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Questions and Answers
What is the primary goal of supply management?
What is the primary goal of supply management?
- To improve the quality of the finished goods produced
- To ensure uninterrupted flows of raw materials at the lowest total cost (correct)
- To maximize customer satisfaction
- To identify and acquire resources for short-term needs
What is the role of purchasing in achieving supply management objectives?
What is the role of purchasing in achieving supply management objectives?
- To negotiate prices with suppliers
- To handle logistics and transportation
- To identify and select suppliers
- To involve suppliers and purchasing personnel in new product design and development efforts (correct)
What is the purpose of the e-procurement system?
What is the purpose of the e-procurement system?
- To track supplier performance
- To enable electronic transmission of purchase orders to suppliers (correct)
- To automate inventory management
- To manage supplier relationships
What is the first step in the purchasing process?
What is the first step in the purchasing process?
What is the definition of supply management according to the Institute of Supply Management?
What is the definition of supply management according to the Institute of Supply Management?
What is the benefit of working closely with strategic suppliers?
What is the benefit of working closely with strategic suppliers?
What is one of the advantages of the make option?
What is one of the advantages of the make option?
What is the purpose of the Make-or-Buy Break-Even Analysis?
What is the purpose of the Make-or-Buy Break-Even Analysis?
What is the major drawback of sole sourcing?
What is the major drawback of sole sourcing?
What is the trend in sourcing currently?
What is the trend in sourcing currently?
What is the difference between sole sourcing and single sourcing?
What is the difference between sole sourcing and single sourcing?
Why should firms use single or a few sources whenever possible?
Why should firms use single or a few sources whenever possible?
What is a key benefit of having a single supplier?
What is a key benefit of having a single supplier?
What is a reason for using multiple suppliers?
What is a reason for using multiple suppliers?
What is an advantage of a single supplier in terms of transportation?
What is an advantage of a single supplier in terms of transportation?
Why might a firm need to use multiple suppliers, even if it's not the most cost-effective option?
Why might a firm need to use multiple suppliers, even if it's not the most cost-effective option?
What is a potential risk of relying on a single supplier?
What is a potential risk of relying on a single supplier?
What is a benefit of working with multiple suppliers in terms of information?
What is a benefit of working with multiple suppliers in terms of information?
What is the primary responsibility of the purchasing function in a business?
What is the primary responsibility of the purchasing function in a business?
What percentage of each sales dollar do manufacturers typically spend on raw materials?
What percentage of each sales dollar do manufacturers typically spend on raw materials?
What drove the shift in the role of purchasing in business?
What drove the shift in the role of purchasing in business?
What is the result of the increased strategic role of purchasing in business?
What is the result of the increased strategic role of purchasing in business?
What is the consequence of large quantities of purchased material and work-in-process inventories?
What is the consequence of large quantities of purchased material and work-in-process inventories?
What is the focus of new supply chain management concepts?
What is the focus of new supply chain management concepts?
What does the Kraljic matrix assess in a portfolio analysis?
What does the Kraljic matrix assess in a portfolio analysis?
How are 'Strategic Purchase' purchases characterized in the Kraljic matrix?
How are 'Strategic Purchase' purchases characterized in the Kraljic matrix?
What is the recommended tactic for managing 'Bottleneck' purchases?
What is the recommended tactic for managing 'Bottleneck' purchases?
In the context of 'Leverage' purchases, what is the main tactic suggested?
In the context of 'Leverage' purchases, what is the main tactic suggested?
What potential issue can arise if Bottleneck purchases are not managed effectively?
What potential issue can arise if Bottleneck purchases are not managed effectively?
How does the Kraljic matrix differentiate between strategic purchase and leverage purchases?
How does the Kraljic matrix differentiate between strategic purchase and leverage purchases?
The primary responsibility of the purchasing function is to acquire finished goods
The primary responsibility of the purchasing function is to acquire finished goods
New supply chain management concepts focus on minimizing the role of purchasing in business strategy
New supply chain management concepts focus on minimizing the role of purchasing in business strategy
The use of e-procurement systems is a traditional method of procurement
The use of e-procurement systems is a traditional method of procurement
Manufacturers typically spend less than 20 percent of each sales dollar on raw materials
Manufacturers typically spend less than 20 percent of each sales dollar on raw materials
Purchasing is a narrow specialized supporting function to overall business strategy in today's business setting
Purchasing is a narrow specialized supporting function to overall business strategy in today's business setting
The Kraljic matrix is used to analyze supply chain management concepts
The Kraljic matrix is used to analyze supply chain management concepts
The e-procurement system allows buyers to review closed bids and select a supplier in real-time.
The e-procurement system allows buyers to review closed bids and select a supplier in real-time.
E-procurement is more efficient when processing requests for quotation and purchase orders.
E-procurement is more efficient when processing requests for quotation and purchase orders.
The e-procurement system allows buyers to track each purchase requisition electronically from conversion to a purchase order.
The e-procurement system allows buyers to track each purchase requisition electronically from conversion to a purchase order.
The e-procurement system reduces the manual task of matching bids to purchase requisitions.
The e-procurement system reduces the manual task of matching bids to purchase requisitions.
The e-procurement system provides up-to-date information on suppliers, but goods and services are not readily available online.
The e-procurement system provides up-to-date information on suppliers, but goods and services are not readily available online.
The e-procurement system allows buyers to initiate bids and suppliers to respond only during business hours.
The e-procurement system allows buyers to initiate bids and suppliers to respond only during business hours.
The Make or Buy decision is a tactical decision.
The Make or Buy decision is a tactical decision.
A firm may outsource production due to lack of expertise in a particular component.
A firm may outsource production due to lack of expertise in a particular component.
Backward vertical integration involves acquiring downstream customers.
Backward vertical integration involves acquiring downstream customers.
A firm may choose to make a component in-house to protect proprietary technology.
A firm may choose to make a component in-house to protect proprietary technology.
The trend in sourcing has been moving towards backward vertical integration.
The trend in sourcing has been moving towards backward vertical integration.
A firm with excess idle capacity may choose to outsource production to a supplier.
A firm with excess idle capacity may choose to outsource production to a supplier.
HKTVmall's O2O store strategy encouraged online shopping and enabled home delivery.
HKTVmall's O2O store strategy encouraged online shopping and enabled home delivery.
The COVID-19 pandemic led to a decrease in demand for masks and PPE in Hong Kong.
The COVID-19 pandemic led to a decrease in demand for masks and PPE in Hong Kong.
The World Health Organization initially recommended the use of masks to prevent the spread of COVID-19.
The World Health Organization initially recommended the use of masks to prevent the spread of COVID-19.
HKTVmall invested in basic warehousing and logistics systems to reduce shipping fees and times.
HKTVmall invested in basic warehousing and logistics systems to reduce shipping fees and times.
The Hong Kong Consumer Council encouraged firms to take advantage of the shortage of masks and PPE.
The Hong Kong Consumer Council encouraged firms to take advantage of the shortage of masks and PPE.
HKTVmall became the dominant player in the market by offering a low-quality e-commerce experience.
HKTVmall became the dominant player in the market by offering a low-quality e-commerce experience.
Using multiple suppliers can help a firm create competition among suppliers in terms of quality only.
Using multiple suppliers can help a firm create competition among suppliers in terms of quality only.
Having a single supplier can lead to higher transportation costs due to the concentration of purchase volume.
Having a single supplier can lead to higher transportation costs due to the concentration of purchase volume.
A firm's volume being too small to split can be a reason favoring the use of multiple suppliers.
A firm's volume being too small to split can be a reason favoring the use of multiple suppliers.
One advantage of using multiple suppliers is accessing more information about market conditions and new process technologies.
One advantage of using multiple suppliers is accessing more information about market conditions and new process technologies.
If a firm needs to spread the risk of supply interruptions, it is advised to only use a single supplier.
If a firm needs to spread the risk of supply interruptions, it is advised to only use a single supplier.
Using a single supplier is always the most cost-effective option due to reduced variability in quality.
Using a single supplier is always the most cost-effective option due to reduced variability in quality.
Study Notes
Supply Management Goals and Roles
- Primary goal of supply management is to optimize the flow of goods and services while minimizing costs.
- Purchasing plays a crucial role in achieving supply management objectives by acquiring the necessary goods and services efficiently.
- Supply management is defined by the Institute of Supply Management as the integration of key business processes across the supply chain.
E-Procurement Systems
- The e-procurement system streamlines purchasing by allowing real-time bid reviews and supplier selection.
- It enhances efficiency in processing requests for quotations and purchase orders.
- Provides electronic tracking of purchase requisitions from initiation to order completion, reducing manual tasks.
Purchasing Process and Strategies
- First step in the purchasing process involves identifying needs and specifications for products or services.
- Working closely with strategic suppliers offers benefits like innovation, cost reduction, and improved service levels.
Sourcing Trends and Models
- Current trend in sourcing is leaning towards backward vertical integration to have more control over supply chains.
- Sole sourcing involves selecting one supplier for a product, while single sourcing may involve a preferred supplier among multiple options.
- Firms should prefer single or a few sources to maintain better control, foster supplier relationships, and ensure consistency.
Supplier Management
- Key benefit of having a single supplier includes streamlined communication and coordination.
- Advantages of using multiple suppliers include competition, cost management, and access to diverse information about market conditions.
- Potential risks of relying solely on one supplier include disruptions in case of supplier issues.
Purchasing Function Responsibilities
- Primary responsibility of the purchasing function is to acquire finished goods effectively and at optimal cost.
- Manufacturers typically spend less than 20% of each sales dollar on raw materials, reflecting efficient cost management.
Strategic Role of Purchasing
- The role of purchasing has evolved to become more strategic within business operations, driving optimization and value creation.
- Increased strategic purchasing influences inventory management and material flow.
Kraljic Matrix and Purchase Types
- The Kraljic matrix assesses supply portfolio based on risk and supply availability, categorizing purchases into strategic, leverage, bottleneck, and non-critical.
- 'Strategic Purchase' characterized by high impact and low supply risk; requires long-term supplier relationships.
- Recommended tactic for managing 'Bottleneck' purchases includes developing alternative supply routes.
- 'Leverage' purchases suggest using competitive bidding to attain favorable pricing.
Consequences of Poor Management
- Failure to manage Bottleneck purchases can result in significant supply interruptions.
- New supply chain management concepts emphasize minimizing procurement's role within business strategy while maximizing efficiency.
HKTVmall Example
- HKTVmall capitalized on the O2O (Online to Offline) strategy to dominate the e-commerce market during the COVID-19 pandemic, facilitating home delivery.
- Investments in logistics reduced shipping fees and times, enhancing customer experience amidst high demand fluctuations.
Risks and Benefits
- Multiple suppliers help firm manage risk and encourage competition in quality.
- Sole suppliers can lead to higher transportation costs due to concentrated purchase volumes.
- Relying on a single supplier can be cost-effective due to reduced quality variability, although not always recommended for risk management.
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Description
Test your knowledge on purchasing terms, e-procurement, single sourcing versus multiple sourcing, and a case study of a Hong Kong e-commerce platform for COVID. Learn about the overview of purchasing as a key business function responsible for acquiring materials, services, and equipment.
