Term
|
Definition
| Purchasing used to not have many opportunities for advancement. It is now gaining more attention from senior management |
|
|
Term
| Purchasing Position within the Organizational Structure: Factors include: |
|
Definition
| history type of industry, value of goods and services: other factors include philosophy of founder, type of material purchased, and ability to influence performance. |
|
|
Term
|
Definition
| Industries that are not driven by materials undervalue purchasing contributions |
|
|
Term
| To Whom Does Purchasing Report? |
|
Definition
| Purchasing reports to the highest executive or one level from the highest executive |
|
|
Term
| Specialization within purchasing |
|
Definition
| Purchasing departments in larger organizations usually structure themselves to support specialized activities, which are grouped in 4 major areas: soursing and negotioating, purchasing research, operational support and order followup, administration and support |
|
|
Term
|
Definition
| Identifies potential suppliers |
|
|
Term
|
Definition
| Long-range material forecasts, conducting value analysis programs, assessing supplier capabilities, and analyzing the cost of structure of suppliers |
|
|
Term
| Operational support and followup |
|
Definition
| This group includes the activities supporting the day to day operations of the purchasing or materials function. Order expediters and follow up personell are part of this group. |
|
|
Term
| administration and support |
|
Definition
| responsible for developing policies and procedures that purchasing personnel follow, determining required staffing levels, devloping department plans organizing and training and seminars, and developing measurement systems to evaluate performance |
|
|
Term
| Purchasing department activities |
|
Definition
Buying
Expediting
Inventory control
Transportation
Managing Counter Trade Arrangements
In sourcing/Outsourcing
Value analysis
Purchasing research/Material forecasting
Supply management
Other responsibilities |
|
|
Term
|
Definition
| Primary responsibility which includes supplier evaluation, negotiating and selection |
|
|
Term
|
Definition
| The process of directly contacting suppliers to determine the status of past due or near past due shipments |
|
|
Term
|
Definition
| Monitor the day to day management of purchased and in-process inventory at each location |
|
|
Term
|
Definition
| Purchasers select the transportation services and providers |
|
|
Term
| Managing Counter Trade Arrangements |
|
Definition
| International or domestic trade where goods are exchanged for goods as payment |
|
|
Term
|
Definition
| analyzes whether a new or existing purchase requirement should be internally or externally sourced |
|
|
Term
|
Definition
| Value represents the the relationship between function and cost. the objective is to enhance value by reducing the cost of good or service without sacrificing quality, enhancing functionality without increasing cost, or provide greater functionality without increasing cost. |
|
|
Term
| Purchasing research/Material |
|
Definition
| Detailed short and long term purchaing plans are required for item subject to technological, economic or political change |
|
|
Term
|
Definition
| involves purchasing, engineering, supplier quality assurance, the supplier, and related functions working together to further mutual goals. |
|
|
Term
|
Definition
| Can assume a variety of other responsibilities such as receiving and warehousing, management of company travel arraingements, production planning and control, commodity futures trading, international materials management econimic forecasting and subcontracting. |
|
|
Term
| Strategic Sourcing Activities |
|
Definition
Manage relationships with critical suppliers
Develop electronic purchasing systems
Implement company-wide best practices
Negotiate company-wide supply contracts
Manage critical commodities |
|
|
Term
|
Definition
Manage transactions with suppliers
Use e-systems to obtain standard or indirect items through catalogues
Source items that are unique to the operating unit
Generate and forward material releases
Provide supplier performance feedback |
|
|
Term
|
Definition
Organizations must decide who will make what decisions.
Decision making authority exists on a continuum ranging from complete authority at the corporate level to total authority in the hands of the operating units. |
|
|
Term
| Advantages of Centrally Led Purchasing |
|
Definition
Leverage volume.
Reduce duplicated efforts.
Coordinate plans/ goals.
Better manage company-wide systems.
Develop expertise.
Manage company-wide change. |
|
|
Term
| ADVANTAGES of DECENTRALIZATION: |
|
Definition
Speed and responsiveness.
Understanding unique operational requirements.
Product development support.
Ownership. |
|
|
Term
|
Definition
|
|
Term
| Linking Purchasing and Corporate Strategy |
|
Definition
Corporate strategy addresses long-term survival and a company’s ability to compete in a changing competitive environment.
An organization must take in more revenues than it spends on operating costs in the long term to grow and increase profits. |
|
|
Term
Translating Corporate Objectives into Purchasing Goals
Four major dimensions: time frame, measurement, specificity and focus |
|
Definition
Time frame: - Objectives are open ended; goals are time phased.
Measurement: - Objectives are stated in relative terms; goals are more specific.
Specificity: - Objectives are stated in broad, general terms; goals are in terms of a particular result.
Focus: - Objectives are externally focused; goals are internally focused. |
|
|
Term
| Integrative Strategy Development |
|
Definition
Corporate strategies, Business unit strategies, Purchasing strategies and
Commodity strategies |
|
|
Term
|
Definition
1. teams staffed with part time members and it's difficult to obtain commitment from people who have conflicts with their time.
2. failure to recognize and reward team members
3. getting over individualistic culture |
|
|
Term
| Purchasing strategies/development |
|
Definition
|
|
Term
|
Definition
| purchasing activities are consistent with the nature of the business strategy and make a proactive contribution to business model effectiness |
|
|
Term
| Translate corporate objectives into purchasing goals |
|
Definition
1. Time frame - objectives are timeless or open ended, while goals are temporal or time phased and intended to be superseded by subsequent goals
measurement: goals are more specific, stated in terms of a particular result that will be accomplished by a specific date.
specificity - "we will be the best in customer satisfaction" is very general.
4 Focus: The statement "we will be regarded by the public as an environmentally conscience company" is externally focused while "we will invest 10% in the environment" is internal. |
|
|
Term
| 1. Identify and define the steps in the purchasing strategy development process |
|
Definition
1 Define business unit requirements -
2. Define the strategic importance of the purchase requirement - 4 quadrants transaction/price, bottleneck/problem, leverage and stratigic.
3. Determine business and purchase requirements and conduct market research -asses what is being spent, what will be needed
4. Set goals and gap analysis
5. Develope sourcing strategy and objectives
6. Execute the strategy
7. Monitor results and review performance |
|
|
Term
| Types of purchasing strategies |
|
Definition
| Supply base, TQM of suppliers, Global sourcing, Longer term relationships, Early supplier design involvement,Supplier development,Total cost of ownership, E-reverse auctions |
|
|
Term
|
Definition
| determining the appropriate number and mix of suppliers to maintain. |
|
|
Term
| Total quality management of suppliers |
|
Definition
| working with suppliers to initiate quality processes and procedures to attain zero defect quality while endorsing continuous improvement. |
|
|
Term
|
Definition
| requires purchasing to view the world as a potential source for products. |
|
|
Term
| Longer-term supplier relationships |
|
Definition
| the selection of and continuous involvement with suppliers. |
|
|
Term
| Early supplier design involvement |
|
Definition
| participation of suppliers at the concept or predesign phase of new-product development |
|
|
Term
|
Definition
| working directly with a supplier to facilitate improvement in a designated functional or activity area. |
|
|
Term
|
Definition
| identifying cost considerations beyond unit price, transport and tooling. |
|
|
Term
|
Definition
| using the internet to facilitate a group of pre-qualified suppliers competing against each other to win business |
|
|
Term
| Describe the major steps in a supplier evaluation and selection process |
|
Definition
1.Recognize need for supplier selection
2.Identify key sourcing requirements.
(What are you looking for in a supplier?)
3. Determining sourcing strategy.
(The sourcing will differ from requirement to requirement.)
4. Identify potential supply sources.
5.Limit suppliers in selection pool.
6.Determine Method of Supplier Evaluation and Selection. (Once the pool is reduced you must decide how to evaluate remaining suppliers.)
Select supplier and reach agreement |
|
|
Term
| Recognize need for supplier selection. |
|
Definition
| New product development, poor internal/external supplier performance, end of a contract, when buying new equipment, when expanding into new markets or product lines, when current suppliers have insufficient capacity. |
|
|
Term
| Identify key sourcing requirements. |
|
Definition
Quality
Cost
Delivery Performance
Technological Capabilities |
|
|
Term
| Determining sourcing strategy. |
|
Definition
Single source vs. multiple sources.
Short-term vs. long-term contracts.
Domestic vs. foreign supplier. |
|
|
Term
| Identify potential supply sources |
|
Definition
| (Intensity of search differs from requirement to requirement based on capability of current supplier and strategic importance of the requirement.) |
|
|
Term
| Limit suppliers in selection pool. |
|
Definition
Purchasers often perform a first cut or preliminary evaluation of potential suppliers to narrow the list
Time and resources prohibit in-depth evaluation of all suppliers
Methods to reduce suppliers in the pool--
Financial risk analysis (discussed later)
Evaluation of previous performance
Evaluation of supplier provided information
What kind of information should we ask suppliers to provide? |
|
|
Term
| Determine Method of Supplier Evaluation and Selection |
|
Definition
(Once the pool is reduced you must decide how to evaluate remaining suppliers.)
Review supplier provided information:
RFP’s
Detailed cost breakdown information.
Supplier visits
Use of Preferred suppliers
External or Third-party information
Cross-functional teams often evaluate suppliers directly through on-site visits
Possible areas to evaluate during a supplier visit--
Cost structure
Delivery performance
Quality systems and performance
Management capability
Workforce capability
Supplier agility and flexibility
Supplier’s supply chain management capabilities
Process and technological capability
Environmental compliance
Financial capability and stability
Information systems capability
Production scheduling and control systems
Longer-term relationship potential
Capacity |
|
|
Term
| Select supplier and reach agreement |
|
Definition
Competitive Bid
Negotiations
Weighted factor approach |
|
|
Term
| 4. Identify and discuss the ways to shorten supplier selection time? |
|
Definition
1.Map the current supplier evaluation and selection process
2.Integrate with internal customers
3.Data warehouse with supplier information
4. Third party support
5. New organizational design features
6. preferred supplier list
7. electronic tools
8. Predefined contract language and shorter contracts |
|
|
Term
| Map the current supplier evaluation and selection process |
|
Definition
| identify the steps activities time and costs involved within a process and opportunities for improvement will become evident. |
|
|
Term
| Integrate with internal customers |
|
Definition
| Having insight into expected supply requirements helps with evaluation of suppliers |
|
|
Term
| Data warehouse with supplier information |
|
Definition
| easy access to supplier data and information like contract expirations |
|
|
Term
|
Definition
| Other companies compile supplier information |
|
|
Term
|
Definition
| Have quick access to capable group of suppliers |
|
|
Term
|
Definition
| e learning scorecard is a tool to use that requires a user to rank various criteria between suppliers |
|
|
Term
| Predefined contract language and shorter contracts |
|
Definition
| most contracts address areas that are similar in the basic areas they cover, such as cost, quality and delivery requirements. |
|
|
Term
| Discuss the factors affecting purchasing role in managing supplier quality? |
|
Definition
1.The ability of a supplier to affect a buyers total quality
2.The resources available to support supplier quality management and improvement
3.The ability of a buying firm to practice world class quality
4. A supplier's willingness to work jointly to improve quality
5. A suppliers current quality levels
6. A buyers ability to collect and analyze quality-related data |
|
|
Term
| Supplier’s ability to affect buyer’s total quality. |
|
Definition
| Certain suppliers will provide items that are critical to a firms success. Those suppliers must be handled differently |
|
|
Term
| Discuss the eight principles of total quality management |
|
Definition
Define quality in terms of customers and their reqiurements.
persue quality at the source
stress objective rather then subjective analysis
empasize prevention rather then detection of defects
focus on process rather then output
strive on process rather then output
strive for zero defects establish continueous improvement as a way of life
make quality everyones responsibility |
|
|
Term
| Define Quality in Terms of Customers and Their Requirements: |
|
Definition
Buyer must clearly quantify or specify requirements.
Buyer must clearly communicate requirements through RFPs, negotiation process, and performance feedback sessions. |
|
|
Term
| Pursue Quality at the Source |
|
Definition
Cross-functional teams should visit and evaluate potential suppliers.
Suppliers should be involved in the development stage of the buyer’s requirements |
|
|
Term
| Stress objective rather than subjective analysis: |
|
Definition
Develop objective supplier measurements.
Use data from measurements to award future business, identify performance improvement opportunities, and provide feedback and quality expectations to the supplier. |
|
|
Term
| Emphasize Prevention Rather than Detection of Defects : |
|
Definition
Avoid nonconformance of products.
Select suppliers that have systems, processes and methods in place to prevent defects.
Use of supplier quality certifications and corrective action requests support prevention of defects. |
|
|
Term
| Focus on process rather than output: |
|
Definition
Shift from a product to process orientation.
Focus on the process that creates the output rather than the output. If the process is correct, the output should be quality.
Suppliers must provide evidence of process capability. |
|
|
Term
|
Definition
Philip Crosby defines zero defects as conformance to requirements.
Optimize your supply base to ensure capable suppliers. Average supplier quality should increase as lower performers are eliminated. |
|
|
Term
| Establish continuous improvement as a way of life: |
|
Definition
Shift performance targets upward once a supplier achieves current levels.
Use Value Analysis to improve products and processes.
Work to develop your supplier’s performance capabilities. |
|
|
Term
| Make quality everyone’s responsibility: |
|
Definition
Buyers and sellers must assume ownership for total quality across the supply chain.
Making quality each participant’s responsibility is essential for total supply chain quality. |
|
|
Term
| 7. Identify and briefly discuss the advantages of an optimized supply base |
|
Definition
Supply Base Optimization
A continuous process that strives for the ideal number and mix of capable suppliers
Optimization does not only mean adding or reducing suppliers. It can mean switching suppliers, also
Optimization does not mean supply base reduction, although historically North American firms have too many tier one suppliers |
|
|
Term
|
Definition
| As companies continue to rely on fewer total suppliers, the selection process takes on even greater importance |
|
|
Term
Supply Base Optimization
Why is optimization critical? |
|
Definition
The costs associated with multiple suppliers for each purchased good or service usually outweigh any perceived reduction in supply risk
Optimization is a critical prerequisite to the development of a world-class supply base |
|
|
Term
| 8. Identify and briefly discuss the risks of maintaining fewer suppliers |
|
Definition
Supplier Dependency - smaller suppliers become too dependant for economic survival
Absence of Competition -A supplier may raise prices if the enviroment isn't cometitive.
Supply Disruption - Strikes, fires, acts of nature
Overaggressive Supply Reduction - Purchasers may reduce too much and remaining suppliers have insufficient capacity |
|
|
Term
| 11. Identify and discuss the Steps Harley-Davidson took to create a high powered purchasing organization. |
|
Definition
Created an onsite resedency program for suppliers to participate during the development of new products.
Have purchasing personnel work directly with engineers.
Created the position of purchaing engineer.
created a supplier advisory council that meets on a regulr basis to share product devlopment plans and supply chain information create joint measures of success and work on long range goals and devopment. |
|
|
Term
| 11. Identify and discuss the Steps Harley-Davidson took to create a high powered purchasing organization. |
|
Definition
Created an onsite resedency program for suppliers to participate during the development of new products.
Have purchasing personnel work directly with engineers.
Created the position of purchaing engineer.
created a supplier advisory council that meets on a regulr basis to share product devlopment plans and supply chain information create joint measures of success and work on long range goals and devopment. |
|
|
Term
| 11. Identify and discuss the Steps Harley-Davidson took to create a high powered purchasing organization. |
|
Definition
Created an onsite resedency program for suppliers to participate during the development of new products.
Have purchasing personnel work directly with engineers.
Created the position of purchaing engineer.
created a supplier advisory council that meets on a regulr basis to share product devlopment plans and supply chain information create joint measures of success and work on long range goals and devopment. |
|
|
Term
| 12. Identify and discuss Honda’s commitment of resources(6) to support and develop suppliers. |
|
Definition
1. 2 ft employees help suppliers devlope their employee involvement programs.
2. forty ft engineersin the purchasing department work with suppliers to improve productivity and quality
3. over 100 engineers in the quality control department deal with incoming parts and supplier quality issues
4. honda provides techinal support to suppliers in a number of techincal areas, including plastics technology, welding, stamping, and aluminum die casting.
5. honda forms special teams to help suppliers on a as-needed basis.
6. a "quality up" program targeets suppliers with lower quality. honda works with highest executives at the supplier to make sure the supplier makes a %100 quality product. |
|
|
Term
| Definition of supplier quality |
|
Definition
| – The ability to consistently meet or exceed current and future customer expectations or requirements within critical performance areas on a consistent basis. |
|
|
Term
|
Definition
Shift performance targets upward once a supplier achieves current levels.
Use Value Analysis to improve products and processes.
Work to develop your supplier’s performance capabilities. |
|
|
Term
| Importance of measurement |
|
Definition
Issues critical to the final design and implementation of a measurement system.
What to Measure:
Delivery Performance
Quality Performance
Supplier Cost Reduction
Issues critical to the final design and implementation of a measurement system.
Measurement and Reporting Frequency
Uses of Measurement Data |
|
|
Term
| TCO - total cost of ownership |
|
Definition
| : identifying cost considerations beyond unit price, transport and tooling. Which includes cost associated with late delivery, poor quality or other supplier non-conformance. |
|
|
Term
| Portfolio analysis (quadrants) |
|
Definition
|
|
Term
| In sourcing versus outsourcing/phases I-IV/risks |
|
Definition
Advantages/Insourcing
Higher degree of control
Visibility over process
Economies of scale
Disadvantages/Insourcing
Higher volumes required
High investment needed
Dedicated equipment has limited uses
Problems with supply chain integration
The Insourcing/Outsourcing Decision Process
Advantages/Outsourcing
Greater flexibility
Lower investment risk
Improved cash flow
Lower potential labor costs
Disadvantages/Outsourcing
Possibility of choosing wrong supplier
Loss of control over process
Long lead-times/capacity shortages
“Hollowing out” of the corporation
The Insourcing/Outsourcing Decision Process |
|
|
Term
| Sources of information when evaluating a supplier |
|
Definition
| Current suppliers, Sales representitives, information databases, experience personnel, trade journals trade directories trade shows, second-party or indirect information (apics), Internal sources, internet searches |
|
|
Term
| Key Supplier Evaluation Criteria |
|
Definition
• Cost/price
• Quality
• Delivery
• Management Capability
• Employee Capabilities
• Supplier’s Cost Structure
• Total Quality Performance, Systems, and Philosophy
• Process and Technological Capability
• Environmental Regulation Compliance
• Financial Stability
• Production Scheduling and Control Systems |
|
|
Term
|
Definition
| It may bedifficult to impliment JIT and lead times may be 2 or 3 times as long. |
|
|
Term
|
Definition
Developed in Europe in 1987; updated 1994 and 2000
• Recognizes product quality is a result of a quality process
• Revised 2000 version (ISO 9000:2000) is a process-based approach to quality management. |
|
|
Term
| Supplier measurement systems (3 types)-performance measures |
|
Definition
Delivery performance - A buyer can asses how well a supplier satisfys the quantity and due date commitment
Quality performance - can compare a suppliers quality against some previously specified performance objective, track improvement rates and comare similar suppliers.
Cost reduction - track a suppliers real cost after adjustment for inflation or compare cost with another cost in the same industry. |
|
|
