SCM 354 PURCHASING AND SUPPLY CHAIN MANAGEMENT ASU
STUDY GUIDE #6
Chapter Overview 1 - correct answer - A new competitive business environment
- Why purchasing is important
- Understanding the language of purchasing and supply management
- The supply chain umbrella - management activities
- Four enablers of purchasing and supply chain management
A New Competitive Environment - correct answer - Increasing numbers of world class
*global competitors*
- Sophisticated customer base
* *More performance at lower cost*
- Widely available *information sources*
- Balance of power between buyers and suppliers
- *Greater* levels of *outsourcing*
Factors Driving SCM - correct answer - Low cost and *wide availability of information*
* More closely links members of a supply chain
- *Higher levels of competition* in domestic and international markets
* Requires greater quickness, agility, and flexibility
- *Customer expectations* and requirements
* *Constantly changing* and more demanding
- Ability of an organization's supply chain to identify and mitigate risk
* Minimize disruptions
- *Competition is now between supply chains*, not just between companies
Why Purchasing Is Important - correct answer - *Increasing value and savings*
- Building relationships and driving innovation
- Improving quality and reputation
- *Reducing time-to-market*
- *Managing* supplier *risk*
- Generating economic impact
- Contributing to *competitive advantage*
Increasing Value and Savings - correct answer - *Suppliers have substantial impact on
a firm's total cost*
- Many product features originate from suppliers
- *In manufacturing, purchased content is more than 55% of revenues*
- Avoiding costs through early involvement in product design stage
Building Relationships and
Driving Innovation - correct answer - Traditional approach is to bargain hard for price
reductions
- Newer approach is to conduct *joint cost reduction with suppliers*
- Both buyer and supplier must benefit
,- Suppliers can contribute innovative ideas
Improving Quality and Reputation - correct answer - Buyer focuses on core
competencies and outsources non-core activities and materials
- Need for ability to track materials back up through supplier's supply chain
- *Supplier quality --> product quality*
* Lapses in managing supplier quality can potentially tarnish a buyer's reputation
Reducing Time-to-Market - correct answer - Include suppliers early in product design
process to take advantage of their expertise
- *Early supplier involvement can lead to an average of 20% improvement on material
costs, material quality, and product development times*
Managing Supplier Risk - correct answer - Supplier risk is magnified by sourcing
strategies that emphasize global sourcing, single sourcing, and JIT inventory
- *Need to develop business continuity plans to mitigate risks*
Generating Economic Impact - correct answer - *The monthly ISM Report on Business®
is a closely followed national economic indicator*
* A change index
* Manufacturing and non-manufacturing components
- > 50 means economy is expanding
- < 50 means economy is contracting
Language of Purchasing and SCM - correct answer *Common Questions*
- Is purchasing different from supply management?
- Are supply chains and value chains the same?
- What is supply chain management?
- What is an extended enterprise?
Purchasing - correct answer - *Typical Activities*
* Supplier identification and selection
* Buying
* Negotiation
* Contracting
* Supply market research
* Supplier measurement and improvement
* Purchasing systems development
The Five Rights of Purchasing - correct answer 1) Getting the "right" *quality*
2) In the "right" *quantity*
3) At the "right" *time*
4) For the "right" *price*
5) From the "right" *source*
,Supply Management - correct answer - A strategic approach to *planning for and
acquiring the organization's current and future needs* through effectively managing the
supply base, utilizing a process orientation in conjunction with cross-functional teams to
achieve the organizational mission
Supply Management - correct answer - Strategic responsibilities
* Activities which have a major *long-term impact on firm performance*
* Aligned with the overall mission and strategies of the firm
- *Managing the supply base*
* Work directly with suppliers to provide world-class performance
- Process approach
* *Identifying, evaluating, selecting, managing, and developing suppliers to improve
performance*
* Move across functional area boundaries
- Cross-functional
* Sharing information
* *Suppliers as an extension of the buying company*
Supply Chains and Value Chains - correct answer - Supply chain orientation
* *Strategic value of managing operational activities and flows within and across a
supply chain*
- Value chain - *what does value mean?*
* Primary and secondary support *activities that can lead to competitive advantage*
The Extended Value Chain - correct answer Look at saved images
Cereal Value Chain Example - correct answer Look at saved images
The Supply Chain Umbrella - correct answer *Core Functions*
- Purchasing
- Inbound transportation
- Quality control
- Demand and supply planning
- Receiving, materials handling, and storage
- Material or inventory control
- Order processing
- Production planning, scheduling, and control
- Shipping/Warehousing/Distribution
- Outbound transportation
- Customer service
Enablers of Purchasing and SCM - correct answer (1)
Human Resources
View the supply chain holistically
Manage critical
Relationships
, Analyze competitive markets
Engage in fact-based decision making
Practice advanced cost management
Understand e-business systems
Analyze big data
Utilize mobile devices
(2)
Organizational Design
Centrally-led supply teams
Executive responsibility for coordinating purchasing and supply chain activities
Collocation of supply personnel with internal customers
Cross-functional teams to manage supply chain processes
Supply strategy coordination and review sessions between business units
Executive buyer-supplier council to coordinate with suppliers
(3)
Information
Technology
Demand planning
Order commitment, scheduling, and production management
Distribution and transportation scheduling
Material replenishment
Reverse auctions
Requisition to pay systems
Intranets
Webinars and podcasts
(4)
Measurement
Use data from visible sources
Quantify what creates value
Use goals that change over time
Rely on benchmarking to establish performance targets
Link to business goals and objectives
Feature efficiency and effectiveness measures
Assign ownership and accountability
1. Capable Human Resources - correct answer - *Supplier relationship management*
- Total cost analysis
- Purchasing strategies
- Supplier *analysis*
- Competitive market analysis
- Need for close *collaboration with suppliers*
- Need for close *internal coordination*
2. Proper Organizational Design - correct answer - Assessing and *selecting structure
and formal system of communication*
- Division of labor
STUDY GUIDE #6
Chapter Overview 1 - correct answer - A new competitive business environment
- Why purchasing is important
- Understanding the language of purchasing and supply management
- The supply chain umbrella - management activities
- Four enablers of purchasing and supply chain management
A New Competitive Environment - correct answer - Increasing numbers of world class
*global competitors*
- Sophisticated customer base
* *More performance at lower cost*
- Widely available *information sources*
- Balance of power between buyers and suppliers
- *Greater* levels of *outsourcing*
Factors Driving SCM - correct answer - Low cost and *wide availability of information*
* More closely links members of a supply chain
- *Higher levels of competition* in domestic and international markets
* Requires greater quickness, agility, and flexibility
- *Customer expectations* and requirements
* *Constantly changing* and more demanding
- Ability of an organization's supply chain to identify and mitigate risk
* Minimize disruptions
- *Competition is now between supply chains*, not just between companies
Why Purchasing Is Important - correct answer - *Increasing value and savings*
- Building relationships and driving innovation
- Improving quality and reputation
- *Reducing time-to-market*
- *Managing* supplier *risk*
- Generating economic impact
- Contributing to *competitive advantage*
Increasing Value and Savings - correct answer - *Suppliers have substantial impact on
a firm's total cost*
- Many product features originate from suppliers
- *In manufacturing, purchased content is more than 55% of revenues*
- Avoiding costs through early involvement in product design stage
Building Relationships and
Driving Innovation - correct answer - Traditional approach is to bargain hard for price
reductions
- Newer approach is to conduct *joint cost reduction with suppliers*
- Both buyer and supplier must benefit
,- Suppliers can contribute innovative ideas
Improving Quality and Reputation - correct answer - Buyer focuses on core
competencies and outsources non-core activities and materials
- Need for ability to track materials back up through supplier's supply chain
- *Supplier quality --> product quality*
* Lapses in managing supplier quality can potentially tarnish a buyer's reputation
Reducing Time-to-Market - correct answer - Include suppliers early in product design
process to take advantage of their expertise
- *Early supplier involvement can lead to an average of 20% improvement on material
costs, material quality, and product development times*
Managing Supplier Risk - correct answer - Supplier risk is magnified by sourcing
strategies that emphasize global sourcing, single sourcing, and JIT inventory
- *Need to develop business continuity plans to mitigate risks*
Generating Economic Impact - correct answer - *The monthly ISM Report on Business®
is a closely followed national economic indicator*
* A change index
* Manufacturing and non-manufacturing components
- > 50 means economy is expanding
- < 50 means economy is contracting
Language of Purchasing and SCM - correct answer *Common Questions*
- Is purchasing different from supply management?
- Are supply chains and value chains the same?
- What is supply chain management?
- What is an extended enterprise?
Purchasing - correct answer - *Typical Activities*
* Supplier identification and selection
* Buying
* Negotiation
* Contracting
* Supply market research
* Supplier measurement and improvement
* Purchasing systems development
The Five Rights of Purchasing - correct answer 1) Getting the "right" *quality*
2) In the "right" *quantity*
3) At the "right" *time*
4) For the "right" *price*
5) From the "right" *source*
,Supply Management - correct answer - A strategic approach to *planning for and
acquiring the organization's current and future needs* through effectively managing the
supply base, utilizing a process orientation in conjunction with cross-functional teams to
achieve the organizational mission
Supply Management - correct answer - Strategic responsibilities
* Activities which have a major *long-term impact on firm performance*
* Aligned with the overall mission and strategies of the firm
- *Managing the supply base*
* Work directly with suppliers to provide world-class performance
- Process approach
* *Identifying, evaluating, selecting, managing, and developing suppliers to improve
performance*
* Move across functional area boundaries
- Cross-functional
* Sharing information
* *Suppliers as an extension of the buying company*
Supply Chains and Value Chains - correct answer - Supply chain orientation
* *Strategic value of managing operational activities and flows within and across a
supply chain*
- Value chain - *what does value mean?*
* Primary and secondary support *activities that can lead to competitive advantage*
The Extended Value Chain - correct answer Look at saved images
Cereal Value Chain Example - correct answer Look at saved images
The Supply Chain Umbrella - correct answer *Core Functions*
- Purchasing
- Inbound transportation
- Quality control
- Demand and supply planning
- Receiving, materials handling, and storage
- Material or inventory control
- Order processing
- Production planning, scheduling, and control
- Shipping/Warehousing/Distribution
- Outbound transportation
- Customer service
Enablers of Purchasing and SCM - correct answer (1)
Human Resources
View the supply chain holistically
Manage critical
Relationships
, Analyze competitive markets
Engage in fact-based decision making
Practice advanced cost management
Understand e-business systems
Analyze big data
Utilize mobile devices
(2)
Organizational Design
Centrally-led supply teams
Executive responsibility for coordinating purchasing and supply chain activities
Collocation of supply personnel with internal customers
Cross-functional teams to manage supply chain processes
Supply strategy coordination and review sessions between business units
Executive buyer-supplier council to coordinate with suppliers
(3)
Information
Technology
Demand planning
Order commitment, scheduling, and production management
Distribution and transportation scheduling
Material replenishment
Reverse auctions
Requisition to pay systems
Intranets
Webinars and podcasts
(4)
Measurement
Use data from visible sources
Quantify what creates value
Use goals that change over time
Rely on benchmarking to establish performance targets
Link to business goals and objectives
Feature efficiency and effectiveness measures
Assign ownership and accountability
1. Capable Human Resources - correct answer - *Supplier relationship management*
- Total cost analysis
- Purchasing strategies
- Supplier *analysis*
- Competitive market analysis
- Need for close *collaboration with suppliers*
- Need for close *internal coordination*
2. Proper Organizational Design - correct answer - Assessing and *selecting structure
and formal system of communication*
- Division of labor
