strategic sourcing process
cross sourcing
sourcing strategy where a company uses a single supplier for one particular part or service and another supplier with the same capabilities for a different part or service, with the understanding that each supplier can act as a backup for the other supplier
multiple sourcing
sourcing strategy where buying firm shares its businesses across multiple suppliers
single sourcing
sourcing strategy where the buying firm depends on single company for all or nearly all of a particular item or service
dual sourcing
sourcing strategy where two suppliers are used for the same product or service
portfolio analysis
structured approach used by decision makers to develop a sourcing strategy for a product or service, based on the value potential and the relative complexity or risk represented by a sourcing company
statement of work
terms and conditions for a purchased service that indicate, among other things, what services will be performed and how the service provider will be evaluated
spend analysis
the application of quantitative techniques to purchasing data in an effort to better understand spending patterns and identify opportunities for improvement
1. assess opportunities 2. profile internally and externally 3. develop sourcing strategy 4. screen suppliers, 5. conduct supplier selection 6.negotiate and implement agreements
6 steps of the strategic sourcing process
develop sourcing strategy
third step of strategic sourcing process
cost-based contract
type of purchasing contract in which price of a good or service is tied to the cost of some key inputs or other economic factors, such as interest rates
fixed price contract
type of purchasing contract in which stated price does not change, regardless of fluctuations in general overall economic conditions, industry competition, levels of supply, market prices, or other environmental chANGES