NHM 373 Final Exam Questions With
Complete Answers
Ordering Process Overview - ANSWER Takes place when a need is identified
and the buyer commits to a specific purchase and a supplier; can be formal or
informal; involves a series of activities; procedures and process must be pre-
developed/established to ensure purchasing goals are achieved; internal needs
must be communicated to the buyer
What must be communicated internally prior to placing an order? - ANSWER -
Exactly what products must be purchased
-Quality requirements
-Which products from which approved vendor
-Quantity needed
-Coordination amongst departments, and staff
It is always the ________ responsibility to know and to tel the supplier exactly
what is needed - ANSWER purchasers
What must be communicated externally when placing an order? - ANSWER
"RFPs" from vendor; any problems with the order, product, or service
Request for Proposal (RFP) - ANSWER equating information from several
suppliers to determine who you should order from in order to maintain the
highest quality with low costs; request for proposal on price quotation from
approved vendors
Common ordering challenges - ANSWER -quality problems
-backorders
-change in quantities or purchase unit sizes
-on site shortages
-storage capacities
-coordination between receiving, production/service, vendors, and purchasers
What is the ordering process like for a centralized organization? - ANSWER
Department managers makes needs known (requisition form) to a purchasing
department who either orders the items and issues that might be in storage
What is the ordering process like for a decentralized organization? - ANSWER
every department orders the products needed for their specific department
Basic steps in the ordering process - ANSWER 1. needs are identified
,2. requests made
3. items issued (if available and on hand)
4. RFP's requested (it items not on hand)
5. Select pre-approved vendor - order placed (if items not on hand)
6. Items received from vendor
7. items issued to requesting department or moved to storage
8. payment made when due
Commonly used documents in the purchasing process - ANSWER purchase
requisition, purchase order, request for proposal, invoice, credit memo
purchasing requisition - ANSWER issue requisition and purchase requisition;
internal document to make needs known
purchase order - ANSWER used to inform vendor that prices are acceptable and
order is placed; there are typically multiple copies of this document
Invoice - ANSWER document accompanying deliveries; contains payment info
and much of the same info on the purchase order; multiple copies
Credit memo - ANSWER document used to adjust the invoice (payment) for
delivery mistakes/shortages
Formal styles of purchasing - ANSWER competitive bidding, requires formal
contract between supplier and buyer; most institutions enter a formal
purchasing method; ex - bid buying
Bid buying - ANSWER a number of suppliers compete over price quote on
buyers specs (price quotation) using a "Bid Request Form"
Types of bids - ANSWER fixed bids, daily bids, line item bidding, bottom line
bidding
Fixed Bids - ANSWER used for large quantity over a long period of time (usually
nonperishable items); suppliers prefer to avoid long-term contracts because
prices can go up over time
Why don't suppliers like long term fixed bids? - ANSWER because of price
changes over time
Daily bids (Quotation buying) - ANSWER used for perishable items; usually
called in by the telephone and followed by written confirmation before
acceptance; "market price"
Line item bidding - ANSWER each supplier bids on each product on the list;
lowest price receive order for that product; very time consuming
, Bottom line bidding (all or nothing) - ANSWER suppliers bid best price on
complete lists of items; usually used by fed, state, local institutions
Disadvantage of line item vs bottom line bidding? - ANSWER receiving - multiple
deliveries for line item, same delivery for bottom line
How Is bidding done? - ANSWER bids are solicited with specs and closing date;
bids are submitted, sealed unmarked envelope; lowest bidder is awarded the
contract
Info required when requesting for bids - ANSWER -delivery requirements
-payment terms
-products with specs
-pricing protection required
-sample invoice
-effective dates of contract
-addition of items
-means of assuring program compliance
Advantages of bid purchasing - ANSWER 1. Lower prices
2. Consistent quality assurance
3. Reduced paperwork
4. Reduced labor cost
Vendor contracts - ANSWER written agreement between buyer and vendor that
defines the responsibilities of both parties over a specified period of time; legally
enforceable if all conditions/agreements aren't met; oral agreements can be
enforced by the courts
3 required elements in a contract - ANSWER 1. an offer
2. a consideration
3. an acceptance
Contract offer - ANSWER a proposal to perform/provide product/service as
agreed
contract consideration - ANSWER an exchange (products for payment)
Contract acceptance - ANSWER agreement of specific terms and conditions of
the contract
Trade-outs - ANSWER agreements between two business in which the contracts
consideration is not in the form of money; trading services vs money
Complete Answers
Ordering Process Overview - ANSWER Takes place when a need is identified
and the buyer commits to a specific purchase and a supplier; can be formal or
informal; involves a series of activities; procedures and process must be pre-
developed/established to ensure purchasing goals are achieved; internal needs
must be communicated to the buyer
What must be communicated internally prior to placing an order? - ANSWER -
Exactly what products must be purchased
-Quality requirements
-Which products from which approved vendor
-Quantity needed
-Coordination amongst departments, and staff
It is always the ________ responsibility to know and to tel the supplier exactly
what is needed - ANSWER purchasers
What must be communicated externally when placing an order? - ANSWER
"RFPs" from vendor; any problems with the order, product, or service
Request for Proposal (RFP) - ANSWER equating information from several
suppliers to determine who you should order from in order to maintain the
highest quality with low costs; request for proposal on price quotation from
approved vendors
Common ordering challenges - ANSWER -quality problems
-backorders
-change in quantities or purchase unit sizes
-on site shortages
-storage capacities
-coordination between receiving, production/service, vendors, and purchasers
What is the ordering process like for a centralized organization? - ANSWER
Department managers makes needs known (requisition form) to a purchasing
department who either orders the items and issues that might be in storage
What is the ordering process like for a decentralized organization? - ANSWER
every department orders the products needed for their specific department
Basic steps in the ordering process - ANSWER 1. needs are identified
,2. requests made
3. items issued (if available and on hand)
4. RFP's requested (it items not on hand)
5. Select pre-approved vendor - order placed (if items not on hand)
6. Items received from vendor
7. items issued to requesting department or moved to storage
8. payment made when due
Commonly used documents in the purchasing process - ANSWER purchase
requisition, purchase order, request for proposal, invoice, credit memo
purchasing requisition - ANSWER issue requisition and purchase requisition;
internal document to make needs known
purchase order - ANSWER used to inform vendor that prices are acceptable and
order is placed; there are typically multiple copies of this document
Invoice - ANSWER document accompanying deliveries; contains payment info
and much of the same info on the purchase order; multiple copies
Credit memo - ANSWER document used to adjust the invoice (payment) for
delivery mistakes/shortages
Formal styles of purchasing - ANSWER competitive bidding, requires formal
contract between supplier and buyer; most institutions enter a formal
purchasing method; ex - bid buying
Bid buying - ANSWER a number of suppliers compete over price quote on
buyers specs (price quotation) using a "Bid Request Form"
Types of bids - ANSWER fixed bids, daily bids, line item bidding, bottom line
bidding
Fixed Bids - ANSWER used for large quantity over a long period of time (usually
nonperishable items); suppliers prefer to avoid long-term contracts because
prices can go up over time
Why don't suppliers like long term fixed bids? - ANSWER because of price
changes over time
Daily bids (Quotation buying) - ANSWER used for perishable items; usually
called in by the telephone and followed by written confirmation before
acceptance; "market price"
Line item bidding - ANSWER each supplier bids on each product on the list;
lowest price receive order for that product; very time consuming
, Bottom line bidding (all or nothing) - ANSWER suppliers bid best price on
complete lists of items; usually used by fed, state, local institutions
Disadvantage of line item vs bottom line bidding? - ANSWER receiving - multiple
deliveries for line item, same delivery for bottom line
How Is bidding done? - ANSWER bids are solicited with specs and closing date;
bids are submitted, sealed unmarked envelope; lowest bidder is awarded the
contract
Info required when requesting for bids - ANSWER -delivery requirements
-payment terms
-products with specs
-pricing protection required
-sample invoice
-effective dates of contract
-addition of items
-means of assuring program compliance
Advantages of bid purchasing - ANSWER 1. Lower prices
2. Consistent quality assurance
3. Reduced paperwork
4. Reduced labor cost
Vendor contracts - ANSWER written agreement between buyer and vendor that
defines the responsibilities of both parties over a specified period of time; legally
enforceable if all conditions/agreements aren't met; oral agreements can be
enforced by the courts
3 required elements in a contract - ANSWER 1. an offer
2. a consideration
3. an acceptance
Contract offer - ANSWER a proposal to perform/provide product/service as
agreed
contract consideration - ANSWER an exchange (products for payment)
Contract acceptance - ANSWER agreement of specific terms and conditions of
the contract
Trade-outs - ANSWER agreements between two business in which the contracts
consideration is not in the form of money; trading services vs money
