Supply Management (6 Factors) - ANSWERS• Fosters social responsibility
• Enhances quality
• Enables access to technology and innovations
• Ensures timely availability of resources
• Reduces total cost (not just purchase price)
• Minimizes supply risk
Supply Risk - ANSWERSProbability of an unplanned event that negatively affects a firm; requires TRUST
• Delays and disruptions
• Thefts of intellectual property
• Price increases (can involve exchange rates)
• Product safety problems
Strategic Sourcing Process - ANSWERS• Assess opportunities
• Profile internally and externally
• Develop the sourcing strategy; deciding if you want to insource or outsource
• Screen suppliers and create selection criteria
• Conduct supplier selection
• Negotiate and implement agreements
Spend Analysis - ANSWERS• The application of quantitative techniques to purchasing data in an effort to
better understand spending patterns and identify opportunities for improvement
The Make-or-Buy Decision - ANSWERSKnown as the insourcing/outsourcing decision
, • often high level, strategic decisions
Insourcing - ANSWERSThe use of resources within the firm to provide products or services
Advantages of Insourcing - ANSWERSo High degree of control
o Ability to oversee the entire program
o Economies of scale/scope
Disadvantages of Insourcing - ANSWERSo Lose flexibility (because YOU have to do it)
o Required high investment (your own equipment)
o Loss of access to superior products and services offered by potential suppliers
Outsourcing - ANSWERSThe use of supply chain partners to provide products or services
Advantages of Outsourcing - ANSWERSo High strategic flexibility
o Low investment risk
o Improved cash flow; easier to keep track of $ because all you get are invoices; suppliers do the work for
you
o Access to state of the art products/services
Disadvantages of Outsourcing - ANSWERSo Possibility of choosing a bad supplier
o Loss of control over processes and technologies
o Communication and coordination challenges
o "Hollowing out" of the corporation; can get to the point that you yourself aren't really doing anything
that has to do with the product
Total Cost Analysis - ANSWERSA process by which a firm seeks to identify and quantify all of the major
costs associated with various sourcing options
Direct Costs - ANSWERSCosts that are tied directly to the level of operations or supply chain activities
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