Procurement and Lifetime Costing Quiz
227 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the definition of value as explained in the text?

  • Value is the same for every individual or organisation.
  • Value is about meeting the exact needs of the individual or organisation at the time at which they are required. (correct)
  • Value is solely determined by the cost of a product or service.
  • Value is not important in procurement.

    • What are direct costs in procurement?

  • Costs that are avoidable in procurement.
  • Costs that do not have a monetary value.
  • Costs not associated directly with the job or contract in question.
  • Costs associated directly with the job or contract in question. (correct)

    • What contributes to added value in the production of a product or service?

  • The willingness of the customer to pay.
  • The cost of indirect costs.
  • Everything that goes into the production of a product or the creation of a service that has a monetary value. (correct)
  • Only the selling price of the product or service.

    • How can added value be gained in procurement?

    <p>By reducing inputs and thereby reducing input costs.</p> Signup and view all the answers

    What can procurement professionals do to add value to products or services?

    <p>Lower costs and work with suppliers</p> Signup and view all the answers

    How can a strong brand add value?

    <p>Through awareness, engagement, and communication</p> Signup and view all the answers

    What is Red Bull's success attributed to?

    <p>Its brand identity and associations</p> Signup and view all the answers

    What is Red Bull's brand linked to?

    <p>High energy and risk-taking</p> Signup and view all the answers

    What can additional features such as a reversing camera or free insurance add to a product or service?

    <p>Tangible or intangible value</p> Signup and view all the answers

    What can excellent service, attention to detail, and a good reputation add to a product or service?

    <p>Value</p> Signup and view all the answers

    What can convenience, like proximity to a shop, add to a product or service?

    <p>Value, leading customers to pay more</p> Signup and view all the answers

    How is value for money in procurement achieved?

    <p>Through cost-effectiveness and efficiency, not just the lowest price</p> Signup and view all the answers

    What does the total cost approach in procurement consider?

    <p>Various aspects, not just the purchase cost</p> Signup and view all the answers

    What are the key areas to consider for value for money in procurement?

    <p>Product or service price, lifecycle costs, and quality</p> Signup and view all the answers

    What logically leads to a better deal according to the text?

    <p>A lower price</p> Signup and view all the answers

    What is value for money in procurement linked to?

    <p>Efficiency, economies, and effectiveness</p> Signup and view all the answers

    Which factors contribute to achieving value for money?

    <p>Efficiency, economies, and effectiveness</p> Signup and view all the answers

    What is crucial for providing good value for money in procurement?

    <p>Efficiency</p> Signup and view all the answers

    Which strategies are mentioned for achieving efficiency in procurement?

    <p>Building relationships, communication, keeping up-to-date with technology, being open-minded</p> Signup and view all the answers

    What is Kaizen linked to within procurement?

    <p>Efficiency</p> Signup and view all the answers

    What are the three Es that contribute to achieving value for money?

    <p>Efficiency, Economies, Effectiveness</p> Signup and view all the answers

    What is underpinning all five factors for organizational success?

    <p>Value for money</p> Signup and view all the answers

    What does the lifetime costing document for the proposed project include?

    <p>Pricing for design, planning application, wildlife relocation, materials, machinery hire, compensation for local businesses</p> Signup and view all the answers

    How long will the road last before resurfacing is needed?

    <p>4 years</p> Signup and view all the answers

    What is essential for achieving value for money and contributing to organizational success?

    <p>Efficiency in procurement</p> Signup and view all the answers

    What are the five factors contributing to organizational success?

    <p>People, Purpose, Procedures, Customers, Resources</p> Signup and view all the answers

    What is linked to efficiency within procurement?

    <p>Kaizen</p> Signup and view all the answers

    What are the Five Rights of Procurement?

    <p>Quantity, quality, time, place, price</p> Signup and view all the answers

    What does Vai's Vegetable Pickers scenario illustrate?

    <p>The importance of adhering to the Five Rights of Procurement</p> Signup and view all the answers

    What does the AppZy activity encourage in procurement?

    <p>Applying the Five Rights of Procurement in creating a purchase order</p> Signup and view all the answers

    What does lifetime costing encompass?

    <p>Total anticipated costs of a fixed asset during its lifetime</p> Signup and view all the answers

    Why are fixed exchange rates beneficial for procurement?

    <p>They stabilize currency exchange rates</p> Signup and view all the answers

    What must order quantities meet in procurement?

    <p>Demand without causing excessive inventory costs</p> Signup and view all the answers

    What are crucial factors to consider in procurement decisions?

    <p>Supplier reputation and adherence to environmental policies</p> Signup and view all the answers

    What does Figure 1.2 illustrate?

    <p>The concept of lifetime costing</p> Signup and view all the answers

    What does the term 'freight costs' refer to in procurement?

    <p>Transport costs</p> Signup and view all the answers

    What is the significance of the Five Rights of Procurement in decision-making?

    <p>They are essential for effective procurement decision-making</p> Signup and view all the answers

    What are the significant considerations in procurement?

    <p>Packaging type and payment terms</p> Signup and view all the answers

    What does the term 'lifetime costing' encompass?

    <p>Total anticipated costs of a fixed asset during its lifetime</p> Signup and view all the answers

    What does lifetime costing encompass?

    <p>Initial purchase price and ongoing expenses</p> Signup and view all the answers

    What is the primary purpose of lifetime costing?

    <p>To provide a long-term view of investment costs</p> Signup and view all the answers

    What does Table 1.3 in the text provide?

    <p>Advantages and disadvantages of lifetime costing</p> Signup and view all the answers

    What is an example of a factor considered in lifetime costing for sourcing a new machine for a factory?

    <p>Transportation costs</p> Signup and view all the answers

    What does the case study of Rigger's Roads Ltd demonstrate?

    <p>Application of lifetime costing in a real-world scenario</p> Signup and view all the answers

    What prompted the procurement department to seek estimates for the road's lifespan and required maintenance?

    <p>A hospital manager's request to address traffic issues</p> Signup and view all the answers

    What does lifetime costing enable procurement professionals to do?

    <p>Comprehensively evaluate the costs and benefits of investments and services over their entire lifespan</p> Signup and view all the answers

    What cost factors does lifetime costing encompass?

    <p>Running costs, maintenance, insurance, financing, warranty, and disposal</p> Signup and view all the answers

    What does the concept of lifetime costing extend beyond?

    <p>The initial purchase price</p> Signup and view all the answers

    Why is lifetime costing considered a crucial tool for procurement professionals?

    <p>It enables them to make informed decisions about investments and procurements</p> Signup and view all the answers

    What does the total lifetime cost include?

    <p>All money and time spent on design, prototypes, research, and market research to establish requirements</p> Signup and view all the answers

    What is the significance of considering lifetime costing for organizations?

    <p>To achieve the best possible value for money in the long term</p> Signup and view all the answers

    According to Garvin's theory, which approach defines quality as completely down to personal preference and a person's perceived idea of quality?

    <p>User based</p> Signup and view all the answers

    What does the manufacturing-based approach to defining quality rely on?

    <p>Specifications to meet the requirement</p> Signup and view all the answers

    In the context of quality, what does success equate to within an organisation?

    <p>Value</p> Signup and view all the answers

    What is the primary purpose of quality standards, processes, and procedures in organisations?

    <p>To ensure acceptable quality of goods and services</p> Signup and view all the answers

    What is the primary focus of ISO 9001:2015?

    <p>Ensuring continuous improvement</p> Signup and view all the answers

    What is the main emphasis of Quality Assurance (QA) in total quality management (TQM)?

    <p>Preventing poor quality through planned activities</p> Signup and view all the answers

    What does ISO 9001 require organizations to do?

    <p>Set their own quality objectives and continuously improve processes</p> Signup and view all the answers

    What is an essential element of ISO accreditation for organizations?

    <p>Documenting quality management systems</p> Signup and view all the answers

    What does ISO 13485 specifically focus on?

    <p>Quality management for medical devices</p> Signup and view all the answers

    What is the main objective of ISO 9001:2015?

    <p>Helping organizations continually meet quality requirements</p> Signup and view all the answers

    What is the primary purpose of Quality Management System (QMS)?

    <p>Organizing activities to produce the best outcome</p> Signup and view all the answers

    What is a key aspect of ISO 9001:2015?

    <p>Involving risk, leadership, processes, supply chain, and efficiency</p> Signup and view all the answers

    What is the significance of ISO accreditation for certified organizations?

    <p>Optimizing operations and ensuring consistently high-quality ingredients</p> Signup and view all the answers

    What does Quality Assurance (QA) focus on in TQM?

    <p>Preventing poor quality through planned activities and checks</p> Signup and view all the answers

    What is the relevance of ISO 9001 for organizations?

    <p>It is relevant for all organizations, regardless of size or industry, and focuses on continuous improvement</p> Signup and view all the answers

    What is a fundamental requirement for organizations seeking ISO accreditation?

    <p>Meeting criteria such as documenting quality management systems</p> Signup and view all the answers

    What is the primary aim of the Six Sigma method in manufacturing?

    <p>To eliminate defects and reduce waste</p> Signup and view all the answers

    What is one of the potential disadvantages of striving for zero defects?

    <p>Potential demotivation</p> Signup and view all the answers

    What are the advantages of zero defects in manufacturing?

    <p>Waste reduction and cost savings</p> Signup and view all the answers

    What is the concept of zero defects related to?

    <p>The Six Sigma approach</p> Signup and view all the answers

    What did a global supplier of aircraft titanium casting parts face challenges in?

    <p>Managing production costs and maintaining zero-defects quality</p> Signup and view all the answers

    What are the advantages of QA systems and strategies?

    <p>Meeting customer requirements and removing defects before market release</p> Signup and view all the answers

    What does striving for perfection in zero defects improve?

    <p>The end product's quality and reduces waste in the project</p> Signup and view all the answers

    What are the potential disadvantages of zero defects?

    <p>Potential demotivation</p> Signup and view all the answers

    What did the organization do to address challenges in managing production costs and delivery time?

    <p>Changed the production process and implemented faster and more efficient inspection</p> Signup and view all the answers

    What is the aim of zero defects and Six Sigma in manufacturing?

    <p>To improve quality, reduce waste, and enhance processes for increased profitability and customer satisfaction</p> Signup and view all the answers

    What does the concept of zero defects aim to supply?

    <p>Faultless products</p> Signup and view all the answers

    What does the Six Sigma method seek to eliminate?

    <p>Defects</p> Signup and view all the answers

    What is a key responsibility for procurement professionals in ensuring product or service quality?

    <p>Conducting supplier evaluations to ensure products or services meet required quality standards</p> Signup and view all the answers

    What can be incorporated into a supplier contract to maintain quality?

    <p>Incentives for meeting key performance indicators (KPIs) and consequences for not meeting them</p> Signup and view all the answers

    What approach can help organizations maintain an acceptable level of quality?

    <p>Internal quality procedures, such as the quality circle approach</p> Signup and view all the answers

    What is a key consideration in assessing the quality of supplies?

    <p>Using specifications to ensure products or services are ordered and delivered as required</p> Signup and view all the answers

    What is a crucial aspect of supplier evaluation for procurement professionals?

    <p>Investigating if potential suppliers can supply products at the required quality standard</p> Signup and view all the answers

    What can be introduced to promote continuous quality standards for suppliers?

    <p>Key performance indicators (KPIs)</p> Signup and view all the answers

    What may suppliers be required to hold or undergo to ensure quality standards?

    <p>A formal quality standard or audits by the buying organization</p> Signup and view all the answers

    What can be incorporated into a supplier contract to maintain quality?

    <p>Incentives for meeting key performance indicators (KPIs) and consequences for not meeting them</p> Signup and view all the answers

    What is a key responsibility for procurement professionals in ensuring product or service quality?

    <p>Conducting supplier evaluations to ensure products or services meet required quality standards</p> Signup and view all the answers

    What approach can help organizations maintain an acceptable level of quality?

    <p>Internal quality procedures, such as the quality circle approach</p> Signup and view all the answers

    What is a key consideration in assessing the quality of supplies?

    <p>Using specifications to ensure products or services are ordered and delivered as required</p> Signup and view all the answers

    What is a crucial aspect of supplier evaluation for procurement professionals?

    <p>Investigating if potential suppliers can supply products at the required quality standard</p> Signup and view all the answers

    What is the primary focus of Quality Control (QC) in measuring quality?

    <p>Correcting defects</p> Signup and view all the answers

    What is a key Supplier Key Performance Indicator (KPI) related to quality?

    <p>Less than 2% goods rejection</p> Signup and view all the answers

    What contributes to improving quality and ensuring customer satisfaction?

    <p>Process refinement</p> Signup and view all the answers

    What is a crucial factor impacting external lead times in procurement?

    <p>Raw material availability</p> Signup and view all the answers

    What is the primary objective of Material Requirements Planning (MRP) systems?

    <p>Ensuring availability of materials</p> Signup and view all the answers

    What is a consequence of manual processes for procurement?

    <p>Slower internal lead times</p> Signup and view all the answers

    What emphasizes the need for prompt action in identifying and raising requisitions for needed products?

    <p>Efficiency of the workforce</p> Signup and view all the answers

    What facilitates quick reactions to requisitions, reducing internal lead times?

    <p>An up-to-date and evaluated supplier database</p> Signup and view all the answers

    What is crucial to avoid delays in procurement and extend total lead times?

    <p>Attention to detail in requisitions</p> Signup and view all the answers

    What can hinder raw material availability and impact external lead times?

    <p>International trade disagreements</p> Signup and view all the answers

    What is crucial to minimizing lead times and ensuring quality in procurement?

    <p>Timely and efficient procurement processes</p> Signup and view all the answers

    What is crucial for planning production and minimizing inventory value?

    <p>MRP systems</p> Signup and view all the answers

    What is the primary purpose of a blanket order in procurement?

    <p>To provide guaranteed supply, set prices, and lower stock holding levels</p> Signup and view all the answers

    What are the downsides of blanket orders in procurement?

    <p>Potential financial penalties for inaccurate forecasts and excess inventory</p> Signup and view all the answers

    What does the Just in Time (JIT) system aim to achieve in inventory management?

    <p>Ensure stock arrives just in time for production</p> Signup and view all the answers

    What are the potential consequences of high inventory levels in procurement?

    <p>Cash flow issues, potential obsolescence, and decreased profitability</p> Signup and view all the answers

    What is the primary focus of the MRP system in procurement?

    <p>Automate the procurement process by notifying the buyer about product requirements</p> Signup and view all the answers

    What is the main purpose of the buyer's decision-making process in procurement?

    <p>To evaluate cost savings against inventory costs, considering bulk purchase discounts</p> Signup and view all the answers

    What are the inventory costs typically associated with in procurement?

    <p>Storage, salaries for management, insurance, and depreciation</p> Signup and view all the answers

    What are the key theories mentioned for reducing excess inventory in procurement?

    <p>Just in Time (JIT) and Kanban</p> Signup and view all the answers

    What is the primary advantage of a blanket order in procurement?

    <p>Guaranteed supply</p> Signup and view all the answers

    What is the main downside of a blanket order in procurement?

    <p>Potential financial penalties for inaccurate forecasts and excess inventory</p> Signup and view all the answers

    What is the focus of the Just in Time (JIT) system in procurement?

    <p>Ensuring stock arrives just in time for production</p> Signup and view all the answers

    What are the potential consequences of high inventory levels in procurement?

    <p>Cash flow issues, potential obsolescence, and decreased profitability</p> Signup and view all the answers

    What is the primary purpose of expediting in procurement?

    <p>To track the progress of an order from being received with the supplier to when the goods or services are physically delivered</p> Signup and view all the answers

    What does total lead time in procurement refer to?

    <p>The complete amount of time from the initial identification of the need to when the goods are physically available for the organisation to use</p> Signup and view all the answers

    What is the significance of evaluating and considering factors affecting total lead time in procurement?

    <p>To ensure that products arrive as needed to keep an organisation running</p> Signup and view all the answers

    What is the role of an expeditor within procurement?

    <p>To ensure that the supplier has received the order that the buyer has placed</p> Signup and view all the answers

    What is a crucial factor for supplier selection in procurement, based on the text?

    <p>Supplier delivery performance</p> Signup and view all the answers

    What can late deliveries lead to, as mentioned in the text?

    <p>Production stoppage, customer dissatisfaction, and loss of business</p> Signup and view all the answers

    What is the purpose of measuring delivery performance through Key Performance Indicators (KPIs) outlined in the supplier's contract?

    <p>To assess and track supplier's delivery performance</p> Signup and view all the answers

    What action did Emma, the buyer at Katie's Keyrings Ltd, take in response to the split ring supplier's price increase?

    <p>Sent out RFQs to other potential suppliers to explore cost-saving options</p> Signup and view all the answers

    What can poor delivery performance by a supplier lead to, according to the text?

    <p>Justified contract termination</p> Signup and view all the answers

    What is the primary focus of the expediting process in procurement, as mentioned in the text?

    <p>Maintaining contact with the supplier during manufacturing</p> Signup and view all the answers

    What is the potential consequence of order acknowledgement discrepancies, according to the text?

    <p>Problems upon goods reception</p> Signup and view all the answers

    What is the significance of effective expediting in procurement, as mentioned in the text?

    <p>Crucial for delivery preparation and potential delay management</p> Signup and view all the answers

    What is a key consideration for Katie's Keyrings Ltd in exploring cost-saving options for the split ring supplier?

    <p>Supplier's ability to guarantee on-time and in-full deliveries</p> Signup and view all the answers

    What potential challenge did Emma encounter when sending out RFQs to potential suppliers?

    <p>Some potential suppliers cannot guarantee on-time and in-full deliveries</p> Signup and view all the answers

    What consequence can late deliveries by a supplier lead to, as mentioned in the text?

    <p>Production stoppage, customer dissatisfaction, and loss of business</p> Signup and view all the answers

    What is the potential outcome of poor delivery performance by a supplier, according to the text?

    <p>Justified contract termination</p> Signup and view all the answers

    What technology can be involved in a Kanban system?

    <p>RFID tracking devices and automatic e-orders</p> Signup and view all the answers

    What is the primary aim of a Just-In-Time (JIT) system?

    <p>Maintain low inventory levels and specific lead and delivery times</p> Signup and view all the answers

    What does the Total Cost of Acquisition (TCA) encompass?

    <p>Tooling, inventory-carrying costs, and remedy</p> Signup and view all the answers

    What is a key factor for the effectiveness of the procurement function?

    <p>Continuous attention and effective cross-functional communication</p> Signup and view all the answers

    What did Bellevue Medical Center aim to achieve by piloting a two-bin Kanban system?

    <p>Reduce time spent on supply chain activities and increase time with patients</p> Signup and view all the answers

    What does the Kanban system aim to ensure?

    <p>Constant component availability without surplus</p> Signup and view all the answers

    What does Cardinal Health's two-bin Kanban solution combine?

    <p>Lean management techniques with real-time consumption patterns</p> Signup and view all the answers

    What is involved in setting value-for-money criteria?

    <p>Considering pricing, costs, quality, timescales, quantities, and locations</p> Signup and view all the answers

    What does the procurement function involve evaluating to suggest improvements for supplier performance?

    <p>Data</p> Signup and view all the answers

    What is the primary focus of the Kanban system?

    <p>Reducing time spent locating supplies</p> Signup and view all the answers

    What is the aim of the Kanban system in terms of inventory?

    <p>Ensure constant component availability without surplus</p> Signup and view all the answers

    What contributes to the lowering of inventory costs according to the text?

    <p>Both JIT and Kanban</p> Signup and view all the answers

    What is a crucial factor for supplier selection in procurement, based on the text?

    <p>Supplier delivery performance</p> Signup and view all the answers

    What can late deliveries lead to, as mentioned in the text?

    <p>Production stoppage, customer dissatisfaction, and loss of business</p> Signup and view all the answers

    What is the purpose of measuring delivery performance through Key Performance Indicators (KPIs) outlined in the supplier's contract?

    <p>To assess and track supplier's delivery performance</p> Signup and view all the answers

    What action did Emma, the buyer at Katie's Keyrings Ltd, take in response to the split ring supplier's price increase?

    <p>Sent out RFQs to other potential suppliers to explore cost-saving options</p> Signup and view all the answers

    What can poor delivery performance by a supplier lead to, according to the text?

    <p>Justified contract termination</p> Signup and view all the answers

    What is the primary focus of the expediting process in procurement, as mentioned in the text?

    <p>Maintaining contact with the supplier during manufacturing</p> Signup and view all the answers

    What is the potential consequence of order acknowledgement discrepancies, according to the text?

    <p>Problems upon goods reception</p> Signup and view all the answers

    What is the significance of effective expediting in procurement, as mentioned in the text?

    <p>Crucial for delivery preparation and potential delay management</p> Signup and view all the answers

    What is a key consideration for Katie's Keyrings Ltd in exploring cost-saving options for the split ring supplier?

    <p>Supplier's ability to guarantee on-time and in-full deliveries</p> Signup and view all the answers

    What potential challenge did Emma encounter when sending out RFQs to potential suppliers?

    <p>Some potential suppliers cannot guarantee on-time and in-full deliveries</p> Signup and view all the answers

    What consequence can late deliveries by a supplier lead to, as mentioned in the text?

    <p>Production stoppage, customer dissatisfaction, and loss of business</p> Signup and view all the answers

    What is the potential outcome of poor delivery performance by a supplier, according to the text?

    <p>Justified contract termination</p> Signup and view all the answers

    What technology can be involved in a Kanban system?

    <p>RFID tracking devices and automatic e-orders</p> Signup and view all the answers

    What is the primary aim of a Just-In-Time (JIT) system?

    <p>Maintain low inventory levels and specific lead and delivery times</p> Signup and view all the answers

    What does the Total Cost of Acquisition (TCA) encompass?

    <p>Tooling, inventory-carrying costs, and remedy</p> Signup and view all the answers

    What is a key factor for the effectiveness of the procurement function?

    <p>Continuous attention and effective cross-functional communication</p> Signup and view all the answers

    What did Bellevue Medical Center aim to achieve by piloting a two-bin Kanban system?

    <p>Reduce time spent on supply chain activities and increase time with patients</p> Signup and view all the answers

    What does the Kanban system aim to ensure?

    <p>Constant component availability without surplus</p> Signup and view all the answers

    What does Cardinal Health's two-bin Kanban solution combine?

    <p>Lean management techniques with real-time consumption patterns</p> Signup and view all the answers

    What is involved in setting value-for-money criteria?

    <p>Considering pricing, costs, quality, timescales, quantities, and locations</p> Signup and view all the answers

    What does the procurement function involve evaluating to suggest improvements for supplier performance?

    <p>Data</p> Signup and view all the answers

    What is the primary focus of the Kanban system?

    <p>Reducing time spent locating supplies</p> Signup and view all the answers

    What is the aim of the Kanban system in terms of inventory?

    <p>Ensure constant component availability without surplus</p> Signup and view all the answers

    What contributes to the lowering of inventory costs according to the text?

    <p>Both JIT and Kanban</p> Signup and view all the answers

    What does lifetime costing encompass?

    <p>Ongoing expenses and potential returns over the asset's lifespan</p> Signup and view all the answers

    What is the primary purpose of lifetime costing?

    <p>To evaluate the costs and benefits of investments and services over their entire lifespan</p> Signup and view all the answers

    What is the significance of ISO accreditation for certified organizations?

    <p>It ensures quality and compliance with international standards</p> Signup and view all the answers

    What are the advantages of lifetime costing?

    <p>It provides a long-term view of investment costs and time to see returns</p> Signup and view all the answers

    What is the aim of zero defects and Six Sigma in manufacturing?

    <p>To reduce the number of defects to zero</p> Signup and view all the answers

    What is a key consideration in assessing the quality of supplies?

    <p>The supplier's commitment to quality standards</p> Signup and view all the answers

    What does Table 1.3 in the text provide?

    <p>It details the advantages and disadvantages of lifetime costing</p> Signup and view all the answers

    What can hinder raw material availability and impact external lead times?

    <p>Supplier location</p> Signup and view all the answers

    What is a key aspect of ISO 9001:2015?

    <p>It emphasizes customer satisfaction and continuous improvement</p> Signup and view all the answers

    What is crucial to minimizing lead times and ensuring quality in procurement?

    <p>Supplier location and quality control</p> Signup and view all the answers

    What is linked to efficiency within procurement?

    <p>Quality control</p> Signup and view all the answers

    What does the concept of lifetime costing extend beyond?

    <p>Ongoing expenses and potential returns over the asset's lifespan</p> Signup and view all the answers

    What is the primary focus of the Kanban system?

    <p>Ensuring constant component availability without surplus</p> Signup and view all the answers

    What is a key factor for the effectiveness of the procurement function?

    <p>Evaluating data to monitor, measure, and suggest improvements for supplier performance</p> Signup and view all the answers

    What is encompassed in the total cost of acquisition (TCA)?

    <p>Pricing, costs, quality, timescales, quantities, and locations</p> Signup and view all the answers

    What is the significance of ISO 9001 for organizations?

    <p>It focuses on continuous improvement in product and service quality</p> Signup and view all the answers

    What contributes to improving quality and ensuring customer satisfaction?

    <p>Implementing Lean management techniques with real-time consumption patterns</p> Signup and view all the answers

    What does the Kanban system aim to ensure?

    <p>Constant component availability without any replenishment process</p> Signup and view all the answers

    What is a key consideration in assessing the quality of supplies?

    <p>Considering lifetime costing and potential supplier issues</p> Signup and view all the answers

    What is a consequence of manual processes for procurement?

    <p>Inefficiency and potential errors</p> Signup and view all the answers

    What is the aim of the Just-In-Time (JIT) system in inventory management?

    <p>To maintain low inventory levels and specific lead and delivery times</p> Signup and view all the answers

    What is the relevance of ISO accreditation for certified organizations?

    <p>It demonstrates a commitment to continuous improvement in product and service quality</p> Signup and view all the answers

    What is a key responsibility for procurement professionals in ensuring product or service quality?

    <p>Evaluating data to monitor and suggest improvements for supplier performance</p> Signup and view all the answers

    What can be incorporated into a supplier contract to maintain quality?

    <p>Evaluating data to monitor and measure supplier performance</p> Signup and view all the answers

    What is the potential consequence of late deliveries, as mentioned in the text?

    <p>Customer dissatisfaction and loss of business</p> Signup and view all the answers

    What is the primary purpose of the expediting process in procurement?

    <p>Managing supplier's delivery performance</p> Signup and view all the answers

    What is the significance of measuring delivery performance through Key Performance Indicators (KPIs) outlined in the supplier's contract?

    <p>Evaluating supplier's adherence to delivery timelines</p> Signup and view all the answers

    What is a crucial factor for supplier selection in procurement, based on the text?

    <p>Supplier delivery performance</p> Signup and view all the answers

    What is a potential consequence of poor delivery performance by a supplier, according to the text?

    <p>Justified contract termination</p> Signup and view all the answers

    What is the primary focus of ISO 9001:2015?

    <p>Quality management system</p> Signup and view all the answers

    What is the main purpose of the buyer's decision-making process in procurement?

    <p>Selecting the best suppliers</p> Signup and view all the answers

    What is the primary focus of Quality Assurance (QA) in total quality management (TQM)?

    <p>Ensuring product quality and customer satisfaction</p> Signup and view all the answers

    What does the term 'lifetime costing' encompass?

    <p>Total cost of ownership over the product's lifespan</p> Signup and view all the answers

    What is the relevance of ISO 13485?

    <p>Quality management for medical devices</p> Signup and view all the answers

    What is involved in setting value-for-money criteria?

    <p>Balancing quality and cost considerations</p> Signup and view all the answers

    What does the concept of lifetime costing extend beyond?

    <p>Initial purchase cost</p> Signup and view all the answers

    What is the primary purpose of using milestones in procurement?

    <p>To monitor deadlines and ensure they are met</p> Signup and view all the answers

    What is the critical factor in determining if an activity is a milestone in procurement planning?

    <p>The impact on the deadline</p> Signup and view all the answers

    What is the main purpose of a Gantt chart in procurement?

    <p>To monitor milestones being met</p> Signup and view all the answers

    What negative outcome can early deliveries or deliveries with excess quantities cause for an organization?

    <p>Cash flow problems</p> Signup and view all the answers

    What is a potential consequence of high inventory levels in procurement?

    <p>Cash flow problems</p> Signup and view all the answers

    What is the significance of scheduling in procurement?

    <p>To ensure products or services are received when needed</p> Signup and view all the answers

    What should workers at Goods-ln do if deliveries are early?

    <p>Speak with the buyer to decide if they should be accepted or rejected</p> Signup and view all the answers

    What can early deliveries or excessive quantities of goods lead to for an organization?

    <p>Cash flow problems</p> Signup and view all the answers

    What is the primary focus of Quality Control (QC) in measuring quality?

    <p>Inspecting and testing products</p> Signup and view all the answers

    What is the aim of zero defects and Six Sigma in manufacturing?

    <p>To minimize errors and defects in processes</p> Signup and view all the answers

    What is the primary purpose of using planned milestones in procurement?

    <p>To aid in achieving on-time-and-in-full deliveries</p> Signup and view all the answers

    What is the critical factor in determining if an activity is a milestone in procurement planning?

    <p>The impact on the deadline</p> Signup and view all the answers

    What is the primary purpose of milestones in procurement?

    <p>To define tasks that affect deadlines and move the project forward</p> Signup and view all the answers

    What can early or excessive deliveries lead to?

    <p>Cash flow problems</p> Signup and view all the answers

    What is the significance of accurate scheduling in procurement?

    <p>To manage the arrival of goods or services and avoid the negative impacts of late or early deliveries</p> Signup and view all the answers

    What is the primary focus of milestones in procurement?

    <p>To define tasks that affect deadlines and move the project forward</p> Signup and view all the answers

    What can insufficient capacity and logistical issues arise from?

    <p>Early or excessive deliveries</p> Signup and view all the answers

    What is the primary purpose of a Gantt chart in procurement?

    <p>To monitor progress and enable organizations to react and plan accordingly if milestones are not met</p> Signup and view all the answers

    What is the primary aim of scheduling in procurement?

    <p>To manage the arrival of goods or services and avoid the negative impacts of late or early deliveries</p> Signup and view all the answers

    What is the significance of accurate scheduling in procurement?

    <p>To manage the arrival of goods or services and avoid the negative impacts of late or early deliveries</p> Signup and view all the answers

    What are milestones crucial for in procurement?

    <p>Monitoring progress and enabling organizations to react and plan accordingly if they are not met</p> Signup and view all the answers

    What can late deliveries lead to, as mentioned in the text?

    <p>Cash flow problems</p> Signup and view all the answers

    What is the primary advantage of accurate scheduling in procurement?

    <p>Avoiding negative impacts of late or early deliveries</p> Signup and view all the answers

    What is the primary purpose of negotiating with suppliers in procurement?

    <p>To reduce costs and ensure timely delivery</p> Signup and view all the answers

    Study Notes

    Key Considerations in Procurement

    • Currency exchange rates can fluctuate, impacting international trade; fixed exchange rates are beneficial for procurement.
    • Freight costs, including transport and overall competitiveness, need to be established upfront.
    • Maintenance costs, warranty value, and environmental policies are crucial factors to consider in procurement decisions.
    • Supplier reputation and adherence to environmental policies should be evaluated.
    • Order quantities must meet demand without causing excessive inventory costs.
    • Packaging type, payment terms, and quality of products are significant considerations in procurement.
    • The Five Rights of Procurement (quantity, quality, time, place, price) serve as key objectives in procurement.
    • Vai's Vegetable Pickers scenario illustrates the importance of adhering to the Five Rights of Procurement.
    • AppZy activity encourages applying the Five Rights of Procurement in creating a purchase order.
    • Lifetime costing encompasses the total anticipated costs of a fixed asset during its lifetime.
    • Figure 1.2 illustrates the concept of lifetime costing.
    • The Five Rights of Procurement (quantity, quality, time, place, price) are essential for effective procurement decision-making.

    Lifetime Costing and Its Application in Procurement

    • Lifetime costing provides organizations with a long-term view of investment costs, time to see returns, and justification for expenditure.
    • Figure 1.4 illustrates the basic concept of lifetime costing, including pre-purchase costs, item purchase costs, operating costs, maintenance costs, insurance costs, and disposal costs.
    • Procurement professionals use lifetime costing to ensure good value for money when sourcing assets or services for an organization.
    • The total lifetime cost includes all money and time spent on design, prototypes, research, and market research to establish requirements.
    • An example of lifetime costing is sourcing a new machine for a factory, which involves considering purchase price, transportation costs, running costs, manpower, maintenance costs, insurance costs, financing costs, warranty versus call outs, and disposal costs.
    • The advantages and disadvantages of lifetime costing are detailed in Table 1.3, providing a comprehensive overview of its benefits and drawbacks.
    • The case study of Rigger's Roads Ltd demonstrates the application of lifetime costing in a real-world scenario, as the company contracts with the public sector for road building and repair services.
    • A hospital manager has requested authorities to consider moving the hospital's access route to address traffic issues, prompting the procurement department to seek estimates for the road's lifespan and required maintenance.
    • Lifetime costing is a crucial tool for procurement professionals, enabling them to comprehensively evaluate the costs and benefits of investments and services over their entire lifespan.
    • It encompasses various cost factors such as running costs, maintenance, insurance, financing, warranty, and disposal, providing a holistic view of the total cost of ownership.
    • The concept of lifetime costing extends beyond the initial purchase price, taking into account ongoing expenses and the potential for returns over the asset's lifespan.
    • By considering lifetime costing, organizations can make informed decisions about investments and procurements, ensuring that they achieve the best possible value for money in the long term.

    Supplier KPIs and Quality Measurement

    • Supplier Key Performance Indicators (KPIs) related to quality include on-time and in-full delivery, adherence to specification requirements, less than 2% goods rejection, and timely rework return.
    • Quality Control (QC) is used to measure quality by correcting defects, while Quality Assurance (QA) focuses on preventing defects.
    • Quality can be improved through process refinement, material changes, waste reduction, and cost elimination, to ensure customer satisfaction.
    • Lead times are crucial in procurement and encompass internal, external, and total lead times, reflecting the time required for manufacturing and shipment.
    • Material Requirements Planning (MRP) systems automate the procurement function, ensuring timely generation of material requisitions and scheduling orders.
    • An MRP system's objectives include ensuring availability of materials, planning production, and minimizing inventory value, leading to faster internal lead times.
    • Manual processes for procurement result in slower internal lead times, with more risks and inefficiencies compared to automated MRP systems.
    • The efficiency of the workforce impacts internal lead times, emphasizing the need for prompt action in identifying and raising requisitions for needed products.
    • An up-to-date and evaluated supplier database facilitates quick reactions to requisitions, reducing internal lead times.
    • Attention to detail in requisitions is crucial to avoid delays in procurement and extend total lead times.
    • External lead times are affected by factors such as raw material availability, which can be hindered by international trade disagreements.
    • Ensuring timely and efficient procurement processes, including supplier database management and attention to detail, is crucial to minimizing lead times and ensuring quality.

    Optimizing Procurement and Inventory Management

    • Procurement department should closely collaborate with requisition generators to understand needs and schedule orders effectively
    • MRP system automates procurement process by notifying the buyer about product requirements
    • Buyers need to determine an effective minimum order quantity (MOQ) and accurate scheduling for each product
    • Buyer's decision-making involves evaluating cost savings against inventory costs, considering bulk purchase discounts
    • Blanket orders provide a strategic way to schedule orders and require accurate forecasting for success
    • Blanket orders have a set price for goods/services for the order duration and call-off schedules for suppliers
    • Advantages of blanket orders include guaranteed supply, set prices, and lower stock holding levels
    • Downsides of blanket orders include potential financial penalties for inaccurate forecasts and excess inventory
    • Inventory costs include storage, salaries for management, insurance, and depreciation
    • High inventory levels can lead to cash flow issues, potential obsolescence, and decreased profitability
    • Just in time (JIT) and Kanban are inventory management theories to reduce excess inventory
    • JIT system ensures stock arrives just in time for production, refining stock arrival procedures

    Procurement and Inventory Management

    • Just-In-Time (JIT) system aims to maintain low inventory levels and specific lead and delivery times to prevent stock management issues.
    • JIT system requires provisions for potential supplier issues to prevent production line halts.
    • Kanban system ensures constant component availability without surplus, using a replenishment process.
    • Kanban system can involve technology like bar code readers and automatic e-orders, but the process theory remains the same.
    • Both JIT and Kanban contribute to lowering inventory costs.
    • In healthcare, Bellevue Medical Center piloted a two-bin Kanban system, reducing time spent on supply chain activities and increasing time with patients.
    • The Kanban system reduced time spent locating supplies, compared to previous scanning systems.
    • Cardinal Health's two-bin Kanban solution combines Lean management techniques with real-time consumption patterns to calculate correct bin quantities.
    • Procurement function's effectiveness relies on continuous attention and effective cross-functional communication.
    • Setting value-for-money criteria involves considering pricing, costs, quality, timescales, quantities, and locations.
    • Total cost of acquisition (TCA) includes more than just the price, encompassing other costs such as tooling, duty, inventory-carrying costs, inspection, and remedy.
    • Procurement involves evaluating data to monitor, measure, and suggest improvements for supplier performance.

    Procurement and Scheduling in Business

    • Emma faces a dilemma of choosing between cheaper goods with uncertain delivery or a 20% price increase to ensure timely delivery, which could be more costly if production stops.
    • Emma decides to negotiate with her current supplier, and they agree on a 15% increase if she places larger orders, leading to a new contract being signed.
    • Milestones are crucial in procurement, particularly in manufacturing, as they help monitor deadlines, identify bottlenecks, and track important dates.
    • Milestones can be defined by tasks that affect deadlines and move the project forward, and are monitored using a Gantt chart.
    • The Gantt chart tracks activities and their completion, allowing for adjustments if delays occur, impacting the end date of the objective.
    • Milestones help monitor progress and enable organizations to react and plan accordingly if they are not met.
    • Milestones in procurement are not solely linked to delivery but can also relate to quality or contracts, such as goods meeting ISO standards or contract signings.
    • Scheduling is essential for ensuring products or services are received in the required quantities and at the right time to avoid harmful effects on the business.
    • Early or excessive deliveries can lead to high inventory costs, cash flow problems, insufficient capacity, and logistical issues for an organization.
    • Early deliveries could result in additional inventory costs and cash flow problems, as the organization may not have the funds to pay for the goods.
    • Insufficient capacity and logistical issues can also arise from early or excessive deliveries, creating problems in efficient operations and disrupting planned processes.
    • Accurate scheduling in procurement is crucial for managing the arrival of goods or services and avoiding the negative impacts of late or early deliveries.

    Studying That Suits You

    Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

    Quiz Team

    Description

    Test your knowledge of key considerations in procurement and the application of lifetime costing in this quiz. Explore topics such as currency exchange rates, freight costs, supplier reputation, the Five Rights of Procurement, and the comprehensive evaluation of costs and benefits over an asset's entire lifespan. Gain insights into effective procurement decision-making and the long-term view of investment costs.

    More Like This

    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser