CHAPTER 2
Oct/Nov 2014 Question 2
2.1 In a table, shortly explain why a supply manager would consider a decentralised
purchasing and supply organisational structure by referring to the following. Chapter
2
(a) Any 5 advantages of a decentralized P&S Organisational structure (5
marks) Your text here 1
(b) Any 5 disadvantages of a decentralized P&S Organisational structure
(5 marks
Type of Advantages Disadvantages
structure
Materials & products are There is a slow response time
standardised. to regional plants.
Centralised Negotiating power is increased & There is resentment from
volume discounts are made geographically dispersed
possible. business unit management.
Staf are aforded the There is a tendency to bypass
opportunity of becoming experts. the central buying office.
Control is improved. Less integration with user
Administrative costs are departments.
reduced. Staf structure is top heavy.
Supplier relations are enhanced. Lack of insight into the
Information systems integration requirements of dispersed
is facilitated. plant units.
Duplication of efort is
eliminated.
There are better relations There is loss of economies of
between decentralised scale.
Decentralis purchasing and other functions. Suppliers are confused by
ed There is good service delivery to dealing with many offices.
regional plants. There is Duplication of staf
There is faster reaction time to and facilities.
user departments in Control over the function is
emergencies. much more difficult.
Support of local suppliers There is greater likelihood of
generates goodwill. communications breakdown.
There is greater autonomy for There is focus on local units
profit centres. and under emphasis on
Inter-divisional competition can strategic issues.
improve purchasing
performance.
,Centralised org structure – is when org vests authority for P&S in 1
person/dedicated team. Specialist staf do strategic planning. Widely used more coz
of availability & efficiency of transport or logistics networks, development such as
SCM, supplier partnering, long-term contracts & integrated info systems.
Sophisticated IT systems has assisted P&S in making info available from centralized
structure to operational units which are geographically dispersed. Decentralised
org structure – is defined as purchasing by diferent departments, branches/plants
while each of them enjoys an important measure of autonomy in decision making
regarding the P&S function. More freedom for the business units to manage own
supply matters.
CHAPTER 3
Question 2 - May/June 2013
2.1 When an order has been placed in the purchasing process, the order from
serves as a source document for all activities to be performed. To which
functions or groups should the order form, or copies thereof, be
distributed and for what reasons? (10) Pg 54
The supplier receives the original order
The financial function receives a copy, verification of invoice and for payment
purposes. This copy and another copy with a certificate confirming that the
ordered goods were received are usually filed as proof of payment for audit
purpose.
The receiving function, frequently part of the stores, receives a copy notifying
it to expect the delivery. This is also used for the receipt and inspection of the
goods.
The inspection function receives a copy with detailed information on the
specs, enabling it to plan the inspection task efficiently.
The purchasing function keeps a copy for follow-up & expediting, and as
control measures in the case of part deliveries of the order.
The last copy says in the order book, as a permanent record of transaction
Analysing the invoice Pg 57
The invoice is analysed and compared with the official order and delivery note. The
most important aspects of this task are:
Comparing invoice prices with those on the order or quotation
Verifying calculations
Checking discounts
Comparing quantities received with those ordered
Confirming that the details on the invoice are in full agreement with the terms &
conditions of the original order.
,Steps of the purchasing cycle
Step P&S Role Elements Documents
Recognitio User Check policy Purch requisitons – mainly used for
n of need communicate guidelines routine purchases such as office
& s spec to P&S Authorisation equipment.
specificati Set specs Travelling requisitions (barcodes
on consisting labels) – mainly used by
stores for the repeated purchasing of
standard inventory requirement.
Kanbas – these are info cards
forming part of the JIT system. They
provide suppliers with a clear
description and specs for org’s
specific needs
Electronic information transfer
Supplier ID Identify Pre-qualification of Electronic catalogues
& selection sources suppliers Supplier websites
Assure Request for proposal (RFI) – used
adequate Request for
quotation to gather info abt potential suppl
supplier products & services.
selection
Request for Quotation (RFQ) –
issued when there is a clear &
unambiguous description of the need
for an item with higher amount & no
existing supplier
Request for bid (RFB) – used in a
competitive bid process with/without
the opportunity to negotiate after bid
receipt.
Bidding & Form Tender procedures Tender documents
negotiatio negotiation Reverse auctions
n team E-auctions
Request for proposal (RFP) – used
Form tender for more complex requirements in
committees which price is just one of the several
keys decision variables.
Ordering/ Establish Develop order Order form
contract order routine routines Contract
Prepare Contract expertise Specifications
contract E-procurement
EDI
Follow –up Establish follow-up late Exception report
, & expediting orders Due date listings
expediting routine Expediting Invoices
Trouble-shooting Electronic reminder
Receipt, Handle faulty Communicate Receiving note
inspection consignment errors & omissions Order form
& issues to suppliers Delivery note
distributio Foster TQM Inspection report
n
Evaluation Assess Supplier Preferred supplier lists
& record suppliers evaluation Supplier ranking scheme
keeping Keep records Supplier rating Performance evaluation forms
Relationship
management
Chapter 4
May/June 205 - Question 3
3.1 In the process of strategic sourcing, a matrix can be used to divide the spending
on purchased products and services into four categories. Provide a detailed
diagram of the fou quadrants of the strategic sourcing matrix (note only
diagrams will be marked. This question is theory question and no application to
the case study is required) Pg. 67
Discus the characteristics of outsourcing. Pg. 70
1. Activities that were initially performed in-house are transferred to an external
party
2. Assets & in some cases, people go over to that external party
3. The existence of an extended r/ship btwn parties over a long period of time
4. Exposure of the buyer to both cost & risk profile in transferring the activity to the
external party, both of which are new.
Oct/Nov 2014 Question 2
2.1 In a table, shortly explain why a supply manager would consider a decentralised
purchasing and supply organisational structure by referring to the following. Chapter
2
(a) Any 5 advantages of a decentralized P&S Organisational structure (5
marks) Your text here 1
(b) Any 5 disadvantages of a decentralized P&S Organisational structure
(5 marks
Type of Advantages Disadvantages
structure
Materials & products are There is a slow response time
standardised. to regional plants.
Centralised Negotiating power is increased & There is resentment from
volume discounts are made geographically dispersed
possible. business unit management.
Staf are aforded the There is a tendency to bypass
opportunity of becoming experts. the central buying office.
Control is improved. Less integration with user
Administrative costs are departments.
reduced. Staf structure is top heavy.
Supplier relations are enhanced. Lack of insight into the
Information systems integration requirements of dispersed
is facilitated. plant units.
Duplication of efort is
eliminated.
There are better relations There is loss of economies of
between decentralised scale.
Decentralis purchasing and other functions. Suppliers are confused by
ed There is good service delivery to dealing with many offices.
regional plants. There is Duplication of staf
There is faster reaction time to and facilities.
user departments in Control over the function is
emergencies. much more difficult.
Support of local suppliers There is greater likelihood of
generates goodwill. communications breakdown.
There is greater autonomy for There is focus on local units
profit centres. and under emphasis on
Inter-divisional competition can strategic issues.
improve purchasing
performance.
,Centralised org structure – is when org vests authority for P&S in 1
person/dedicated team. Specialist staf do strategic planning. Widely used more coz
of availability & efficiency of transport or logistics networks, development such as
SCM, supplier partnering, long-term contracts & integrated info systems.
Sophisticated IT systems has assisted P&S in making info available from centralized
structure to operational units which are geographically dispersed. Decentralised
org structure – is defined as purchasing by diferent departments, branches/plants
while each of them enjoys an important measure of autonomy in decision making
regarding the P&S function. More freedom for the business units to manage own
supply matters.
CHAPTER 3
Question 2 - May/June 2013
2.1 When an order has been placed in the purchasing process, the order from
serves as a source document for all activities to be performed. To which
functions or groups should the order form, or copies thereof, be
distributed and for what reasons? (10) Pg 54
The supplier receives the original order
The financial function receives a copy, verification of invoice and for payment
purposes. This copy and another copy with a certificate confirming that the
ordered goods were received are usually filed as proof of payment for audit
purpose.
The receiving function, frequently part of the stores, receives a copy notifying
it to expect the delivery. This is also used for the receipt and inspection of the
goods.
The inspection function receives a copy with detailed information on the
specs, enabling it to plan the inspection task efficiently.
The purchasing function keeps a copy for follow-up & expediting, and as
control measures in the case of part deliveries of the order.
The last copy says in the order book, as a permanent record of transaction
Analysing the invoice Pg 57
The invoice is analysed and compared with the official order and delivery note. The
most important aspects of this task are:
Comparing invoice prices with those on the order or quotation
Verifying calculations
Checking discounts
Comparing quantities received with those ordered
Confirming that the details on the invoice are in full agreement with the terms &
conditions of the original order.
,Steps of the purchasing cycle
Step P&S Role Elements Documents
Recognitio User Check policy Purch requisitons – mainly used for
n of need communicate guidelines routine purchases such as office
& s spec to P&S Authorisation equipment.
specificati Set specs Travelling requisitions (barcodes
on consisting labels) – mainly used by
stores for the repeated purchasing of
standard inventory requirement.
Kanbas – these are info cards
forming part of the JIT system. They
provide suppliers with a clear
description and specs for org’s
specific needs
Electronic information transfer
Supplier ID Identify Pre-qualification of Electronic catalogues
& selection sources suppliers Supplier websites
Assure Request for proposal (RFI) – used
adequate Request for
quotation to gather info abt potential suppl
supplier products & services.
selection
Request for Quotation (RFQ) –
issued when there is a clear &
unambiguous description of the need
for an item with higher amount & no
existing supplier
Request for bid (RFB) – used in a
competitive bid process with/without
the opportunity to negotiate after bid
receipt.
Bidding & Form Tender procedures Tender documents
negotiatio negotiation Reverse auctions
n team E-auctions
Request for proposal (RFP) – used
Form tender for more complex requirements in
committees which price is just one of the several
keys decision variables.
Ordering/ Establish Develop order Order form
contract order routine routines Contract
Prepare Contract expertise Specifications
contract E-procurement
EDI
Follow –up Establish follow-up late Exception report
, & expediting orders Due date listings
expediting routine Expediting Invoices
Trouble-shooting Electronic reminder
Receipt, Handle faulty Communicate Receiving note
inspection consignment errors & omissions Order form
& issues to suppliers Delivery note
distributio Foster TQM Inspection report
n
Evaluation Assess Supplier Preferred supplier lists
& record suppliers evaluation Supplier ranking scheme
keeping Keep records Supplier rating Performance evaluation forms
Relationship
management
Chapter 4
May/June 205 - Question 3
3.1 In the process of strategic sourcing, a matrix can be used to divide the spending
on purchased products and services into four categories. Provide a detailed
diagram of the fou quadrants of the strategic sourcing matrix (note only
diagrams will be marked. This question is theory question and no application to
the case study is required) Pg. 67
Discus the characteristics of outsourcing. Pg. 70
1. Activities that were initially performed in-house are transferred to an external
party
2. Assets & in some cases, people go over to that external party
3. The existence of an extended r/ship btwn parties over a long period of time
4. Exposure of the buyer to both cost & risk profile in transferring the activity to the
external party, both of which are new.
