SCMT 489: Purchasing and Supply Management Exam 2 Chapter 11,12,13

70-30 Approach: A common approach to multiple sourcing that can yield many of the benefits of single sourcing is the "70-30" approach. This approach is where 70 percent of a buyer's sales volume is awarded to a ___ supplier, and 30 percent to a second supplier. Economies of scale are obtained from the "__ supplier", while the "___ supplier" provides competition. ***

Single, Big, Little

Teacher Note: Many countries tell companies that if they want they country to buy their products then they are going to have to ____ some of their parts for their product from their country. They want to support their local economy.

Source

Responsibility for Source Selection: Who normally has the final say when determining who to source products from?

A company's purchasing department, however in highly technical products, a company's engineers will sometimes pick suppliers.

ADDITIONAL TERMS

ADDITIONAL TERMS

APPENDIX A

APPENDIX A

Teacher Notes: __ ____ - ahead of time, set certain expectations, go on a random basis and select a certain number of units and test them and if there are certain amount of defective parts, then you may reject the order.

Acceptance Sampling

Receivable to Sales = ? ***

Accounts Receivable/ Sales

Teacher Notes: An ___ cost would be like the initial price for a car and all of the various fees associated with buying a car( registration, state taxes).

Acquisition

Management means ___ management and not ___ management.

Active, Passive

Teacher Notes: ABC costing identifying ___ that are invoked in estimating a cost for a cost object.

Activities

Import Duties: An ___ ____ ___ is the most common type of import duty. This type of duty would be a certain percentage of the appraised value of a specific merchandise(such as 5%). *****

Ad Valorem Rate

Potential Problems with Global Sourcing: Higher Costs of Doing Business: The need for translators, communication problems, and the distances involved in making site visits, and so on, ____ to the cost of doing business with global suppliers. ********

Add

Global Trade Intermediaries: ___ or ____ are roughly the same thing as a commission house except they work for the actual exporter instead of just acting for them like commission houses do. *****

Agents, Representatives

Appendix B pg268 ****

Appendix B pg268 ****

Sales Personnel are excellent source of information about suppliers and materials. Not only are they usually well informed about the capabilities and features of their own products, they are also familiar with similar and competitive products. Because of their specialized knowledge, salespeople often can suggest new _____ for their products which will eliminate the need to search for new suppliers.

Applications

______ are used in aiding the production outside of a buying firm's country and are provided by the buying firm. Koufteros said that this would be like a buyer helping a supplier wit the production of their products. ****

Assists

An ____ is when someone has a product that they want to sell, and they say what the minimum price to sell their product will be and they say when the closing date for selling this product will be. Ebay is an _____.

Auction, Auction

A process control chart tells you what is happening in a process. It will tell you how off your process is on ___.

Average

CounterTrade Definitions: ____ is when goods are exchanged for other goods with no money involved. This is the ___ form of countertrade. If goods are ___ to save on transportation costs, the arrangement is called a ____. ***

Barter, Simplest, Bartered, Swap

Teacher Notes: More Advanced Technology: ___ ___ is what most professors do in anticipation that someone will apply what they just did(just an idea). _____ ____ is when a professors idea's are applied and used (sometimes other countries can be better at this than our domestic country).

Basic Research, Applied Research

Teacher Notes: A ____ NPV means the more attractive your investment. Don't invest if your NPV is below ____.

Bigger, Zero

Teacher Notes: A ____ __ ___ is pretty much a receipt that is issued by a carrier for moving merchandise. This document will always list out all of the items ships, the fees associated, and the other cost involved with shipping the product. A ___ __ ___ is the document that you can use to make claims against your transportation carrier. You will need this document to determine who is liable for damages to your product.

Bill of Lading, Bill of Lading

A ___ ___ ___ is a receipt issued by a carrier for merchandise. These are a contract for ___ of merchandise, a receipt for merchandise, a document of freight ____, a list of handling instructions, and these may contain a title. *****

Bill of Lading, Shipment, Charges

ESI: If you involve your suppliers early in your product development process, this gives your suppliers a feeling of ownership over your product, and you have your suppliers share some of the ____ if something were to go wrong.

Blame

What is another word for standard terms and conditions?

Boilerplate

Global Trade Intermediaries: ____ _____ usually act for exporters abroad, selling in the United States and receiving a commission for a foreign exporter. These _____ _____ generally do not have the goods billed to them, although they handle many of the ___, ____, and ___ details. *****

Commission Houses, Commission Houses, Selling, Shipping, Customs

Reverse auctions are typically used for ____ products, and Reverse auctions are very impersonal because they are done over the ____.

Commodity, Internet

Bidding Vs. Negotiation: The more standardized a product that you are going that you are going to be buying, then you should use ___ ____. If you are going to be buying a new, unique product , then you should use _____.

Competitive Bidding, Negotiations

Two -Step Bidding/Negotiation is seen in very ____ situations.

Complex

Import Duties: _____ ____ is a combination of an ad valorem rate and a specific rate. ****

Compound

Direct Suppliers: Payments: A bank that ___ a letter of credit assumes the risk. Suppliers want a ____ letter of credit. (ESSAY QUESTION)***

Confirms, Confirmed

Ethical Considerations: A ____ ___ ___ exists when supply managers must divide their loyalty between the firm which employs them and another firm. Such conflicts always should be avoided in all source section decisions. Companies can help to maintain an ethical work environment by having an ______ _____ with checks and balances. ***

Conflict of Interest, Ethical Infrastructure

Information Technology Capability Analysis: This would be like asking the question is this suppliers technology platform able to "connect" with our technology platform. If a supplier's technology platform cannot connect with a buyer's technology platform, then usually that suppler usually will not even be ____ to be used a supplier for the buyer.

Considered

Buying the wrong material, whether in quality, form, or design, can increase the cost of ___ (the application of direct labor and manufacturing overhead to direct materials to create a product or service). Material that is not optimized for the production process can increase labor and overhead use and thus, because throughput is decreased and the cost of maintaining the quality of the finished product is increased.

Conversion

___ ____ product would be a product which has ___ if any competitors. This type of product's price is based on a supplier's _____. ****

Cost Driven, Few, Costs

In contrast to competitive bidding, reverse auctions produce "real-time" interaction. Though effective ____ _____ come from reverse auctions, reverse auctions are not appropriate for all situations. Reverse bid processes can have an ____ effect on long-term relationships. ***

Cost Savings, Adverse

Inventory Turnover = ? ****

Cost of goods sold/ Average Inventory

TCO calculations include only ____ and not revenues. *****

Costs

CounterTrade Definitions: In a ______, unrelated goods are exchanged. ___'s usually involve ___ separate contracts. ****

Counter-purchase, Counter-purchase, Two

____ refers to any transaction in which payment is made partially or fully with goods instead of money. ___ links the sale of a product into a foreign country and the sale of goods out of that country. Many foreign governments may impose ____ requirements. ****

Countertrade, Countertrade, Countertrade

Process Capability ratio is symbolized by?

Cp

ESI: For a new product, the most ____ suppliers are the most critical to involve as soon as possible.

Critical

Evaluation Conference: For an extremely ___ purchase, a supplier evaluation conference is held at the supply manager's plant to discuss the purchase. From such a discussion, it is usually easy to differentiate among suppliers who understand the complexities of the purchase and these who do not. When those who do not are eliminated, the search for the right supplier is narrowed further.

Critical

Reasons for Global Purchasing: Superior Quality: A key reason for companies to use global sourcing is to obtain the required level of quality. Although this factor is declining in significance, supply managers in a variety of industries still look for global sources to fulfill their most ____ quality requirements. ___ has superior quality compared to a lot of other countries. ***

Critical, Japan

Concluding Remarks: TCO is an analytical tool and a philosophy. Accurate estimation of total costs requires a ____-functional approach. Supply management is a critical member of such a ___-functional approach. TCO is also applicable in one's private life enabling better decision making. ****

Cross, Cross

Direct Suppliers: Preparing for Direct Relations: Buyers should conduct significant preparation to make sure that they understand a supplier's ____ before beginning direct relations. Buyers should also use an ____ if there are significant language barriers between their language and a supplier's language. ****

Culture, Interpretor

Teacher Notes: Countertrade seems to be used with specific _____ that you really can't exchange/trade.

Currencies

Working Capital =? ***

Current Assets - Current Liabilities

Current Ratio = ? ***

Current Assets/ Current Liabilities

Some 75 percent of field failures in customer goods can be attributed to defects in purchased goods. Field failures lead to customer dissatisfaction. When a customer is dissatisfied with a product, he or she frequently shares that dissatisfaction with friends and acquaintances, some of whom may be potential customers. This flow of negative publicity frequently results in lost sales or _____ _____ ___.

Customer Dissatisfaction Costs

Reasons for Global Purchasing: Lower Total Costs: Sometimes it is cheaper for firms to buy materials from international suppliers than it is for them to purchase their product ______, but remember that total costs do not only just include acquisition costs, other costs must be taken into consideration such as transportation, inventory, quality, and disruption costs when considering the total cost for a product. ***

Domestically

Teacher Notes: Avoids Exchange Controls: This means that companies want to protect their currency so that it doesn't get ____. Companies do not want to send out too much of their money because that would result in their currency getting _____. ____ systems avoid this problem.

Downgraded, Devalued, Bartering

____ ___ would be like the costs of not producing a product for a few days while a machine is down. This costs would also be like the goodwill costs for customers that would be mad from late, or undelivered orders.

Downtime Costs

Teacher Notes: The ___ has problems because the interests of one country. does not always coincide with the interests of another country.

EU

What are some examples of additional strategic issues that buyers encounter when selecting sources of supply? *** (Do not memorize this entire list)

Early Supplier Involvement, Supply Base Reduction, Single Versus Multiple Sourcing, Share of Supplier's Capacity, Local, National, and International Sourcing, Manufacturer or Distributor, "Green" Supply Management, Minority-And Women-Owned Businesses, Ethical Considerations, Reciprocity

Facility Visits: By visiting a supplier's facility, a sourcing team can obtain firsthand information about the adequacy of a firm's technological capabilities, its manufacturing or distribution capabilities, and its management's. technical know-how and orientation. Depending on the importance of the visit, the company may send representatives form only supply management and ____ , or it may include some combination of representation from those functions and finance, operations, quality assurance, marketing, and industrial relations.

Engineering

Teacher Notes: ___ ___ wold like the costs associated with getting rid of a product in an environmentally friendly way.

Environmental Costs

Annuities are ____ payments. ***

Equal

UCL and LCL are created based on the history of your processes. These are developed though an ____ that you use, and they are not just a random guess.

Equation

Teacher Notes: Most countries in the EU support a single currency but some countries have not adopted the ______.

Euro

Bidding Vs. Negotiation: Suppliers must be qualified and want the contract in order to be able to engage in a buyer's competitive bidding process. You don't have to invite ____ supplier in an industry for your competitive bidding process. If you have a super small volume, then a company may not even want to even bid on your contract for a small volume of products. It may not be worth it to engage in a contract with you for such a small volume(it could cost more to create the contract for the supplier than for the actual profits that the suppliers may realize from producing the product.)

Every

ROP=?

Expected demand during LT + SS ( Sufficient to satisfy demand of LT)

Financial Condition Analysis: Preliminary investigation into a supplier's financial condition often can prevent the expense of further study. A qualified supply manager or professional from the ___department often conducts these investigations. A review of financial statements and credit ratings can reveal whether a supplier is clearly incapable of performing satisfactorily. Financial stability is essential for suppliers to assure continuity of supply and reliability of product quality.

Finance

When purchasing inventory and materials, opening new facilities, or investing in equipment, the acquisition team should consider the quantitative and qualitative costs of _____ alternatives, which are considered ongoing acquisition costs. A business can finance by using surplus cash, debt financing, or by equity financing. Each form of financing has it's own costs and benefits.

Financing

Teacher Notes: ____ ____ would bel like the interest costs that you would incur if you purchased a car on credit rather than paying for the car outright with cash.

Financing Costs

____ ____ is currency that is not associated to the U.S dollar. These types of currencies values are determined by the ______. The stability of these currencies is more questionable than with the stability of other types of currencies. ****

Floating Currency, Market

Potential Problems with Global Sourcing: Social and Labor Problems: Sometimes foreign suppliers can be engaging in practices that a domestic country's government or citizens do not like. This includes issues like sweatshops and the utilization of child labor in some facilities. Companies need to monitor their suppliers to ensure that their global suppliers are not engaging in these practices, since these practices can have adverse effects on a company. EX: ___ and apple. ****

Foxcon

Free of Duty Terms: GSP stands for and GSP really means? ****

Generalized System of Preferences and this basically means "duty free"

Teacher Notes: The EU attempted to men a sort of "common foreign policy", but ____ and the ___ usually call the shots for the EU. Smaller countries usually do not call the shots fo the EU.

Germany, UK

Supplier Base Reduction: John Deere cited that the increased leverage that they gained with suppliers by utilizing supplier base reduction resulted primarily from the increased volume of business with a supplier, which builds ___ and ____. ****

GoodWill, Trust

Teacher Notes: Marketing products in less developed countries: This would be like developing countries paying you cabs with ___ rather than with financial currency that they don't have.

Goods

The Solicitation: Once it has been decided whether to use competitive bidding or negotiation as the means of selecting the source, an ___ ___ ___(IFB) or a ___ ____ ___ (RFP) is prepared. The IFB or RFP normally consists of a purchase description of the time or service required, information on quantities, required delivery schedules, special terms and conditions. ***

Invitation for Bids, Request for Proposal

Direct Suppliers: Payments: A _____ letter of credit means that the letter of credit can not be canceled or modified without the consent of the beneficiary. _____ means that once issued, people can't return products, cancel them or modify them. Suppliers like this type of letter or credit because it is easy for them to deal with. (ESSAY QUESTION) ****

Irrevocable, Irrevocable

Direct Suppliers: Eliminating Intermediaries: After a buying firm has gained confidence in the quality of the imported materials and volume increases, the firm typically attempts to discontinue the use of global trade intermediaries for ___ procurements. Its major motivation is to avoid the intermediaries ___.

Major, Markup

___ ____ product would be a product whose prices are set by the ___ ____. For this type of product, a supplier cannot set a ___ price. EX: This would be like how ___ prices are set by the market. These type of products would be like steel or timber. *****

Market Driven, World Market, Higher, Commodity

Direct Suppliers: Exchange Rate: When the U.S dollar strengthens relative to foreign currencies, then foreign products are ___ desirable to U.S companies became it makes foreign products seem more affordable/cheaper to U.S companies.

More

Free of Duty Terms: MFN stands for and MFN really means? ***

Most Favored Nation. This really just means that a specific favored country's duty rates are lower than the full rates (statutory rates).

Teacher Notes: ____ is currently being renegotiated.

NAFTA

____ is a trade agreement between the U.S, Mexico, and Canada. ****

NAFTA

Local, National, and International Sourcing: A ___ ___ is a source headquartered within the country and has facilities in multiple regions of the country. These sourcing have operations and facilities in multiple regions of the country that they are headquartered in. ____ ____ tend to be larger companies than _____ ____. ****

National Source, National Sources, Local Sources

Import Duties: ____ ____ would be a specified amount per unit, such as $1,000 for a fur coat. This would really be a set price for a duty. ***

Specific Rate

Bidding Vs. Negotiation: You need to adequately describe your products in your ____ when you are conducting competitive bidding.

Specifications

Two-Step Bidding/Negotiations are used in situations where inadequate ____ preclude the initial use of traditional competitive bidding. ****

Specifications

Cp= ___

Specifications width/ Process Width

ESI: ___-___-___ approach is used when supply management doesn't involve other departments and has no communication with other departments in ______ development.

Over-the-Wall, Product

Manufacturers: A major problem in TCO analysis of manufacturers is accurate allocation of manufacturing ___. Most manufacturers use activity-based costing to improve ___ allocation. Activity-Based costing(ABC) is a technique for accumulating cost for a given cost object that represents the total and true ___ ___ required or consumed by the object. ****

Overhead, Cost, Economic Resources

___ ____ ___ would be like the costs associated with remedying products or services that are inadequate or defective. This would be like when Jeep had a defect in their cars where the brakes wouldn't work, and people died.

Product Liability Costs

Direct Suppliers: Dealing directly with a supplier usually results in the lowest _____ price, including transportation and import duties.

Purchase

___ ___ is just one component of a product's total cost. ****

Purchase Price

Teacher Notes: Some people make the mistake to only consider the ____ ___ when they are deciding to purchase a product. You need to look at the total cost involved in a product and not just it's _____ ____.

Purchase Price, Purchase Price

Direct Suppliers: Eliminating Intermediaries: Eliminating Intermediaries results in the lowest ___ price, but direct procurement requires extra cost beyond price. Eliminating intermediaries requires ____, this requires involvement of the company in ___ aspects of procurement. *****

Purchase, Knowledge, All

Teacher Notes: IF you are having problems with one of your suppliers in China, then you will not ____ a court case against your supplier if the court case occurs in China.

Win

Average Accounts Payable Period= ?****

(Accounts Payable/Purchases) * 365

Average Collection Period = ? ***

(Accounts Receivable/Sales) * 365

PV(Non-Annuity) = ???****

(FV/ ((1+r)^t))

What are the two types of Bill of Ladings? ***

1.) Ocean Bill of Lading, 2.) Airway Bill of Lading

What are five qualities of the EU? ****

1.) Common foreign policy(between all member countries), 2.) Single Currency (Euro), 3.) Central Bank(have a single central bank- The European Central Bank), 4.) ISO 9000:2000(International Standard for Quality), 5.) Reduced Red Tape

What are the four profitability ratios? ***

1.) Profit Margin, 2.) Gross Profit Margin, 3.) Return on Assets, 4.) Return on Equity

What are the three different types of Assists? ****

1.) Components (Subassemblies or parts in imported goods), 2.) Special Tooling (Tooling, Dies, molds, and equipment), 3.) Design Information

Teacher Notes: The Euro tends to be more stable than European countries ____ currency.

Original

Teacher Notes: The Chinese can build a ___ story hotel in ___ days. This way more advanced than what the U.S could do in the hotel building industry.

30, 15

Average Days in Inventory = ? ***

365/Inventory Turnover

R stands for? ****

Discount Rate per Period(Annual rate divided by the number of periods in one year)

Direct Suppliers: Qualifying Direct Suppliers: What are the two things that should be done to quantify a direct supplier? ****

1.) A country and region analysis, 2.) A financial condition analysis over a firm

What are the three components of Total Cost? (ESSAY QUESTION, Describe each)

1.) Acquisition Costs (Acquisition costs are the initial costs associated with the purchase of materials, products, and services. They are not long-term costs but represent immediate cash flows) , 2.) Ownership Costs (Ownership costs are the costs, after the initial purchase, associated with ongoing use of a purchased material or product. These costs can b like the cost for energy usage, and repairs) , 3.) Post-Ownership Costs (Post ownership costs would be like costs that are incurred after a firms ownership of a product, these costs would include like disposal costs, environmental costs, warranty costs, product liability costs, and customer dissatisfaction costs)

What are the three types of import duties? ****

1.) Ad Valorem Rate, 2.) Specific Rate, 3.) Compound Rate

Managing Suppliers: If suppliers are unlikely to meet a firm's future requirements, the firm may do what three things? ****

1.) Assist with financing/technological assistance with their supplier, 2.) Develop new sources of supply , 3.) Be required to develop the capability (that used to be done by a supplier) internally

What are six advantages of CounterTrade? ***

1.) Avoiding Exchange Controls, 2.) Selling to countries with inconvertible currencies, 3.) Marketing products in less-developed countries (This means that through countertrade, some countries with centrally planned economies are now opened up to business through countertrade), 4.) Reducing Risks with unstable currencies, 5.) Goodwill in foreign countries (Through countertrade, foreign government like their trade balances, and their hard currency amounts), 6.) Fuller use of plant capacity(Through countertrade, buyers can get longer sales contracts, which use their plant capacity better)

What are the four distinct definitions(Terms) for countertrade? ***

1.) Barter, 2.) Offset, 3.) CounterPurchase, 4.) Buy-Back/Compensation

What are the the 6 ways to Select suppliers? ****

1.) Bidding Versus Negotiation, 2.) Reverse Auctions, 3.) Two-Step Bidding/Negotiation, 4.) The Solicitation, 5.) Weighted-Factor Analysis, 6.) Responsibility for Source Selection

What are the seven advantages to local buying? ****

1.) Closer cooperations between the buyer and seller is possible (You can get your variable lead time to be smaller since your supplier is located in close proximity), 2.)Delivery Dates are more Certain (Since transportation is only a minor factory in delivery), 3.) Lower prices can result from consolidated transportation and insurance ( A local supplier in effect brings in many local buying firm's orders in the same shipment), 4.) Shorter Lead times reduce inventory (AKA: The seller is able to produce JIT since they are located locally), 5.) Rush Orders are filled faster (Since suppliers are closer, you can get your inventory faster), 6.) Disputes are more easily resolved, 7.) Implied social responsibilities to the community are fulfilled

Right after visiting a supplier facility, you need to ____ your experience before you forget anything.

Document

What are seven potential problems with global sourcing?****** (ESSAY QUESTION, ONLY NEED TO KNOW FIVE)

1.) Cultural Issues (Cultural issues can be a problem for global sourcing because of a wide variety of approaches to conducting business in different regions of the world, EX: Asian Countries emphasize gift giving in business which is way different than the United States), 2.) Long Lead Times (Sourcing outside of your domestic market can lead to long lead times due to variable shipping schedules, unpredictable time requirements from customs activities, the need for greater coordination of SCM, strikes by unions, storms at sea, and increased security procedures), 3.) Additional Inventories (Additional Inventories to compensate for traditionally longer lead times by procuring an item internationally can lead to higher inventory and inventory carrying costs), 4.) Lower Quality (Although most global suppliers are known for production high quality, sometimes lower quality can be an issue. Sometimes, global suppliers tend to be less responsive to design changes than domestic suppliers which can result in "off-spec" incoming materials for a buyer, which can cause potential rework or scraping, which could add substantial costs to a buyer), 5.) Social and Labor Problems (Increasing concerns over sweatshops and child labor is causing firms to look at their global suppliers to ensure that these things are not happening because these issues if discovered can lead to customer dissatisfaction and lost sales for the buyer) 6.) Higher Costs of Doing Business (The need for translators, communications problems, the distances involved with making site visits, and so on, add to the costs of doing business), 7.) High Opacity (Countries other than the U.S have higher opacities because the risks invoked in conducting businesses in these countries tends to be higher than that of the United States. Opacity looks at corruption in a country's government, laws governing contracts or property rights, economic policies, accounting standards, and business regulations. For example, China has a higher opacity because there is more bureaucracy in their government and their government tends to be more corrupt than the U.S)

What are three ways to reduce acquisition costs by minimizing taxes? ****

1.) Custom Duties and Tariffs (Focus on compliance to eliminate penalties and on planning to ensure that the proper Tariff classifications with the lowest rates are appleid), 2.) Regional Trade Agreements (Source and/or produce in free trade areas that reduce or eliminate duties on all or part of a product), 3.) Income-base shifting ( Use transfer pricing to shift income legally from high-tax areas to lower-tax areas)

What are the two measures of Long-Term Financial Strength? ****

1.) Debt to Equity Ratio, 2.) Times Interest Earned

Closing Remarks: With respect to global supply management, supply professionals must learn to do what six things? *****

1.) Develop a global supply management view, 2.) Learn to deal with changing global environments, 3.) Deal with diverse cultures effectively, 4.) Work within distributed organizational structures, 5.) Work with teams composed of global members, 6.) Learn to communicate effectively with cultural beliefs and values difference than their own.

What are the four steps to developing a Weighted Factor Analysis? ****

1.) Develop factors to serve as criteria, 2.) Develop sub-factors or performance factors, 3.) Develop a scoring factor (like will all scores be between 0-5 or 0-10), 4.) Score or evaluate the supplier

CounterTrade Definitions: What are the two different types of offsets? ***

1.) Direct Offset, 2.) Indirect Offset

What are the five Strategic Sourcing Plan Stages? ***

1.) Discovery, 2.) Evaluation, 3.) Selection, 4.) Development, 5.) Management

What are some questions to ask before a company should decide to use global suppliers? ****

1.) Does it qualify as high-volume in your industry? (AKA: is your sales volume enough to support your company going global), 2.) Does it have a long-life(two to there year)?(Will your global operations be long term or short term, this will determine how you will set up your global operations), 3.) Does it lend itself to repetitive manufacturing or assembly? ( Will you set up a large global operations to support repetitive manufacturing or will you just be using global sources as a one time only deal?), 4.) Is demand for your product fairly stable? (If you are going global, this is an important factor because you would rather have stable demand when going abroad so you can maintain stable inventories), 5.) Are specifications and drawing well defined? ( You want to clearly define everything with your global supplier so that you can avoid future errors, this would be like the ton to poundage ratio in the U.S versus other countries), 6.) Is technology not available domestically at a competitive price and quality? (Is it worth it to set up operations abroad? You will need to set up operations aboard, and In order to do so, you will need to set up foreign expertise. You need to think about all the risks that you are setting up for yourself by operating abroad. Is it worth it to just pay more for domestic operations than to assume all of the risks of going abroad?)

If the answers to all of the questions on on previous slide are yes, then the supply manager may want to evaluate the support network within his or her firm by asking the following six questions? *****

1.) Does sufficient engineering support exist to efficiently facilitate ECOs when they occur? (ECO stands for Engineering Change Order/Notice), 2.) Will the buyer be able to allow sufficient time to phase out existing "in the pipeline inventory"?, 3.) Will the supply manager's firm take the responsibility?(Will your firm take the responsibility to provide the necessary education and training for those who will have to interact and support foreign suppliers?), 4.) Is the firm prepared to make a financial commitment for expensive trips to the supplier?, 5.) Is management willing to change the approach of how business and transactions are conducted? ( This would be like asking if you are willing to be changing your payment terms, instead of like paying in 45 days to paying in 30 days), 6.) Is the buyer aware of the environment? (Are you aware of all of the rules, regulations, customs procedures, and other operating procedures that affect a foreign country?)

Bidding Vs. Negotiation:What are the five prerequisites to competitive bidding? *** (ESSAY QUESTION)

1.) Dollar volume must be large (The dollar volume of a specific purchase must be large enough to justify the expense, to both the buying and selling firms, that accompanies this method of source section) , 2.) Specifications must be clear(The specifications must be extremely clear, so that there is no confusion regarding any aspect of the contract or the product to be produced), 3.) Market must consist of an adequate number of sellers (Ideally, a competitive bidding process will result in 3-8 potential suppliers, so in general there should be at least 3 potential suppliers to warrant a buying firm to participate in the competitive bidding process), 4.) Seller must be qualified and want the contract (A Supplier must be qualified to produce the product in a contract and actually want to produce the product in a contract), 5.) Time available must be sufficient ( The competitive bidding process requires a large amount of time because suppliers(for large contracts) need time to obtain and evaluate bids from their subcontractors before they can calculate their best price for a contract. Thirty days is not an uncommon amount of time for a price response from a large supplier on a large contract)

Supplier Websites would be like a ___ actual website. Supplier websites are actually operated by suppliers.

Supplier's

What are the six costs associated with Ownership cost s? **** (ESSAY QUESTION, only need to know 5, Describe each)

1.) Downtime Costs (Downtime costs would be the costs associated with lost sales due to your machines being down, downtime costs would also be the loss of consumer goodwill resulting from late or no deliveries caused by downtimes), 2.) Risk Costs (This would be like the risks that a firm takes in either deciding to carry a large amount of buffer inventory or really no buffer inventory at all. Another example of these costs would be the risks associated with a buyer deciding to use a new supplier) , 3.) Cycle Time Costs (Being able to reduce a new product's time to market or increasing the number of items produced in an hour(throughput) will reduce your firm's cycle time immensely, which will increase your profitability and ROI through lower total costs) , 4.) Conversion Costs (Buying the wrong material, whether in quality, form, or design, can increase a company's cost of conversion greatly) , 5.) Non-value added costs (Non-value added costs are costs that simply produce no value for a firm when spend and only increase a firm's total costs, examples of these types of costs would include moving and stockpiling inventories due to poor factory layout, or poor scheduling. Another example would be when a firm maintains cumbersome operating procedures that duplicate efforts and steps for no apparent reason) 6.) Supply Chain Costs (There are various ways for a company to improve their supply chain costs, one example would be for a firm to improve their customer demand forecasting to better improve scheduling , which can result in less costs for a company in the long-run)

What are the four National Buying Advantages?****

1.) Economies of Scale(serve the general population and have a better economy of scale than local suppliers in some instances), 2.) Superior Technical Assistance (Better technology than local firms) , 3.) Better handling of fluctuating demand (National sources have multiple locations to deal/assist with demand fluctuations), 4.) Shortages are less likely

Manufacturer or Distributor: What are the seven potential benefits of a Distributor over buying direct from a Manufacturer? ***** (ESSAY QUESTION, Koufteros wants 7 reasons)

1.) Economy of Scale(Distributors are able to purchase materials(like steel) from manufacturers at lower prices than an individual buyer, because distributors purchase these commodities in mass quantities, while buyer usually only want smaller quantities. Therefore, if we purchase from a distributor, we will be able to experience their economies of scale and thus lower prices), 2.) Reduction of Orders (Since distributors sell a variety of products, a buyer can buy various products from one distributor instead of having to purchase multiple products from various manufacturers), 3.) Reduction of Paperwork (Dealing with one distributor encounters less paperwork than dealing with many manufacturers for a variety of needed products) , 4.) Special Services ( Sometimes a distributor will do some light assembly for a buyer while a manufacturer will not), 5.) Technical Advice (Distributors can sometimes offer technical advice over an array of products while manufacturers can only offer technical advice over one product), 6.) Credit (Distributors can offer credit for their products, so you do not have to pay for the product immediately as you would have to with most manufacturers) 7.) Availability (Distributors will tend to have more products available in a short amount of time than a manufacturer would)

Direct Suppliers: What are five things should be done before a firm begins to use a direct supplier for their operations? ****

1.) Eliminate Intermediaries, 2.) Identify Direct Suppliers, 3.) Qualifying Direct Suppliers, 4.) Preparing for Direct Relations, 5.) The Initial Meeting

What are the seven original goals of NAFTA? ***

1.) Elimination of Tariffs, 2.) Remove agricultural barriers, 3.) Remove manufacturing barriers, 4.) Remove Service trade barriers, 5.) Remove investment restrictions, 6.) Protect intellectual property rights, 7.) Resolve environmental concerns

What are the the four Post-Ownership Costs? **** (ESSAY QUESTION, Koufteros says to describe 5 however there are only four)

1.) Environmental Costs (This would be like the cost of disposing of a product in an environmentally friendly way, like paying a junkyard to scrap your car) , 2.) Warranty Costs (These would be cost incurred if customers utilized your firms warranty service. Your firm would experience costs from having to pay for new products, and repairs on old products through your warranty service) , 3.) Product Liability Costs (Product Liability Costs would be like the costs incurred from poorly designed products. This would be like the costs associated with litigation if your company would make fuel tanks that exploded when the temperature reached too high of levels), 4.) Customer Dissatisfaction Costs(These would be the costs associated with customer dissatisfaction from your products, these would be the costs that your company would incur when a customer is not satisfied with your product and they share this dissatisfaction with their friends, this will ultimately lead to lost sales for your company.)

What are five political and economic alliances? ***

1.) European Union, 2.) NAFTA, 3.)MERCOSUR, 4.) Association of Southeast Asian Nations(ASEAN), 5.) Asia Pacific Economic Cooperation (APEC)

What are the advantages of establishing an IPO? (ESSAY QUESTION) (5) ***

1.) Expands a buyer's supply base (By operating an IPO, a company can expand their supplier base by becoming more familiar with local qualified sources), 2.) Allows personal contact (Since IPOs are located in a country where a buyer purchases, a buyer can personally connect with suppliers and buyers can personally visit supplier sites at any time), 3.) Better Understanding of Local Conditions(Since IPO personnel can visit supplier's sites regularly, IPS can get better information on local conditions such as materials shortages, labor issues, and governmental actions than could domestically passed supply managers), 4.) On-Site Support (IPO personal can easily provide on-site support to suppliers if any issues arise. They can respond to issues in a much faster manner than any domestically based supply manager could), 5.) Staffed by ex-patriates in the past, but not necessarily today(Typically, IPOs were staffed by ex-domestic employees, however today companies are using more local personnel to staff IPOs since they have greater local knowledge and wouldn't really require any learning curves to become familiar with a country's culture)

What are the five disadvantages to CounterTrade? ***

1.) Lengthier negotiations (Countertrade negotiations tend to be more lengthier and more complex than conventional sales negotiations) , 2.) Complex Negotiations, 3.) Government Involvement( Sometimes negotiations must be conduced with powerful government supply agencies which have high negotiating strength), 4.) Higher Transaction Costs(Additional expenses in the form of brokerage fees), 5.) Technology Transfer (Customers(Suppliers) can become competitors in Countertrade deals when customers take advantage of a buyers technology)

Minority-And Women-Owned Business Enterprises: Many forces motivate a buying firm to ensure that MWBE businesses receive a share of the firm's business, such as what seven things? ****

1.) Federal And State Legislation (EX: LM has to abide by federal laws/regulations), 2.) Set-aside quotas in government appropriations, 3.) Actions of Regulatory bodies (such as state public utilities commissions, and chambers of commerce), 4.) Firm's "corporate social consciousness" 5.) Customer base includes MWBE businesses and their employees, 6.) Bottom-line profitability, 7.) Good business sense (Sometimes companies buy from MWBE because they are the best business option for the company to utilize to source products)

What are the eight areas that can be improved in a supply chain that can be improved to reduce a company's supply chain costs? *****

1.) Forecasting(better demand forecasting will result in better scheduling and inventory management which in turn will decrease costs), 2.) Administration (Implementing EDI(Electronic Data Interchange ) within an organization and between members of a supply chain will facilitate communication, reduce purchasing time, paperwork, and errors, which will reduce costs), 3.) Transportation (Streamlining material movement through a supply chain will reduce supply casing cycle time), 4.) Inventory( Embracing JIT will help reduce unnecessary stockpiling and movement of inventory), 5.) Manufacturing( Improving capital budgeting procedures and designing and developing manufacturing processes that provide quality, efficiency, and reliability will lower costs and improve quality), 6.) Customer Service (Listening to the customer can help identify supply chain inefficiencies and blockages, which will reduce costs), 7.) Supplier Selection and Relationships(Determining the appropriate source of supply and type of relationship(transactional, collaborative, or strategic alliance) with each supplier will minimize administrative overhead and help the company focus on the lowest cost at the required quality), 8.) Global Sourcing ( Expanding sources internationally will provide cost saving and quality improvements)

What are the five categories of Global Management Perspective? ***

1.) Future of Global Supply Management, 2.) Stages of Global Supply Management, 3.) Reasons for Global Sourcing, 4.) Potential Problems, 5.) Questions before Going Global

What are the three dutiable or free of duty terms? ***

1.) GSP, 2.) MFN, 3.) Statutory Rates

ESI: What are the four reasons for utilizing ESI? ****

1.) Get supplier inputs before the deign is frozen, 2.) Capitalize on the latest technology, 3.) Save time since design cycles are getting shorter, 4.) Let the supplier know that they are part of your team

What are the four advantages of the Euro? ****

1.) Greatly Reduced Transaction Costs(These costs are reduced because U.S firms are now dealing with a single currency rather than various national currencies), 2.) Increased Competition (Competition should be increased as a result of the Euro because firms costs should be lowered since firms are now forced to be more productive as a result of price transparency), 3.) Reduced Exchange Rate Risk (U.S First will have to hedge against only one currency versus 12 national currencies), 4.) Increased Trade and Capital Movement (The Euro will create a greatly increased capital bond and stock market and reduce the historical EU reliance on government and bank loans. Price stability and lower interest rates with controlled inflation should stimulate capital investment and, as a result, a stable economic growth within all EU countries)

Considerations for Single Sourcing: What are the 11 considerations for using a single supplier over multiple suppliers? **** (ESSAY QUESTION) (only need to know eight for essay)

1.) Have lower total costs resulting from a higher volume (if you give your supplier more volume, then you can spread for FC over more units and it will drive costs down), 2.)Quality Considerations Dictate (May be be the only supplier who will meet the quality that you need), 3.) Buyer obtains more influence with supplier (More leverage as a buyer because you are important to the supplier (since you get so much of their business)), 4.) Lower costs to source, process, expedite, and inspect ( Everything comes from one supplier (one PO) and can conciliate the volume of units shipped and use FTL instead of LTL), 5.) Just-In-Time Requirements ( EX: Toyota, if you give them enough business, they'll locate near you--> use volume as a gravitational force), 6.) Significantly lower freight cots may result (consolidate shipping costs by using FTL instead of LTL), 7.) Special Tooling is required (Having to pay to create for special tooling for more than one supplier is not feasible, so you only pay for one supplier), 8.) Total system inventory will be reduced ( if inventory is stocked in a single location, then it is cheaper), 9.) Supplier will have an improved commitment(Large volume with one supplier will improve their commitment), 10.) Improved interdependency and risk sharing result (Since you use them as a single supplier, they are more willing to work with you and share some of your risks), and 11.) Time to market is critical (Since they are your only supplier, they will be more likely to help you expedite and reduce your time to market for your products rather than if you used multiple sources)

What are the six types fo Global Trade Intermediaries? ****

1.) Import Merchants, 2.) Commission Houses, 3.) Agents or Representatives, 4.) Import Brokers, 5.) Trading Companies, 6.) Subsidiaries

Conditions Demanding Negotiation: What are the four conditions that demand a company utilize negotiations instead of competitive bidding? (ESSAY QUESTION) ***

1.) Impossible to estimate costs with a high degree of certainty (These situations are common for high-technology requirements, with items that require a long time to develop and produce, and under conditions of economic uncertainty), 2.) Price is not the only important variable (For example if quality, schedule, and service are huge aspects that a buyer is looking for in a supplier, then it may be better for the buyer to employ negotiations), 3.) Purchasing firm anticipates a need to make changes in the specification(If a buyer is going to need to constantly change their specifications for a product, then it may be best for the buyer to employ negations), 4.) Special tooling of setup costs are major factors (If there are large setup costs involved with a contract , then the allocation and title of the special tooling that is required would best be done under negotiations instead of competitive bidding.)

Supplier Base Reduction: What are two benefits of supply base reduction that were cited by John Deere? ****

1.) Increased leverage with suppliers, 2.) Better focus on and supplier integration in product development

Direct Suppliers: Payments: What are the three ways that letters of credit are classified as? (ESSAY QUESTION)****

1.) Irrevocable Vs. Revocable, 2.) Confirmed Vs. Unconfirmed, 3.) Revolving Vs. Non-Revolving

Considerations for using Multiple Sources over a Single Source: What are the considerations for using multiple sources over a single source? ***(ESSAY Question, need to only know six of the factors)

1.) Protect the buyer during bad times (protect buyer during times of shortages, strikes, and other emergencies), 2.)Maintain Competition (Sometimes if there is one supplier, they may become competent, so competition keeps supplier's on their toes on trying to please you), 3.) Provide a back-up source( if something happens to one supplier, then you have another supplier to rely upon with multiple suppliers instead of a single supplier), 4.) Meet local content requirements for international manufacturing locations ( EX: To be called a Chinese phone, 50% of the phone's parts must come from China), 5.) Meet Customer's Volume Requirements (one or two suppliers alone can't meet a large company's demand on their own), 6.) When a customer is a small player in the market for a specific item (These means that the buyer doesn't have any leverage with a single supplier, so they engage with multiple suppliers to try and find the best deal/value for their company), 7.) Avoid complacency on the part of the supplier ( Don't let your supplier think that they are your only options, EX: Honda makes some certain parts themselves and maintains some capabilities, so suppliers know that they are not Honda's only option. This causes suppliers to stay on their toes and continuously try to please Honda), 8.) When the technology path is uncertain ( You don't want to put all of your eggs in one basket in the hopes that one supplier will take you the furthest in new technology; you should bet on multiple suppliers), 9.) Supplier's tend to "leapfrog" in technology (Leapfrog - skips generation and are more innovative technology, this means that some suppliers may not have the most up to date tech, but some suppliers will due to their more recent leapfrog. Buyers want to have multiple sources over a single source so that they can get the latest technology from their suppliers)

What are the five costs associated with Acquisition Costs? **** (ESSAY QUESTION, Describe Each)

1.) Purchase Price (The price paid for direct and indirect materials, a product, or service that is frequently a major component of an item's total cost), 2.) Planning Costs (These would be costs incurred during the acquisition process related to developing requirements and specifications, preforming price and cost analysis, supplier selection/sourcing, contract determination, initial order processing, and monitoring), 3.) Quality Costs (These would be costs related to ensuring that your product will have/be made with the highest quality, this would be like the high engineered-in-quality costs that a firm would incur when designing a product, and also the costs that a firm would have to pay to ensure that their suppliers have sufficient quality processes in place to create their products), 4.) Taxes (These would be the various taxes associated with procuring materials, these costs can be direct (e.g., duties, processing fees), and indirect (e.g., foreign fuel taxes, tolls, facility fees) on the cost of procured materials and products), 5.) Financing Costs (These would be the costs that company's would incur when deciding how to finance their newly acquired purchases, these would be the costs of if a company decided to pull out a long for their products, the financing costs associated with it would be the interest costs that a firm would have to pay.)

What are the six funds management ratios? ***

1.) Receivable to Sales, 2.) Average collection period, 3.) Average accounts payable period, 4.) Inventory turnover, 5.) Average days in Inventory, 6.) Fixed Assets Turnover

What are the six reasons not to engage in Reciprocity? *****

1.) Reciprocity doesn't follow sound principles of buying and selling, 2.) Companies may relax their competitive efforts as a result of reduced competition, 3.) Sales departments may develop a false sense of security, 4.) New customers may be hard to find because pre-established relationships with competitors, 5.) Company reputations may be impaired because of bad publicity, 6.) Conspiracy and restraint-of-trade situations can develop, with their attendant legal dangers (very few reciprocity cases are brought to court)

What are the six reasons for Global Purchasing? (ESSAY QUESTION, need to only know five) ****

1.) Superior Quality (A key reason for a company to use global sourcing would be to obtain the required level of quality, sometimes domestic sources do not offer the quality that buyers are looking for), 2.) Better Timeliness (Sometimes global sources can offer better certainties about being able to meet a buyer's schedule requirements. For example, some global sources may offer better estimations about order lead-time lengths and variability in lead-times than most domestic sources), 3.) Lower Total Costs (Many companies use global sourcing for this reason. However, companies need to consider the total cost to get their products from a global supplier to the U.S and not just the costs to bring unit cost of product), 4.) More Advanced Technology (Some global sources can be more advanced technologically than their domestic counterparts. Failure for companies to utilize these suppliers can result in manufacturers losing their competitive position to competitors that incorporate more advanced technologies into their processes , 5.) Broader Supply Base(Sourcing globally lets a buyer gain more access to more suppliers this increased competition will enable a buyer to better receive the lowest price), 6.) Expanded Customer Base (Firms can expand their customer base by utilizing global sourcing, Firms can engage in countertrade with their global suppliers, which will increase the buyers total sales)

What are the two steps of Two-Step Bidding/Negotiations? ***

1.) Technical Proposals (IFBs for Step 2 are sent only to those sellers who submitted acceptable technical proposals. 2.) Price Bidding

Even if all of the prerequisites for competitive bidding are met. What are two additional arguments that favor negotiations over competitive bidding? ***

1.) The negotiation process is far more likely to lead to a complete understanding of all issues of the procurement, 2.) Competitive bidding tends to result in sacrifices in product quality, development efforts, and other vital services due to the pressure that is put on suppliers to offer the lowest cost for the RFP.

What are the 3 liquidity measures? **

1.) Working Capital, 2.) Current Ratio, 3.) Quick Ratio

Share of Supplier's Capacity: Many firms try not to exceed more than ___ to ___ of any one suppliers capacity. This issue became all too real in the early 2000s. Many companies cancelled orders that had ____ supplier lead times, which resulted in suppliers being caught with, in some cases, hundreds of millions of dollars of work-in-process. ****

15,25, Long

Teacher Notes: More cars are sold in China than in the U.S as of ____ years ago. The United States is able to keep foreign manufacturers outside of the U.S Market by constantly changing automobile regulations.

18

Local, National, and International Sourcing: The lines between local, national, and international sourcing have become blurred in the last ___ years. ****

30

It is estimated that some ___ percent of all costs add little or no value to a business or its products.

40

Minority-And Women-Owned Business Enterprises: In Texas, government contractors do not have to use MWBE businesses unless their contract is over ______ dollars, and private businesses do not have to use them, however sometimes they do as a courtesy.

5,000

Bidding Vs. Negotiation: About ___/10 suppliers actually respond to a buyer's RFI or RFP to engage in the competitive bidding process.

6

There are at least ___ aspects of quality.

8

Teacher Notes: MG is a very old car company that went bankrupt. This car used to be seen in Bond movies. After MG went bankrupt, the Chinese bought the company and cleared out their manufacturing facility and moved all production to China. The Chinese were able to start production of the new car within ___ months. ( it would have taken much more than ___ months to do this in the UK).

9, 9

Direct Suppliers: The Initial Meeting: In the initial meeting, you should provide a ___ of your firm, provide a ____ of your facility (if the initial meeting is at a supplier's facility, then ______ the supplier's facilities), meet with ___ personnel, describe how and when the supplier's firm will get _____, and always remember that the potential supplier is ____ your firm as much as your firm is ____ the potential supplier. *****

Briefing, Tour, Tour, Critical, Paid, Judging, Judging

Potential Problems with Global Sourcing: Additional Inventories: Companies tend to add ___ inventories to buffer the effects of long lead times which come from the decision to source globally instead of domestically. ***

Buffer

CounterTrade Definitions: ____/_____ is an agreement by the seller of turnkey plants, machinery, or other capital equipment to accept as partial or full payment products produced in the plants and/or capital equipment. ****

Buy-Back/Compensation

Service Capability Analysis: This would be like asking does a supplier provide prompt/quality services if one of our machines that we utilize goes down. You want to find and use suppliers that offer quick/quality services if we as a ___ might need them.

Buyer

Reasons for Global Purchasing: Expanded Customer Base: Sourcing globally can create opportunities to sell in countries where a buying firm's suppliers are based. In some countries, trade restrictions may be in place that require non-domestic suppliers to procure materials in the ____ country as part of the ___ transaction. These type of arrangements are commonly referred to as ____. ****

Buying, Sales, Counter Trade

PV(Annuity) = ****

CF ( 1/r - (1/r*(1+r)^t)))

Teacher Notes: You can utilize country reports by the _____ or by external parties to learn more about the countries where your suppliers are located in. Additionally, if you want to find out about the financial condition of your supplier , you may have to ___ third parties companies to find financial information on suppliers.

CIA, Pay

Teacher Notes: ___ is by far the number one exporter of cars to the United States.

Canada

Reasons for Global Purchasing: Better Timeliness: A second major reason for global sourcing is to improve the certainty of the supplier about meeting schedule requirements. Order lead-times and variability in lead-time estimations may be better than those available with domestic sources. EX: Other countries could do the job right now, much faster than waiting for the ___ here in our home country. ****

Capacity

The quick ratio is a standardized measure of liquidity in which only assets can be converted to ____ quickly (e.g. cash, accounts receivable, and marketable securities) are included in this calculation. ***

Cash

A ___ ____ __ may be required at customs. This ___ is important because it determines which tariffs a company will be issued depending on which country that their country's products come from. EX: This ___ is used for instances such as: A product shipped from Hong Kong may not have been actually made in Hong Kong, so a ____ ___ ___ is an effort to trace product origins for tax and tariff purposes. *****

Certificate of Origin, Certificate, Certificate, Certificate of Origin

Future of Global Supply Management: World financial markets are ____ linked through 24-hour trading. International business is no longer limited to large large ____ corporations. Fewer Marketplace differences exist ("_____" of global consumer markets is occurring at a rapid rate), Manufacturing firms in "developing" countries have ____ their capabilities, and productivity and quality is dramatically ____ worldwide. ***

Closely, Multinational, Westernization, Improved, Improving

Concluding Remarks: The increase in long-term collaborative relationships is highlighting the need to develop strategic sourcing plans. The plan aids in source selection by detailing how suppliers will be discovered, evaluated, selected, developed, and managed. The plan should be developed in a ___ environment that includes all relevant functional area representatives and supply chain members. ****

Collaborative

Developing Suppliers: Development of suppliers one of the greatest untapped frontiers in supply chain management. Even suppliers recognized as the "best of the best" require investment on the part of the buying firm to realize the full benefit of the ____ effort. ***

Collaborative

Reciprocity: Reciprocity exists when supply managers give preference to suppliers that are also _____. This practice can be illegal, and the line between legal and illegal reciprocal practices frequently is very thin. It is entirely legal to buy from one's customers at fair market prices, without economic threatened without the intent of restricting completion. Reciprocity can become illegal when the activity restricts ____ and ____. *****

Customers, Competition, Trade

___ ___ serve as the buying firm's agent. They handle clearance of shipments through customs. ****

Customs Brokers

A ___ ___ is used to clear merchandise through customs. This is not a commercial invoice, this is supplied by the U.S Treasury, and this is filled out by the ____. ***

Customs Invoice, Supplier

Teacher Notes: ___ ____ ____ would be the costs to convert products from raw material form to finished goods form.

Cycle Time Costs

Teacher Notes: ___ ____ ____ would bel like the costs associated with taking a longer time to bring your product to the market or the cost associated with running a longer cycle on your machines than the cycle times that your competitors are running on their machines. Koufteros says that ___ ___ __ would be like if you bought a machine that could process a certain amount of natural gas per hour. Like you could buy one machine that would be more productive compared to the machine that you are currently using.

Cycle Time Costs, Cycle Time Costs

If your suppliers take on a ton of debt, your company will be taking these ____ on as well.

Debts

A TCO analysis may include the study of: Manufacturability(feasibility of manufacturing a designed product), Manufacturing infrastructure requirements(Basic facilities, and services needed to manufacture product), Outsource Decision, Analysis of suppliers beyond tier one, Structure of foreign and domestic tariffs/duties/taxes, Costs of ____, Foreign Regulations, Foreign political/economic stability, Foreign Exchange Risk, Language/Communication Requirements, Volatility of end-customer demand and responses of the network to changes in that demand, Inventory Carrying Costs (Investment vs service levels), Inventory Risk (Relocation, damage, obsolesce, shrinkage), Quality Costs. ***

Delivery

Capacity Capability Analysis: You need to know your suppliers true capacities. You need to know if they are able to support your ____. You should not just takes a supplier's word that they have the capacity to meet your ___, you need to verify that they do have an acceptable capacity.

Demand, Demand

Teacher Note: Countries like to have their own currency so that they can _____ their currency when they want. Countries _____ their money to attract sales for that country's products, which will stimulate their economy.

Depreciate, Depreciate

Potential Problems with Global Sourcing: Cultural Issues: Different cultures can have very ____ ways of thinking/acting. Different cultures have different _____ (like how they could either be on time with deliveries or always late with deliveries). Different cultures may view ___ space differently(like some cultures don't believe in personal space, like they like to kiss each other when they meet, so this culture would obviously be much more touchy than Americans culture). Cultures also differ in the ___ that they eat. For example, in some countries it is perfectly acceptable to each pigeons, while in America, It would be inconceivable to believe that someone would eat a pigeon. ****

Different, Expectations, Personal, Food

Direct Suppliers: Payments: Direct payments are more ____ to use than paying through an intermediary or IPO. ****

Difficult

Manufacturing: Manufacturers are concerned with all the same TCO issues as service and retail firms, with some added issues. Issues that are particularly important in cost analysis for manufacturers are: ___ ___ and _____ ___. Also, emphasis should be placed on the variance between "should cost" and ____ cost. This should not be confused with price variance. ***

Direct Materials, Manufacturing Overhead, Actual

CounterTrade Definitions: A ____ ____ involves close close technological ties between the items sold and the items purchased. For example, when the government of Australia purchased the helicopters made by Boeing, Boeing agreed to buy ailerons for the 727 from an Australian supplier. ****

Direct Offset

Supply Channels: After a firm decides to source globally for the first time, the firm must decide which supply channels to use. The lowest price method for firms to use to source globally is through ___ ____. However, this may be infeasible due to ___ total costs and ___ resources. The simplest way to source globally is through the use of an _____. *****

Direct Procurement, High, Limited, Intermediary

Teacher Note: A ___ offset is used by LM in that they buy parts for their F-35 from countries that also buy the F-35. A ___ offset is buying any product form any businesses in that country.

Direct, Indirect

Direct Suppliers: Currency and Payment Issues: A purchaser's funds tend to be tied up for a ____ amount of time when global source is used than when a domestic source is used. Funds tend to be more tied up with global sources due to some countries cultural-customs to require companies to make ____ payments before work even begins, this greatly differs from conducting business with domestic suppliers because with domestic suppliers, payment usually occurs after ____.

Greater, Advance, Receipt

Gross PM = ? ***

Gross Margin/ Sales

The ____ initial cost of engineered-in quality during the design phase generally lowers future ownership and post-ownership costs for both the purchaser and the customer. The ___ of the relationship established during the suppler negotiation process can have long-run benefits and cost reductions for a buying firm.

Higher, Quality

I do not need to worry about "Green" Supply Management.

I do not need to worry about "Green" Supply Management.

Global Trade Intermediaries: ___ _____ act as "marriage brokers" between buyers and sellers from different nations. Their commissions are paid by sellers for locating buyers and by buyers for finding sources of supply, but they are not involved in the shipment or clearance of an order through customs. ___ ___ charge fees for bringing both parties together. ****

Import Brokers, Import Brokers

Global Trade Intermediaries: ___ ___ buy goods from their own accounts and sell through their own outlets. Since they assume all the risks of clearing goods through customs and performing all of the intermediate activity, their customers are relieved of import problems and in effect can treat those transactions as _____ ____. This is the ____ method of global trade intermediaries for an import merchant to use. ***

Import Merchants, Domestic Source, Easiest

Weighted Factor Analysis is really just determining various factors that you are going to judge potential suppliers on. After determining the various factors that you are going to judge potential suppliers on, then you develop weights for each of the factors. The weights that you develop should be weighed based on your company's interpretation of the ____ of a certain factor. After doing all this, you add up all of the scores for each supplier and determine which supplier had the highest total score.

Importance

Reasons for Global Purchasing: More Advanced Technology: Global sources in some industries are more advanced technologically than their North American counterparts. Failure to take advantage of such product or process technologies can result in a manufacturer' losing its competitive position to competitors that ______ the more advanced technologies. *****

Incorporate

70-30 Approach: When the "big supplier" fails to perform in a 70-30 approach, the "big suppliers volume may be reduced, and the smaller supplier is awarded an ____ in sales volume. ***

Increase

Teacher Note: The EU was meant to reduce red tape for foreign countries, however it really ____ the red tape for European countries.

Increased

Teacher Notes: Reverse Acculturization ___ productivity and quality worldwide on a global scale.

Increases

Reasons for Global Purchasing: Broader Supply Base: Sourcing globally increase the number of possible suppliers form who the buying firm can select. Increased competition for the buying firm's business will better enable a firm to develop reliable low-__ suppliers. Broadening the supply base does not mean ____ the number of suppliers. Broadening the supply base actually increase the opportunity to find better suppliers, enabling the buying firm to ___the number of contracted suppliers and pursue collaborative or alliance relationships when appropriate. In addition, broadening your supplier base will minimize your ____ should something happen to one of your suppliers. *****

Increasing, Decrease, Risks

Third-Party Evaluators: ____ third-party firms can be hired to conduct many of the analyses listed in this section.

Independent

CounterTrade Definitions: A ___ ____ involves the purchase or facilitation of sales of commodities unrelated to the purchasing country. When the Swiss purchased F-5 aircraft, the manufacturer (Northrop) facilitated sales of Swiss elevators and other non-aircraft products in North America. ***

Indirect

An ___ ____ is a document that is prepared by an entity that is independent of the exporter. This _____ assures the buyer's shipment is as ordered. ****

Inspection Certificate, Certificate

Direct Suppliers: Direct Suppliers eliminate the need for _______.

Intermediaries

Supplier Information Files would be like a company's ____ database on supplier. These files would include the name of a supplier, a list of materials that a supplier offers, a supplier's delivery history, a supplier's quality record, a supplier's overall desirability, and general information about a supplier's plant and management. This information tends to be kept on past and present suppliers that a company either has used or is currently using.

Internal.

International Procurement Offices: IPO stands for? ****

International Procurement Office

Local, National, and International Sourcing: An ____ _____ is a source that is headquartered outside of a buying firm's country, but this does not define the location of the firm's operations. For example, the firm can be headquartered in Singapore, but they could have no operations in Singapore. ****

International Source

Why is the analysis of a potential supplier's financial conditions so important? *** (ESSAY QUESTION)

It is important to perform an analysis of a potential supplier's financial conditions because investigations into a potential supplier's financial condition often can prevent the expense of further study. A review of a firm's financial statements and credit ratings can reveal whether a supplier is clearly incapable of performing satisfactorily. These analysis can often prevent the difficulties of getting a 1.) Financially weak supplier to maintain quality, 2.) a supplier who does not have sufficient working capital to settle an expensive claim, or 3.) a financially unsound supplier incapable of working overtime to meet a promised delivery date.

When developing the factors and weights that you will use to judge potential suppliers in a Weighted Factor Analysis you need to remember the acronym ____, which means ___ ___ __ ___. You don't need to make this process any more complicated than it needs to be.

KISS, Keep It Simple Stupid

Direct Suppliers: Identifying Direct Suppliers: When identifying direct suppliers, you should identify and contact ____ players at your supplier, visit with the supplier's key personnel, use the meeting to provide ____ feedback, explain your company's goals and values, take care not to appear to be unreasonable(take care not to insult suppliers), consider the ___ of your request, and if dealing with a new supplier, state your ____ to deal directly right from the start. Lastly, be prepared to give _____ for direct buying(say like what drives your company; cost, timeliness, quality, etc.). ****

Key, Performance, Timing, Intention, Reasons

Teacher Notes: The main reason that firms tend not to use direct procurement is because it is hard to determine all of the factors associated with procuring from a foreign country. Buying direct appears to be the most inexpensive, however you will have various costs incurred with having to develop a ton of ___ over operations in a foreign country.

Knowledge

You may want to hire a third-party evaluator to help translate ____ with your suppliers.

Languages

Bidding Vs. Negotiation: Dollar volume must be ___ to conduct competitive bidding. You do not want to use competitive bidding on cheap products.

Large

Quality Capability Analysis: A potential supplier's quality capability is a critical factor to examine. If a prospective supplier's process capability is ____ than the buying firm's incoming quality requirements, the supplier typically does not merit further investigation. An obvious exception occurs when no supplier possesses the required process capability. In this case, the two firms will have to work together to improve the supplier's process capability.

Less

Direct Suppliers: A __ ___ ___ is an agreement issued by a bank saying that a person will pay a certain amount of money, and if that person doesn't pay, then the bank will pay that person's dues. These assurance is not offered for free by banks.

Letter Of Credit

In general, the higher the current ratio, the more protection a company has against _____ problems. ****

Liquidity

Liquidity Measures: ___ refers to a company's ability to pay its bills when they are due and provide for unanticipated cash requirements. In general, poor liquidity measures imply short-run credit problems. From a supply management perspective, short-run credit problems could signal possible decreases in quality or difficulties in meeting scheduled deliveries. **

Liquidity

International Procurement Offices: The one weakness of IPOs is that they have the tendency to represent the ___ supplier's interests over those of their parent company.

Local

Phone Directories can be useful in helping a supply manager to identify ___ suppliers. Phone Directories tend to be a cumbersome process and should only really be used if other supplier information sources have proved fruitless or if local sources are desired.

Local

Local, National, and International Sourcing: A ___ __ would be a source whose firm's headquarters and all facilities are located in the city or region where the materials or services will be used. EX: Local baker in Bryan with a sister bakery, these two bakeries supply buns to over 2000 local McDonalds a day. ****

Local Source

Teacher Note: Offsets can run up to the value of the contract or the product being produced. This sometimes happens with ____ __ and their customers in foreign countries.

Lockheed Martin

Acquisition Costs are the initial costs associated with the purchase of materials, products, and services. They are not ______-term costs of ownership but represent an immediate cash flow.

Long

Managing Suppliers: Managers must ensure the suppliers perform as required. Suppliers must meet the firm's ____-term needs. ***

Long

Bidding Vs. Negotiation: Competitive bidding requires having ___ lead times to create bids than with Negotiations.

Longer

The times-interest-earned ratio measures the extent to which a company's operating profits cover it's interest payments. A _____ times-interest earned ratio may signal difficulties in meeting long-term financial obligations. ******

Low

Teacher Notes: MFN is a status that is given to preferred nations. This status gives countries _____ duties than most other countries. We have this agreement with China.

Lower

Reverse auction would be like you being GE and you wanting to buy a standardized part. You would use an internet website to describe your need and suppliers would respond based on your need. Suppliers would submit bids and the supplier with the ___bid would receive the offer. Reverse auctions are used for very standardized products and they are not really used for unique products. Reverse auctions are also only used for ___ time transactions, they are not used for long contracts with companies.

Lowest, one

Trade Journals are really just like industry specific or job specific _____. For example, a supply manager in the aircraft industry would read Aviation Week. There are various advertisements in trade journals for potential suppliers.

Magazines

Filing of Mail Pieces is when supply managers save ____ advertisements and file them away. The ads kept by supply managers should be given a file number, dated, and indexed by name and the number of each publication.

Mail

Two-Step Bidding/Negotiations is like how the U.S is flying 5th generation fighter jets. The Airforce is inviting suppliers to bid. They don't ask suppliers to submit bids, they ask them to submit proposals. The military will look at the technical aspects of the proposal in the first stage. This is where the Airforce will list out their performance specifications for their potential suppliers. The Airforce really doesn't know exactly what they want in their sixth generation fighter jet yet. This is really just where the Airforce just lists out their desired performance specifications. Both Boeing and LM would compete to see who can meet the specifications, one can win the proposal for design, but the other can win the proposal for manufacturing it. This would be just really evaluating the designed proposal by both parties. This process involves heavy ______ since their really isn't even a completed product yet.

Negotiations

ROE= ? ****

Net Income/ Average Stockholder's equity

ROA= ?****

Net Income/ Average Total Assets

PM=?***

Net Income/Sales

Direct Suppliers: Payments: ____ letters of credit are valid for one transaction only. When relationships are established, a ___ letter of credit may be issued. (AKA: A ____ letter of credit is used for multiple transactions, while a ____ letter of credit is used for only one transaction.) (ESSAY QUESTION)****

Non-Revolving, Revolving, Non-Revolving

Some examples of ____ ___ ____ ___ would be like the costs of moving and stockpiling batches of direct materials and work-in-process inventory because of poor factory layout, poor scheduling, and a variety of wastes that increase uncertainty in the outputs of the system. Another example would be like when a company maintains cumbersome operating procedures that duplicate efforts and steps for no apparent reason. Another example would like like if a firm routes their daily service appointments in a random fashion rather than designing routes that maximize travel time.

Non-Value Added Costs

Potential Problems with Global Sourcing: Higher Opacity: Opacity means __ ____ or hazy. There is a lot of haziness in how business is supposed to be done. In addition to this fact, there is a lot of opacity in some countries over other counties. Countries that are corrupt, unstable, have bad economic policies, have different accounting standards, and have different business regulations could be described as having ___ opacity. You want to have suppliers in a country with a ____ opacity if possible. ******

Not clear, High, Low

Bidding Vs Negotiation: Few topics generate more passionate discussions than bidding versus negation. The selection of biding or negotiation should be decided using ___ criteria, a ____ cost perspective, and sound supply management logic. *****

Objective, Total

CounterTrade Definitions: With this form of transaction, some, all, or even more than 100 percent of the value of a sale is ____ by the purchase (or the facilitation of purchases by others) of items produced in the buying country. ***

Offset

Trade Shows are like when manufacturers, distributors, or trade organizations sponsor trade shows about their products. Trade Shows are an excellent way for supply managers to learn about possible sources of supply. Trade shows also provide an excellent opportunity for supply managers to see various new products and modifications of ___ products.

Old

Bidding Vs. Negotiation: You must have an adequate number of sellers to engage in competitive bidding. If there is only ___ supplier, the you can't engage in competitive bidding.

One

If UCL and LCL is bigger than UT and LT, then your Process Capability Ratio will be less than ___.

One

If UCL and LCL is smaller than UT and LT, then your Process Capability Ratio will be greater than ___. This is the desirable situation for suppliers. The higher your Process Capability Ratio, then the ____ chance that your company will not produce a defective part.

One, Greater

Teacher Notes: Maintenance costs, fuel costs, yearly insurance costs, registration renewal costs would all be ____ costs associated with operating a car.

Operating

Teacher Notes: Part of ownership costs would be _____ ____.

Operating Costs

Times Interest Earned=?****

Operating Profit Before Interest/Interest on long-term debts

Service and Retail Providers: Understanding what drives the cost of ____ expenditures is critical to any service business. Revenue must cover direct costs, material and labor, and overhead in order to generate a profit. TCO analysis of ___ materials costs are often overlooked and can yield great savings. TCO analysis of a firm's ___ ____ can reap lower per person costs, greater benefits, and improved morale. TCO analysis of _____ purchases may help reduce the expenditures for maintenance and parts over the lives of investments. ***

Overhead, Recurring, Labor Base, Equipment

___ ___ are the costs, after the initial purchase, associated with the ongoing use of a purchased product or material. Ownership costs are both quantitative and qualitative. These costs would be like costs for energy usage, scheduled maintenance and rear, and financing(lease vs buy), ease of use costs, aesthetic factors, ergonomic factors(maximize productivity, minimize fatigue).

Ownership Costs

Teacher Notes: A ___ __ is like when you need to order something from Amazon and your package has a packing slip listing which lists out all of the products that you ordered in your package.

Packing List

A ___ __ consists of movement order, contents, descriptions(weights, markings, and measures). Companies may need to use more than ___ ___ ____. ****

Packing List, One Packing List

Management Capacity Analysis: Evaluating an organization's management site and compatibility usually requires several visits to the potential supplier's facilities. A quick way to draw conclusions that often hold true is to evaluate the management capability fo the firm by evaluating the sales representative, the facility ground, and even the ____ lot. A properly trained sales representative knows his or her product throughly, understands the firms buying requirements, gives useful suggestions to the supply manager and appropriate members of the buying team, commits the company to specific delivery promises, and follows through on all orders. The presence of this type of sales representative indicates that the supplier's firm is directed and managed by responsible and enterprising executives.

Parking

PPM stands for?

Parts Per Million Defective

Teacher Notes: PPM stands for?

Parts Per Million Defective

The average accounts payable period is used to assess how well a firm manages its _____. If the average days payable is increasing or is large in relation to the credit terms offered by the company's suppliers, it may signal that trade credit is being used as a source of funds. ***

Payables

_____ ____ is a currency that is associated to the U.S dollar. These currencies are more stable than ___ or unpegged currency. An example of this type of currency would be the Hong Kong Dollar. The Hong Kong Dollar is a ___ _____ because it's value is pegged against the U.S Dollar. These two types of currencies are tied together and they do not vary from one another.****

Pegged Currency, Floating, Pegged Currency

CF stands for? ***

Periodic Cash Inflow or Outflow (must be the same each period for an annuity)

Competitive bidding is very impersonal, while on the other hadn't, negotiations is more ____.

Personal

Teacher Notes: ____ ____ would be referring to the costs of planning out on which product you are going to purchase. For example, the time spent planning and researching cars before actually buying them would be referring to these type of costs.

Planning Costs

___ ___ are costs incurred during the acquisition process include the costs of developing requirements and specifications, performing price and cost analysis, supplier selection/sourcing, contract determination, initial order processing, and monitoring.

Planning Costs

NPV analysis is frequently incorporated into TCO analysis. NPV analyzes _____ values of the initial expenditure along with the likely future revenue and expenditure streams. The ____ value of a sum of future cash flows discounted by a required rate of return. NPV ___ than zero suggests accepting an investment. NPV ____ than zero suggests rejecting an investment. NPV ___ to zero is a point of indifference. ****

Present, Present, Greater, Less, Equal

Conditions Demanding Negotiation: As a general rule, competitive bidding assumes that products are equal between supplier and the only differentiator between suppliers is ___. The supplier with the __ price normally gets the job. However, in the oil and gas industry, companies value safety and reliability from suppliers, so price is not always the only differentiator in competitive bidding.

Price, Lowest

A ___ ___ ___ is a commercial invoice estimate that is used mainly for banking & permit needs. This invoice enables a firm to obtain an ___ or exchange permit. ***

Pro Forma Invoice, Import

Early Supplier Involvement: Early Supplier Involvement(ESI) is an approach in supply management to bring the expertise and collaborative synergy of suppliers in the design process. ESI is used to find "win-win"opportunities in developing alternatives, and improvements to materials, services, technology, specifications and tolerances, standards, order quantities and lead time, processes, packaging, transportation, redesigns, assembly changes, design cycle time, and inventory reductions. Today, ESI is an accepted way of life at many _____ firms and a requirement for WCSM. ****

Proactive

A ___ ___ ___ has a mean, a range, a p-chart, a c-chart, an UCL(Upper Control Limit), and a LCL (Lower Control Limit).

Process Control Chart

Supplier Surveys: These are normally surveys given to potential suppliers which are used on a series of ____ which cover the following areas: principal officers and titles, bank references, credit references, annual history of sales and profit for the last five years, a. referral list of customers, number of employees, space currently occupied, expansion plans(including sources of funds), an indications of the use of Design of Experiments(DOE), current production defect rate for similar products, number of inspectors used, and quality methods adopted.

Questions

Quick Ratio = ****

Quick Assets/ Current Liabilities

Reciprocity is not legal in the U.S. and not too many cases are brought to court; like ____ ____ _____ ( means a favor or advantage granted or expected in return for something). Reciprocity is only illegal in the U.S if the agreement is meant to restrain trade or competition.

Quid Pro Quo

___ ____ is when a supplier big steps in updating their technology by leapfrogging instead of using incremental innovation.

Radical Innovation

ESI: Supplier knows about all technology with some products (ex: engines of planes), but if you don't have a supplier involved, you may design something not ____ (don't have the technology or the materials to make it)

Realistic

Direct Suppliers: Currency and Payment Issues: From the buying firms point of view, the preferred method of payment is after _____ and inspection of the goods. However, it may be customary in many countries for advance payments to be made ______ to commencing work. Additionally, ____ ___ ____ are common in global commerce. ********

Receipt, Prior, Letters of Credit

The average collection period is used to assess the quality of a company's ____. The average collection period may be assessed in relation to the company's own credit terms or the typical credit terms of firms in its industry. ***

Receivables

Teacher Notes: Eliminating intermediaries should ___ your costs, however that is not always the case. There are more issues than just saying that you are going to go purchase materials abroad, there are various other factors that go into souring abroad.

Reduce

Direct Suppliers: Briefing on your Firm for the Supplier: When briefing a potential direct supplier on your company itself, you should provide information on the ____ product line and related lines, actual and forecasted __ volume, your customers, your market share, unclassified corporate strategy information, ____ reports, and an indication of why the buying firm is soliciting the potential global supplier's interest (quality?, price?) *****

Relevant, Sales, Annual

ROP stands for?

Reorder Point

RFP means to solicit more information on product development/design while RFQ( ___ ____ ____ ) is meant to solicit more pricing information.

Request for Quotation

Teachers Notes: ____ __ is when a foreign country brings in western businesses into their country. This develops a certain set of expectations for this country's domestic businesses to adhere to.

Reverse Acculturation

____ ___ is when you want to buy a standardized part, you describe the need, select suppliers and they submit their bids and the supplier with the lowest bid gets the job.

Reverse Auctions

____ ____ would be like the risks associated with carrying excess inventory or the risks associated with carrying too little inventory if a stockout occurred. Another expel of ____ ___ would be like the risks associated with sourcing from a new suppler, the risk assisted with hiring new employees, and etc.

Risk Costs, Risk Costs

___ ___ ___ means that you will get different tariff rates depending on which country your product comes/originates from).

Rules of Origin

___ ____ _____ would be like what happen in the action figure court case. ***

Ruling on Imports

With respect to duties, ___ __ ___ occur after entry documents have been filled and entry is liquidated. Also, there is ___ guarantee that subsequent shipments will receive the same tariff. ****

Ruling on Imports, No

What is the safety stock equation when demand is variable?

Safety Stock =[z*(Sqrt(LT))*omega*d]

The fixed asset turnover ratio provides a crude measure of how well a firm's investment in plant and equipment is managed relative to the ____ volume it supports. *****

Sales

Fixed Asset Turnover = ? ***

Sales/ Average Fixed Assets

Teacher Notes: In determining the requirements for special packaging, firms should deal with ___ and oxidation issues that would occur when shipping products overseas. For example, you would need to know how to properly package steel to avoid these issues when steel is traveling by vessel for like 30 days.

Salt

Teacher Notes: ___ ___ would be like the the disposition cost to either sell a car or either the money that you would receive from selling a car.

Salvage Value

Teacher Notes: Don't assume that if you can import a product at a 4% tariff rate that you will receive a 4% tariff rate each time that you try to import a certain product into that exact port. It is very difficult for government agents to interpret tariffs the ___ way each time.

Same

Teacher Notes: ___ ___ would be like the costs if you ran a company and your company offered a warranty. If a customer uses your warranty, then your company would encounter costs associated with issuing that warranty.

Warranty Costs

Direct Suppliers: Preparing for Direct Relations: There should be a technical and commercial analysis should be done before dealign with a direct supplier. A buyer should prepare and review ___ and drawings, pack samples or photos for required _____ if helpful, carefully prepare the ___ requirements, identify specific _____ requirements, determine what percentage of ____ that can be placed offshore, determine requirements for special _____, identify likely lead times, and develop a clear idea of the price objective. ******

Specifications, Materials, Quality, Scheduling, Production, Packaging

Free of Duty terms? Statutory Rates really just means? ****

Statutory Rates really just means the full rates for tariffs.

World class Supply Management requires supply management to develop a _____ ____ ____ that details how supply management will discover, evaluate, select, develop, and manage a viable supplier base. ***

Strategic Souring Plan

A higher Cp means more ____ requirements.

Stringent

Global Trade Intermediaries: _______ are established by multinational corporations where a physical presence is needed to improve competitive capability and/or meet host government restrictions. ___ facilitate international sales for a company. EX: Toyota North America is a subsidiary of ______ itself. ****

Subsidiaries, Subsidiaries, Toyota

Bidding Vs. Negotiation: The time available for a job to be undertaken must be ____. Sometimes companies need the job to be taken as soon as possible, however the competitive bidding process is not an immediate process and the process takes time.

Sufficient

Customers can set the UT(Upper Tolerance) and the LT (Lower Tolerance) for a process control chart. UT and LTs are set by the customer while UCL and LCL would be set by a ___ to ensure if a process is statistically effective.

Supplier

The gross margin percentage measures the gross profit earned on each dollar of sales. Thus, this ratio may be used to inter the typical markup percentage used by a _____. ***

Supplier

What are the potential methods to Evaluate potential suppliers? *** (Do not memorize this entire list)

Supplier Surveys, Financial Condition Analysis, Third-Party Evaluators, Evaluation Conference, Facility Visits, Quality Capability Analysis, Capacity Capability Analysis, Management Capability Analysis, Service Capability Analysis, Flexibility Capability Analysis, and Information Technology Capability Analysis

What are the various ways that you can Discover suppliers? ***(don't need to memorize all of these)

Supplier WebSites, Supplier Information Files, Supplier Catalogs, Trade Registers & Directories, Trade Journals, Phone Directories, Filing of Mailing Pieces, Sales Personnel, Trade Shows, Company Personnel, Other Supply Management Departments, and Professional Organizations.

International Procurement Offices: An IPO is an office in a foreign country that is owned and/or operated by a parent company to facilitate business interactions in the foreign country and the surrounding region. IPOs expand their buyer's s ____ base, they allow ___ contact, allow a better understanding of ___ conditions, allow on-site support, and have traditionally been staffed by previous domestic employees in the past, but today firms are using more ___ talent to operate IPOs. ****

Supplier, Personal, Local, Local

Company Personnel: Personnel from other departments in a supply managers firms often can provide supply management with helpful information about prospective suppliers. Through their associations in professional organizations, civic associations, and social groups, these employees often learn about outstanding ____.

Suppliers

Other Supply Management Departments: Supply management departments in other firms can be helpful sources of information about ____. Information exchanged among individuals from these departments can be mutually beneficial for all the participating companies; therefore, this source of information should be developed actively.

Suppliers

Supplier Catalogs are pretty much just catalogs that house information over _____ .

Suppliers

Professional Organizations: Local supply chain management organizations such as The Institute of Supply Management tend to be a great way for members to locate and evaluate new source of ____.

Supply

Teacher Notes: ___ ____ __ would be like the cost for holding spare parts for your products or machines.

Supply Chain Costs

Sometimes reverse bidding is ____, which means allows multiple times to bid, and sometimes reverse bidding is ____ , which means only one chance to bid (give best price and drives down the bid).

Synchronous, Asynchronous

Development of a strategic souring plan is driven by the recognition that ____ sourcing will not succeed in developing a supply base that will yield the benefits of collaborative relationships and alliances.

Tactical

A firm that sources internationally must address the impact of ____, both direct (e.g., duties, processing fees), and indirect (e.g., foreign fuel taxes, tolls, facility fees), on the cost of procured materials and products. Supply Managers need to sit down with their tax colleagues to minimize the global impact of all ____ on supply chain operations.

Taxes, Taxes

What arguments favor dual sourcing? (ESSAY QUESTION) ***

The arguments that favor dual sourcing would be the benefits that companies can achieve by using the "70-30" approach. With this approach, one supplier is awarded 70 percent of a buyer's volume, while a second supplier is awarded the other 30 percent of the buyer's volume. Through this system, a buyer can obtain economies of scale through the "big buyer", while the "little supplier" will provide competition. Additionally, another benefit would be that whenever a "big supplier" fails to perform, the percentages may be reversed from the "big supplier" to the "little supplier".

Describe the competitive bidding process? **** (ESSAY QUESTION)

The competitive bidding processes involves a firm sending out requests for bids to various potential suppliers. Requests for bids ask suppliers to quote the price at which they will perform in accordance with the terms and conditions of the retailing contract if they were to become a successful bidder. Under competitive bidding, the buying firm will generally pick the lowest bidder however sometimes that is not always the case. For example, many oil companies when participating in the competitive bidding process look at the safety record of a supplier along with their bid. So, if a potential bidder has a bad safety record, but submitted the lowest bid, then an oil and gas company would most likely not award the contract to that specific supplier due to their lack of emphasis on safety.

Teachers Notes: ____ would be like how there are McDonalds, Taco Bell, Papa Johns, and dominos are nearly in every country.

Westernization

Describe briefly the legal case "Ruling on Imports". Why is it so important to study such ruling if you are a supply management professional? (ESSAY QUESTION)

This court case was a court case between ToyBiz as the plaintiff and U.S Customs as the defendant. This entire court case revolved around whether ToyBiz's action figures was to be classified as "dolls" or not for tariff purposes for U.S Customs. ToyBiz argued that their action figures were not "dolls", while U.S Customs classified them as "dolls". This was a huge issue for ToyBiz because if their action figures were classified as "Dolls" then ToyBiz would receive higher tariff rates than if they classified ToyBiz's products as "Other Toys". Ultimately, ToyBiz was able to win the court case since their action figures were not truly human beings, but did process human characteristics. This ruling is important for SCM professionals because if a SCM professional thinks that customs is placing their products under the wrong tariff heading, then SCM professionals know that they can go to court and possibly win to receive lower tariff rates. However, SCM professionals should keep in mind that these court decisions do not apply uniformity throughout U.S customs. Since each U.S Customs officers interpret tariff heading differently, your products may be classified as "Dolls" by one officer and as "Other toys" by another.

What is a letter of credit? (PART OF AN ESSAY QUESTION)

This is when a supplier requests a buying firm obtain a letter of credit from their bank. A letter of credit is pretty much an instrument issued by a bank, in which a bank pretty much issues assurance that someone will pay for a transaction or set of transactions. A letter of credit pretty means that if a party does not pay their part of a transaction or set of transactions, then the bank will foot the bill. Letters of credit are often used to take the risk of nonpayment away from suppliers, since the bank will foot the bill if the buyer doesn't end up paying

Trade Registers & Directories would be like _____. Trade Registers & Directories contain information on the addresses, the number of branches, and affiliations of all leading manufacturers. Financial standings of firms are frequently given. The registers are indexed by commodity, manufacturer, and trade name or trademark description of an item.

ThomasNet

Teacher Notes: You need to look at the ___ ___ __ ___, and not just a product's acquisition costs, or a product's operating costs, or a product's salvage value.

Total Cost of Ownership

___ ____ ___ ___ is a philosophy for really understanding all supply chain related costs of doing business with a particular supplier for a particular good or service. *****

Total Cost of Ownership

Debt to Equity Ratio=?****

Total Liabilities/ Stockholder's Equity

T stands for? ***

Total number of periods

Direct Suppliers: Payments: Payments to a global supplier are simplified when a ____ ____ or an ____ are involved. When payments are to be made directly by the buying firm to the supplier, a ____ ____ ___ is frequently used. ****

Trade Intermediary, IPO, Letter of Credit

Global Trade Intermediaries: ____ ____ are large companies that generally perform all of the functions performed by all of the types of agencies already listed. _____ ____ may work for both or only one party. ____ ____ perform the ___, ___, and ___ details. ****

Trading Companies, Trading Companies, Trading Companies, Selling, Shipping, Customs

Cp= ___

UT-LT/(6*omega)

Potential Problems with Global Sourcing: Long Lead Times: Global sourcing can lead to longer lead times for a variety of reasons including strikes by unions, storms at sea, and increased security procedures. EX: Shipping something from China can have a very long lead time. Longer lead times can lead to longer lead time _____. When lead time ____ increase, companies tend to hoard inventories to compensate. ****

Variabilities, Variabilities,

Supply Base Reduction: One of the interesting transitions taking place in supply management is the shift from enlarging a firm's supply base to downsizing that base. Reduction of the supply base usually is achieved through both reducing the _____ of items procured and _____ items previously procured from different suppliers into one supplier. ****

Variety, Consolidating

Before conducting facility visits, you need to narrow down your list of potential suppliers, so that you will not have to ___ that many supplier facilities.

Visit

Flexibility Capability Analysis: Suppliers need to have the ability to adapt to demand volume change(up or down) (____ _____); Suppliers need to be able to adapt to changes in plan or product mix (___ ____ ___); Supplier ned to have the ability to introduce new products and parts( _____ ____ ____)

Volume Flexibility, Product Mix Flexibility, Product Development Flexibility

Bidding Vs. Negotiation: Are we going to use bidding or negations when deciding how to select our suppliers? The ___ of product and the ____ of a product determine if a buyer is going to use either competitive bidding or negotiations.

Volume, Standardization

Potential Problems with Global Sourcing: Lower Quality: Although global supply sources are mostly utilized due to their higher quality standards than their domestic counterparts, sometimes global suppliers actually have ___ quality than their domestic counterparts. This can sometimes be caused by the difference in the fact that the U.S utilizes does not use the metric system, while the rest of the world does. This frequently leads to manufacturing ____ problems when products are manufactured abroad. ****

Worse, Tolerance

UCL= ____

X(double bar) + [A*(subscript 2)(Rbar)]

LCL=

X(double bar) - [A*(subscript 2)(Rbar)]

The mean is symbolized by?

Xbar

Teacher Notes: What is a good formula to use to determine likely lead times?

[(Optimistic + (4x most likely) +Pessimistic)/6]