SCMN 3730 CH. 11 STUDY GUIDE LATEST UPDATE GRADED A+

SCMN 3730 CH. 11 STUDY GUIDE LATEST UPDATE GRADED A+ definition of price analysis Process of comparing supplier prices against external price benchmarks without knowledge of supplier costs definition of cost analysis Process of analyzing each individual cost element that add up to final price What are the four categories and related strategies in the Strategic Cost framework? 1) critical products - strategies - cost analysis - collaborative cost reduction efforts focused on total costs 2) unique products - strategies - cost analysis and reverse price analysis - standardize requirements 3) commodities - strategies - leverage preferred suppliers - price analysis using market forces 4) generics - strategies - total delivered cost - automate to reduce purchasing involvement What is a market analysis? an analytical tool that identifies the primary external forces that are causing prices to either increase or decrease Prices are driven to a large extent by the degree of competition in a market, as well as by conditions of supply and demand What are economic conditions that are favorable to the supplier? And the buyer? Conditions favorable to supplier • High level of capacity utilization • Tight supply • Strong demand Conditions favorable to buyer • Low level of capacity utilization • High level of supply • Weak demand What is TCO? TCO is defined as the present value of all costs associated with a product, service, or capital equipment that are incurred over its expected life Total cost of ownership (TCO) requires a purchaser to identify and measure costs beyond the standard unit price, transportation, and tooling when evaluating purchase proposals. what are TCOs four major elements? 1) Purchase price Invoice amount paid to supplier 2) Acquisition costs