The Language of Business - ANSWER -Accounting is the backbone of procurement
-Return on Capital (consists of the Income Statement and Balance Sheet)
-Balance Sheet shows the costs of materials
-Income Statement shows the sales of materials
Owner's Capital
Input (machines, labor, and materials)
Transformation Process
Output (finished goods) - ANSWER Components of the transformational model of a
business
Primary objective of a business - ANSWER to make PROFIT for the OWNERS of
the business by minimizing the impact of constraints on the operating system that
prevent it from increased profitability AND achieving competitively superior
performance from a best-in-class transformation proces
Productivity - ANSWER Output/Input
Procurement Organization - ANSWER Effects the impact of a business' productivity
by selecting suppliers
Best-in-class - ANSWER assessment of how well one is doing in process vs.
competitors
World class - ANSWER regardless of industry, being the best at it (Amazon,
McDonalds)
Downsize - ANSWER Output remains the same and input is reduced; sometimes
necessary to increase profitability and cut costs
zero-based budgeting - ANSWER offset cost reduction; method of budgeting in
which all expenses must be justified for each new period; starts from a "_____
_____" and every function within an organization is analyzed for its needs and costs.
Operational Excellence Key Components - ANSWER -Implement the right
organizational model
-Integrate the S/C business processes
-Invest in technology
-Achieve superior financials
-Be an effective communicator
dogmatic (opinionated, assertive, authoritarian) v inspirational (developmental,
influential) - ANSWER 20th century vs 21st century leadership change
, Supply Chain - ANSWER sequence of processes involved in the production and
distribution of a commodity; components: extractor, converter, manufacturer,
assembler, distributor, retailer, consumer; flows downward
nodes - ANSWER value added to product
linkages - ANSWER connectivity between nodes
vertical integration - ANSWER one of the basic customer/supplier business
relationships within the supply chain; being integrated on supply chain leading from
extraction; very few today
joint venture - ANSWER one of the basic customer/supplier business relationships
within the supply chain; rather than buying from supplier, ensures a continued supply
by merging; also declining in today's supply chains
Strategic partnership/relationship - ANSWER one of the basic customer/supplier
business relationships within the supply chain; relationship whereby the relationship
between nodes is intended to be a long lasting relationship that mutually benefits
one another
Transactional Solution - ANSWER one of the basic customer/supplier business
relationships within the supply chain; buying from different nodes
Procurement - ANSWER Cross-functional processes used by organizations to
acquire goods and services
Purchasing - ANSWER Activity of item buying (transaction); how goods and
services are ordered
Sourcing - ANSWER Strategic approach to supplier selections, development, and
management implemented to achieve improved business results
Key events that have defined the supply chain operating environment - ANSWER -
Complex security requirements resulting from 9/11 attack
-Increasing regulations from Enron debacle → Sarbanes-Oxley
-Advancing technology enabling supply chain integration
-Globalizing markets
Industry that places a greater strategic importance on the procurement process
The Chemical Industry puts the biggest emphasis on procurement process, because
2/3 of every dollar spent goes to purchase materials necessary for the production of
a product. After that industry is Manufacturing, Service, and public. - ANSWER
Industry that places a greater strategic importance on the procurement process
Primary responsibilities of procurement - ANSWER -Identify and select suppliers,
negotiate contracts
-Source of supply research (Long-range material forecasts, Boundary scanning)
-Operational support and follow-up (Releasing orders, Changing orders, Expediting
orders)
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