Purchasing and Strategic Sourcing Quiz

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Questions and Answers

Purchasing professionals must assess potential suppliers based on their ability to deliver quality merchandise at a suitable __ on time.

price

What is the main focus of purchasing management?

Handling customer service

Overseeing marketing strategies

Managing the flow of goods and services (correct)

Controlling manufacturing operations

Purchasing managers need knowledge of tax laws and transportation logistics.

True

What is the role of Certified Professional in Supply Management (CPSM)?

guide the organization’s acquisition procedures and standards Signup and view all the answers

Which of the following are examples of critical organizational processes that are part of supply chain management?

Customer-order fulfillment Signup and view all the answers

Strategic purchasing involves directing all activities of the purchasing function toward opportunities consistent with the firm's capabilities to achieve its long-term goals.

True Signup and view all the answers

What is the primary selection criteria for suppliers mentioned in the text?

quality Signup and view all the answers

Strategic purchasing is the process of planning, implementing, evaluating, and controlling ____________ decisions.

strategic and operating Signup and view all the answers

What is one of the most important duties of purchasing?

Evaluate and select suppliers Signup and view all the answers

Why is the transmittal of the purchase order considered a contractual offer?

It constitutes a contractual offer in legal terms. Signup and view all the answers

Purchasing personnel should not request assistance from other departments when identifying or evaluating potential suppliers.

False Signup and view all the answers

What are some reasons for allowing other departments to view purchase orders and incoming receipts?

To gain visibility to future accounts payable obligations Signup and view all the answers

What is 'maverick buying'?

Maverick buying refers to a situation where sellers directly contact and attempt to sell to end users, bypassing the purchasing department. Signup and view all the answers

Purchasing must act as the primary contact with __________.

suppliers Signup and view all the answers

Policies provide a framework for consistent decision making and action within an organization.

True Signup and view all the answers

Match the following principles with positive buyer-seller relationships:

Treating suppliers fairly and with integrity = Supporting and developing suppliers Providing prompt payment to suppliers = Encouraging innovative ideas sharing Developing open communication channels = Informing suppliers about contract decisions Establishing a fair process to award contracts = Principles for positive buyer-seller relationships Signup and view all the answers

Match the purchasing process stages with their descriptions:

Forecast and plan requirement = Review spending patterns and prepare a forecast of purchases Need clarification (requisition) = Meet with internal customers to discuss needs Supplier identification/selection = Select a supplier after evaluating capabilities Contract/purchase order generation = Draft a legally binding document detailing purchase details Receipt of material or service and documents = Receive goods and document delivery Settlement, payment, and measurement of performance = Finalize payment and evaluate supplier performance Signup and view all the answers

What are some of the supplier selection criteria mentioned in the content?

Price/cost competitiveness, Product quality, Delivery performance, Financial condition, Engineering and manufacturing technical competence, Management of its own suppliers, Management capability, Ability to work with the customer, Potential for innovation Signup and view all the answers

What are some topics covered in the principles and guidelines for awarding purchase contracts?

Buyer’s authority to award a contract within a certain dollar limit, Conditions where the competitive bid process is and is not acceptable Signup and view all the answers

What are the main stages included in the purchasing process?

Requisitioning Signup and view all the answers

Integrated Supply Management focuses on managing the nonpurchasing consequences of purchasing decisions.

True Signup and view all the answers

Procurement is the acquisition of goods and/or services at the best possible total cost of ownership, in the right __________ and quality, at the right time, in the right place, and from the right source.

quantity Signup and view all the answers

What are the two distinct categories into which procurement activities are often split based on consumption purposes?

Direct procurement and indirect procurement Signup and view all the answers

Which of the following are examples of direct procurement? (Select all that apply)

Components and parts Signup and view all the answers

Direct procurement activities concern items that are part of finished products.

True Signup and view all the answers

Procure to pay (P2P) is a new generation procurement methodology pioneered by ___.

IBM Signup and view all the answers

Match the procurement phase with its description:

Negotiation = Establishing price, availability, and customization options Fulfillment = Completing supplier preparation, shipment, and delivery Renewal = Reviewing company experience with the product or service Signup and view all the answers

Define 'designing an organization' as per the provided content.

Designing an organization refers to the process of assessing and selecting the structure and formal system of communication, division of labor, coordination, control, authority, and responsibility required to achieve an organization’s goals. Signup and view all the answers

What are the main attributes differentiating organization structures?

Centralization and formalization Signup and view all the answers

Centralized purchasing organization can be found applicable in case of similarities between ______ company locations.

multiple Signup and view all the answers

In a centralized purchasing organization, buyers often have direct and single-point contact with suppliers.

True Signup and view all the answers

Match the following organization types with their characteristics:

Machine bureaucracy = High formality and centralization Entrepreneurial organization = Low formalization and centralized control Professional organization = High formalization and shared decision-making authority Adhocracy = Low formalization and decentralized decision-making Signup and view all the answers

What determines the usefulness of organizational design?

external conditions Signup and view all the answers

What are the two conclusions regarding companies and organizational structure?

Companies can change their organizational structure over time. Signup and view all the answers

The ongoing trend of increasing centralization and reducing the number of suppliers indicates a shift towards _______ in the graph.

centralization Signup and view all the answers

Match the following functions with their responsibilities:

Corporate procurement officer (CPO) = Developing corporate purchasing strategies, systems, reporting Corporate buyer = Strategic commodities, large volumes, high investment projects Purchasing engineer = Materials planning, liaisons between purchasing and R&D Material planners = Monitoring suppliers quality and delivery performance, MRO supplies management Signup and view all the answers

Is choosing an organizational design simple? Explain why firms would change their supply management organization structure.

No, choosing an organizational design is not simple. Firms change their supply management organization structure due to factors like market changes, technological advancements, or operational inefficiencies. Signup and view all the answers

Why is a function’s placement in the organizational hierarchy important?

A function's placement in the organizational hierarchy is important because it determines its authority, communication channels, reporting structure, and level of decision-making power. Signup and view all the answers

What factors contribute to the increasing importance of purchasing within the organizational hierarchy?

Factors like globalization, supply chain disruptions, economic volatility, and evolving customer demands contribute to the increasing importance of purchasing within the organizational hierarchy. Signup and view all the answers

Why would the importance of purchasing diminish under a supply chain management structure?

The importance of purchasing may diminish under a supply chain management structure because responsibilities may be more distributed across different functions, reducing purchasing's singular focus and influence. Signup and view all the answers

Discuss the two most important benefits of centralized purchasing authority.

Centralized purchasing authority can lead to better volume discounts and supplier relationships, as well as improved standardization and control over purchasing processes. Signup and view all the answers

Discuss the two most important benefits of decentralized purchasing authority.

Decentralized purchasing authority can result in faster decision-making and customization to local needs, as well as increased flexibility and responsiveness to market changes. Signup and view all the answers

What factors influence whether a firm centralizes or decentralizes its supply management organization?

Factors like company size, industry dynamics, geographical spread, and strategic goals influence whether a firm centralizes or decentralizes its supply management organization. Signup and view all the answers

What is the difference between strategic and operational purchasing? Provide examples of each.

Strategic purchasing focuses on long-term supplier relationships and market analysis, while operational purchasing deals with day-to-day transactions and order processing. An example of strategic purchasing could be negotiating long-term contracts, while operational purchasing involves raising purchase orders. Signup and view all the answers

Discuss the logic behind physically separating strategic and operational buyers.

Physically separating strategic and operational buyers allows each group to focus on their specific tasks without interference, leading to more efficient and effective purchasing processes. Signup and view all the answers

What is the role of a purchasing research staff?

The purchasing research staff is responsible for market analysis, supplier evaluation, trend identification, and cost analysis to support strategic decision-making. Signup and view all the answers

Discuss the advantages of using a cross-functional team to evaluate and select suppliers.

Cross-functional teams bring diverse expertise and perspectives, promote innovation, enhance decision-making, and ensure alignment with multiple organizational goals when evaluating and selecting suppliers. Signup and view all the answers

What are some barriers to using teams in purchasing and supply chain management?

Barriers to using teams in purchasing and supply chain management include resistance to change, communication challenges, conflicting priorities, and difficulty in integrating diverse viewpoints and expertise. Signup and view all the answers

What is the logic behind co-locating purchasing personnel with internal customers?

Co-locating purchasing personnel with internal customers facilitates better communication, understanding of customer needs, faster decision-making, and building stronger relationships to meet organization-wide objectives effectively. Signup and view all the answers

Study Notes

Purchasing and Supply Process

Purchasing refers to a business or organization attempting to acquire goods or services to accomplish its goals
Purchasing management directs the flow of goods and services in a company and handles all data relating to contact with suppliers
Effective purchasing management requires knowledge of the supply chain, business and tax laws, invoice and inventory procedures, and transportation and logistics issues

Difference between Purchasing and Supply Management

Purchasing is a functional group and a functional activity, whereas supply management is a more inclusive concept that involves a strategic approach to planning for and acquiring an organization's current and future needs
Supply management involves managing the supply base, utilizing a process orientation in conjunction with cross-functional teams to achieve the organizational mission

Supply Chain Management

Supply chain management involves proactively managing the two-way movement and coordination of goods, services, information, and funds from raw material through end user
A supply chain is a set of three or more organizations linked directly by one or more of the upstream or downstream flows of products, services, finances, and information from a source to a customer
Supply chain management requires the coordination of activities and flows that extend across boundaries and involves managing the supply base, supply chain orientation, and process orientation

Strategic Purchasing

Strategic purchasing is the process of planning, implementing, evaluating, and controlling strategic and operating purchasing decisions
Strategic purchasing involves planning, implementing, and controlling activities to achieve long-term goals and objectives

Purchasing Objectives

Objective 1: Supply Continuity - ensuring an uninterrupted flow of high-quality goods and services that internal customers require
Objective 2: Manage the Purchasing Process Efficiently and Effectively - managing internal operations efficiently and effectively, and performing tasks such as determining staffing levels, developing and adhering to administrative budgets, and providing professional training and growth opportunities
Objective 3: Develop Supply Base Management - selecting, developing, and maintaining supply, and improving existing suppliers and developing new suppliers
Objective 4: Develop Aligned Goals with Internal Functional Stakeholders - developing aligned goals with internal functional stakeholders, such as operations, engineering, and technical groups, to achieve common objectives### Purchasing Objectives
Purchasing must communicate closely with other functional groups, which are internal customers.
The objectives of purchasing are:
- Support organizational goals and objectives
- Develop integrated purchasing strategies that support organizational strategies
- Ensure effective communication and collaboration with internal customers
- Evaluate and select suppliers
- Review specifications
- Act as the primary contact with suppliers
- Determine the method of awarding purchase contracts

Purchasing Responsibilities

Purchasing has the legitimate authority to make decisions that fall within their span of control.
The purchasing department has the right to:
- Evaluate and select suppliers
- Review material specifications
- Act as the primary contact with suppliers
- Determine the method of awarding purchase contracts

Procure to Pay Process

The procure to pay process includes:
- Forecast and plan requirements
- Need clarification (requisition)
- Supplier identification/selection
- Contract/purchase order generation
- Receipt of material or service and documents
- Settlement, payment, and measurement of performance

Improving the Procure to Pay Process

E-procurement can improve the procure to pay process by:
- Automating the document generation process
- Electronically transmitting purchase documents to suppliers
- Reducing paperwork and handling
- Reducing the time between need recognition and order release
- Improving communication and reducing errors
- Reducing overhead costs in the purchasing area

Electronic Documents

Electronic documents used in the procure to pay process include:
- Purchase orders
- Purchase requisitions
- Request for quotations

Approval, Contract, and Purchase Order Preparation

After supplier selection, purchasing grants approval to purchase the product or service.
A purchase order is drafted, which includes:
- Quantity
- Material specification
- Quality requirements
- Price
- Delivery date
- Method of delivery
- Ship-to address
- Purchase order number
- Order due date

Importance of Purchasing

Purchasing is a critical function that can affect an organization's competitive advantage.
Purchasing can manage large amounts of resources through the purchasing process.
Effective purchasing can improve organizational performance and provide a strategic advantage.### Purchasing and Strategic Sourcing
Factors influencing importance of purchasing to an organization's success:
- Knowledge and skills required for a purchasing professional
- Challenges in integrating activities across the supply chain
- Performance areas benefiting from purchasing involvement
- Enablers of purchasing and supply chain excellence
- Relationship between growth in worldwide competition and evolution of supply chain concept

Purchasing Policies and Procedures

Objectives of purchasing function:
- Understanding key objectives of purchasing
- Understanding responsibilities of purchasing function
- Understanding purchasing process and role of e-procurement tools
- Understanding different types of purchases made by organizations
- Understanding how organizations improve the purchasing process
Policy overview:
- Definition of policy
- Importance of written and implied policies
- Advantages and disadvantages of policies
Characteristics of effective policies:
- Action-oriented
- Relevant
- Concise
- Unambiguous
Categories of purchasing policies:
- Defining role of purchasing
- Defining conduct of purchasing personnel
- Defining social and minority business objectives
- Defining buyer-seller relationships
- Defining operational issues

Origin and Scope of Purchasing Authority

Policy defining purchasing authority:
- Authority granted by executive committee
- Delegation of tasks to other departments or functions
- Areas where purchasing authority exists or does not exist

Purchasing Procedures

Principles and guidelines for awarding purchase contracts:
- Buyer's authority to award contracts
- Conditions where competitive bid process is or is not acceptable
Importance of reviewing purchasing policies and procedures:
- Ensuring they are up-to-date and relevant
- Avoiding potential consequences of outdated policies
Benefits of comprehensive policy and procedure manual:
- Supports efficient, effective, and consistent purchasing operations
- Provides guidance for employees

Integrated Supply Management

Importance of integration:
- Achieving integration across internal and external functions
- Managing related considerations
Role of cross-functional teams:
- Promoting integration
- Working with engineering and suppliers to develop new products and services

Purchasing Process

Eight stages of purchasing process:
- Requisitioning
- Approving
- Studying market
- Making purchase decision
- Placing orders
- Receipting goods and services
- Accounting goods and services
- Receiving invoices and making payment

Purchasing Management Process

Three stages of purchasing management process:
- Purchasing planning
- Purchasing tracking
- Purchasing reporting

Procurement

Definition of procurement:
- Acquiring goods and services at best possible total cost of ownership
- Considering quantity, quality, time, place, and source
Importance of procurement in SAP Business One:
- Supporting entire purchasing process
- Integrating with vendor and item master data
- Managing multiple currencies and item categories
- Applying discounts and taxes
- Recording goods receipts and invoices
- Managing accounts payable

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Test your knowledge of purchasing operations, structures, and strategic sourcing concepts, including supply management, competitive advantage, and more.

Purchasing and Strategic Sourcing Quiz

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Questions and Answers

Purchasing professionals must assess potential suppliers based on their ability to deliver quality merchandise at a suitable __ on time.

What is the main focus of purchasing management?

Purchasing managers need knowledge of tax laws and transportation logistics.

What is the role of Certified Professional in Supply Management (CPSM)?

Which of the following are examples of critical organizational processes that are part of supply chain management?

Strategic purchasing involves directing all activities of the purchasing function toward opportunities consistent with the firm's capabilities to achieve its long-term goals.

What is the primary selection criteria for suppliers mentioned in the text?

Strategic purchasing is the process of planning, implementing, evaluating, and controlling ____________ decisions.

What is one of the most important duties of purchasing?

Why is the transmittal of the purchase order considered a contractual offer?

Purchasing personnel should not request assistance from other departments when identifying or evaluating potential suppliers.

What are some reasons for allowing other departments to view purchase orders and incoming receipts?

What is 'maverick buying'?

Purchasing must act as the primary contact with __________.

Policies provide a framework for consistent decision making and action within an organization.

Match the following principles with positive buyer-seller relationships:

Match the purchasing process stages with their descriptions:

What are some of the supplier selection criteria mentioned in the content?

What are some topics covered in the principles and guidelines for awarding purchase contracts?

What are the main stages included in the purchasing process?

Integrated Supply Management focuses on managing the nonpurchasing consequences of purchasing decisions.

Procurement is the acquisition of goods and/or services at the best possible total cost of ownership, in the right __________ and quality, at the right time, in the right place, and from the right source.

What are the two distinct categories into which procurement activities are often split based on consumption purposes?

Which of the following are examples of direct procurement? (Select all that apply)

Direct procurement activities concern items that are part of finished products.

Procure to pay (P2P) is a new generation procurement methodology pioneered by ___.

Match the procurement phase with its description:

Define 'designing an organization' as per the provided content.

What are the main attributes differentiating organization structures?

Centralized purchasing organization can be found applicable in case of similarities between ______ company locations.

In a centralized purchasing organization, buyers often have direct and single-point contact with suppliers.

Match the following organization types with their characteristics:

What determines the usefulness of organizational design?

What are the two conclusions regarding companies and organizational structure?

The ongoing trend of increasing centralization and reducing the number of suppliers indicates a shift towards _______ in the graph.

Match the following functions with their responsibilities:

Is choosing an organizational design simple? Explain why firms would change their supply management organization structure.

Why is a function’s placement in the organizational hierarchy important?

What factors contribute to the increasing importance of purchasing within the organizational hierarchy?

Why would the importance of purchasing diminish under a supply chain management structure?

Discuss the two most important benefits of centralized purchasing authority.

Discuss the two most important benefits of decentralized purchasing authority.

What factors influence whether a firm centralizes or decentralizes its supply management organization?

What is the difference between strategic and operational purchasing? Provide examples of each.

Discuss the logic behind physically separating strategic and operational buyers.

What is the role of a purchasing research staff?

Discuss the advantages of using a cross-functional team to evaluate and select suppliers.

What are some barriers to using teams in purchasing and supply chain management?

What is the logic behind co-locating purchasing personnel with internal customers?

Study Notes

Purchasing and Supply Process

Difference between Purchasing and Supply Management

Supply Chain Management

Strategic Purchasing

Purchasing Objectives

Purchasing Responsibilities

Procure to Pay Process

Improving the Procure to Pay Process

Electronic Documents

Approval, Contract, and Purchase Order Preparation

Importance of Purchasing

Purchasing Policies and Procedures

Origin and Scope of Purchasing Authority

Purchasing Procedures

Integrated Supply Management

Purchasing Process

Purchasing Management Process

Procurement

Studying That Suits You

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