D1 - 1.0 Understand What Added Value Can Be Achieved Through Procurement & Scm

Front 1

Define 'Purchasing'

Back 1

1. The purchasing function of an organisation involves the acquisition of supplies or unouts to the organisations activities
2. In some organisationa there is a purcahagins department or unit cich has responsibiltiy for carrying out this function, while in others it may be carried out by individuals and teams

Front 2

Define 'Supply'

Back 2

• The act of providing or making available something in response to a buyers requirement
• Transfer of goods or services from one party to another

Front 3

Define ' Procurement'

Back 3

• A wider term than purchasing
• the process of obtaining goods or services in anyway e.g. leasing and hiring
• reflects the more proactive, relational, strategic and integrated role of the function in modern organisation

Front 4

What does the procurement function do?

Back 4

• Supply market monitoring
• identify sources of supply
• supplier evaluation and selection
• processing procurement requests
• input into specs
• negotiate and develop contracts
• contract management
• admin tasks

Front 5

What is 'Direct Procurement'?

Back 5

• Where items are procured for resale or incorporated in goods for sale
• ADD IN EXAMPLE

Front 6

What is 'Indirect Procurement'?

Back 6

• the purchase of any other ancillary items
• inputs and consumables for the support activities

Front 7

What is Porter's Value Chain?

Back 7

• distinguishes between primary and secondary (support) activities of the organisation
• Primary: bring resources into the organisation, transforming them through production process, moving them to custoemr
• Secondary: supporting the primary business fucntions

Front 8

What materials are used in Manufacturing?

Back 8

1. Raw materials
2. Components and assemblies
3. Work in progress (WIP)

Front 9

What are primary commodities?

Back 9

• items which occur in nature and provide raw materials for business to incorporate into products
• unequally distributed geographically
• subject to flucuation

Front 10

What are maintenance, repair and operation supplies? (MRO)

Back 10

• all goods and services other than capital that are neseccary to transform raw materials to end products
• GET EXAMPLE

Front 11

What are 'non-stock procurements'?

Back 11

• mostly in construction sectors where majority of outputs are products as a direct requirement from the customer
• used in JIT
• GET MORE INFO

Front 12

What is 'Stock to order'?

Back 12

• a non-stock procurement policy where only procure materials as required to fulfil orders recevied from customers

Front 13

What is a 'Stock to forecast' policy?

Back 13

• policy based on forecasting or estimating demand for finished products and planning supplies and inventory quanitties on that

Front 14

What is 'stocking for inventory'?

Back 14

• policy where items are procured and placed into storage in advance of future need or demand

Front 15

What are 'perishable goods'?

Back 15

• subject to deterioration over time

Front 16

What are examples of capital goods?

Back 16

• buildings
• manufacturing plant
• computer hardware
• vehicles

Front 17

How does the procurement of capitral goods differ from other goods?

Back 17

1. Basic purchase price is not the main deciding factor. Takes into considerion total cost ownership
2. Monetary value of the asset is high
3. extended and complex negotiations
4. procurement tends to be non-recurring
5. specifications are difficult and complex
6. benefits are difficult to evaluate

Front 18

What is procurements contribution to the decision of buying capital goods?

Back 18

• list all the sourcing cycle activities

Front 19

What is 'Leasing'?

Back 19

• a contract between a leasing company (lessor) and the customer (lessee) where the lessor buys the asset and the lessee hires it, paying regular instalments over a period to use the asset.

Front 20

What is 'Operating expediture?'

Back 20

? get from big book

Front 21

What is 'Outsourcing'?

Back 21

• delegation of non-core activities under contract to an external supplier on a long-term basis

Front 22

What is 'Segmentation'?

Back 22

• an approach to analysing expenditure with external suppliers by categorising the procurement protfolio or suppliers according to thier priority, value or importance.
• The segment a supplier is allocation ddetermines the procurement resources and appoaches that will be used

Front 23

What is 'Pareto'?

Back 23

• 20% almost always accounts for a large factor in terms of effort.
• Technique to leverage time and effort for biggest benefits

Front 24

Draw the kraljic matrix

Back 24

Draw it

Front 25

What are the general objectives of Procurement?

Back 25

1. the 5 rights
2. internal customer service
3. risk management
4. cost contract and reduction
5. relationship and reputation management

Front 26

What are the five areas of Porter's value chain activities?

What are the support (secondary) activities?

Back 26

1. Inbound logistics
2. Operations
3. Outbound logistics
4. Marketing and sales
5. Service

human resources, tehcnology, procurement

Front 27

What are the five rights of Procurement?

Back 27

The right...

1. Price
2. Place
3. Product
4. Quantity
5. Quality

Front 28

What price will be right for a seller?

Back 28

A price which...

1. the market will bear
2. gets them to win the business
3. cover its costs and make a profit

Front 29

What price will be right for a buyer?

Back 29

A price which...

1. can afford
2. is reasonable
3. gives advantage over competition
4. reflects sound practices

Front 30

What are the factors in a buyers decison on price?

Back 30

• buyer's organisation bagaining power
• number of suppliers in the market
• type of procurement
• total package of benefits
• what they can afford
• what is fair and reasonable

Front 31

What is the 'cost of quality'?

Back 31

The cost of ensuring and assuring quality as well as the loss incurred when quality is not achieved

• The cost of appraisal and prevention activities
• The cost of 'failure'

Front 32

What is 'quality control'

Back 32

• Systems for the detection and correction of defects
• reactive approach

Front 33

What is 'total quality management (TQM)'?

Back 33

• radical approach to quality management
• applied to all resources and relationships in the SC
• seeks continuous improvement in all aspects of quality

Front 34

How can the procurement function help to provide 'the right quality'?

Back 34

• select accredited suppliers
• appraise quality systems of suppliers
• have preffered supplier lists
• influence product design
• ensure spec is clear and unambigious
• manage relationships
• contract manage

Front 35

What are the most important factors that determine 'the right quantity'?

Back 35

1. demand
2. inventory policy
3. service levels
4. market conditions
5. economic order quanitity

Front 36

Why would an organisation hold stock or inventory?

Back 36

• a safety buffer
• reduces the risk of disruption to production
• allow for rapid replenishment
• can get bulk discounts
• hedge against flucuations in price

Front 37

What is a 'push inventory system'?

Back 37

• sets up a regular system for monitoring stock levels and planning to replenish in time
• keep as little stock as possible
• Two main methods: ????

Front 38

What is a periodic review system?

Back 38

• stock level of an item is reviewed at a fixed interval
• If needed a replenishment order is place to top up stock

Front 39

What is a 'fixed order quantity system'?

Back 39

• stock is re-ordered to a set quantity when it falls below minimum stock level
• timing isnt fixed but the quanitity is

Front 40

What is a 'pull inventory management system'?

Back 40

• based on producing goods in response to actual demand
• inventory is low or non-existant
• uses JIT

Front 41

What is 'just in time (JIT)'?

Back 41

• japanese approach to inventory reduction
• aims for goods to arrive at warehouse just in time to go to production
• every effort is made to minimise stock holding
• inventory is 'evil'

Front 42

What is 'Materials requirements planning (MRP)?

Back 42

• designed to translate MPS and the BOM into time phased requiements which trigger purchasing
• a set of logically relationed rules and records for manageing dependant demand items

Front 43

What is 'manufacturing resources planning (MRPII)?

Back 43

• draws on the master production schedule to develop materials planning plus personnel deployment, maintenance planning and financial analysis

Front 44

What is 'enterprise resource planning (ERP)'?

Back 44

• consolidates materials, manufacturing, logisitics, SC, sales and HR into one integrative management system

Front 45

What is 'Lead time'?

Back 45

1. Internal lead time: time between the processes withing the organisation e.g. identifcation of the need and the issue of completed purchase order
2. External lead time: the time between supplier receiiving purchase order and fuulfilling that order
3. Total lead time: combination of internal and external lead times

Front 46

What are the two main purposes of distribution centers?

Back 46

1. Breaking bulk: single large delivery can be made at supplier then DC can split it into smaller consignments

2. Consolidating deliveries: multiple items by multiple suppliers can be sent to DC then sent as one to customer

Front 47

What is intermodal and multimodal?

Back 47

A transport strategy which uses more than one mode of transport in a single movement from orgion to to destination.

GET MORE INFO

Front 48

What is materials management?

Back 48

• The total of all tasks, functions and activities concerning the transfer of external materials into the organisation
• Includes the admin of the above until the materials are consumed

Front 49

What are the key activities of materials management?

Back 49

• Materials and inventory planning
• procurement of the necessary materials, parts and suppliers
• storage and inventory management
• production control

Front 50

what are the advantages of co-ordinating materials related activities?

Back 50

• costs relating to material flows are isolated
• cost reductions can be acheived through waste
• cross functional cooperation
• reconcile conflicting objectives
• implement world class manufacturing techniques

Front 51

What is logistics mangement?

Back 51

• integrates responsibility of both input and output phases. The flow of materials inward to production and outward to the customer

Front 52

What is a supply chain?

Back 52

• encompasses all organisation and activities associated with the flow and transformation of good from raw materials to the end user
• as well as the related information flows

Front 53

What is a dyadic relationship?

Back 53

where the focus of a relationship is only between two parties, one to onw or two party.

Front 54

Why is it helpful to see the supply chain as a network?

Back 54

• more strategic for modelling and mapping relationships
• possibility of wider range of relationships

Front 55

Discuss the different structures of supply chains

Back 55

1. draw diagram of all manudacturing performed by top level purchaser

2. draw diagram of top level purchaser outsources most manufacturing

Front 56

What are the implications of supply chain tiering?

Back 56

• There are fewer commerical relationships to manage
• staff need to drill down through tiers when monitoring policies and systems
• first tier suppliers have expertise and technology to be more efficent

Front 57

What are value-adding strategies?

Back 57

1. value engineerinh
2. lean supply
3. agile supply
4. value adding negotiations and relationships

Front 58

what is supplier management?

Back 58

• selects, co-ordinates, appraises the performance and evleopment of potential suppliers.
• builds and manages relationship with awarded supplier

Front 59

What are drivers of SCM?

Back 59

• Cost pressures
• time pressures
• reliabiltiy
• response
• transparency
• globalisation

Front 60

Benefits of an SCM approach

Back 60

• Reduce costs
• improved responsivness to customers
• access to resources
• enhanced quality and product
• improve SC
• faster lead times
• better communication

Front 61

What are the possible drawbacks of SCM?

Back 61

• requires considerable investment and internal support
• focus on smaller number of suppliers
• exposure to sharing informaiton leads to loss of control
• problems fairly distributing gains and risks amoungst SC partners

Front 62

What is the difference between SCM and Procurement?

Back 62

• SCM's priority is the recognition that the organisation is just one link in a chain of suppliers and customers