Chapter one - Careers in Purchasing and Supply Management

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List and define the ways supply management can contribute to lower total cost of ownership:

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- _Better product design; early supply management and supplier involvement reducing costs significantly during the product design stage.__________________________________________________________

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- Acquisistion cost; specification of the most cost-effective material or item of equipment, use of the appropriate specification, standardization, good sourcing and pricing practices, and professional contract ad supplier relationship manaegment.___________________________________________________________

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- Quality. cost; Selecting suppliers capable of producing the desired level of quality and then certifying their design and manufacturing systems can improve incoming quality while reducing administrative quality cost___________________________________________________________

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- Downtime cost; the amount of money lost when operations are stopped because of malfunctioning machines, products, and services.

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- Risk cost; maintaining large inventories and/or dual or even triple sources of supply to ensure continuity of supply._________________________________________________________

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- Conversation cost; Machine time, manpower, process yield loss, and rework are examples of conversation cost.___________________________________________________________

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- Non-value-added cost; A careful analysis of all the costs involved in bringing an item or service to market reveals that 40-60 percent of the costs confer no added value to the finished good. Non value added activities __________________________________________________________

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- Supply chain cost; the development and management of supply chains and supply networks require a significant investment, primarily in the form of human resources. The proper selection, training, and educating of the individuals involved in these activities, together with the application of software systems, can reduce the necessary investments.__________________________________________________________

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- Cycle time cost; The shorter the cycle time to bring new prod___________________________________________________________ucts to market, develop a statement of work, or select a new source, the lower the total cost.

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- _Post- Ownership cost; these cost frequently are overlooked but must be considered in addressing the total cost of ownership. They include the disposal of scrap and other waste, customer service, warranty costs, and the cost of lost sales resulting from customer dissatisfaction with a product.__________________________________________________________

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Define:

ROI: The return on the total capital invested in a business. Inventory, equipment, and other purchased materials constitute corporate assets attained through the investment capital.

Supply Chain: Through the process of acquiring goods, services, and equipment from other organizations, a chain of upstream suppliers is formed.

Value Chain: Is a series of organizations which add value to goods and services flowing from Mother Erath to the end customer.

What has a greater impact – increasing sales by 10% or lowering costs by 10%?

Lowering cost by 10 %

Explain your choice:

More of a 10% sales increase of is required to match the profit increase generated by a 10% reduction in materials cost. The math formula in the power point proved this. Assets, plus, divided by, multiply…

Operating cost elements , minus, plus, divided by, multiply…

APPENDIX: AN OVERVIEW OF THE MECHANICS OF SUPPLY MANAGEMENT

List and define the steps in the Typical Purchasing Cycle:

- Recognize, define and describe the need.

- Transmit the need

- Investigate and select the supplier

- Prepare and issue the purchase order, contract, or agreement.

- Follow up the order

- Receive and inspect the material

- Audit the invoice

- Close the order

Consider the need for pens in your office environment. Take a look at the eight steps you have defined above.

List and define the particular steps that would be taken to procure pens for your office. Ie: How would a need be made known? How would you go about finding a supplier?

Recognize, define and describe the need.

Transmit the need, communicate that there is a need, Investigate and select the supplier

Recognize, define and describe the need.

Transmit the need

Investigate and select the supplier

Prepare and issue the purchase order, contract, or agreement.

Follow up the order

Receive and inspect the material