Flashcards
D3
Cards in this deck (66)
- 1tactical / operational sourcinglower level decision making required, low profit, low risk routine items
- 2strategic sourcinghigh level, long term decisions relating to high profit and high risk procurements
- 3the sourcing process1. identify the need / requirement
2. create sourcing plan
3. market analysis
4. pre-qualification of suppliers
5. evaluate suppliers
6. evaluate suppliers
7. create contract and manage relationship - 4Pareto principle 80 / 20 rule80% of spend, risk or value residing in 20% of suppliers or supplies
- 5procurement positioning matrixthe importance of the item being purchased vs. the complexity of the supply market
- 6when should a supplier appraisal be used?1. for major, high-value purchases
2. for potential long-term partnerships
3. international sourcing & outsourcing
4. supplier development & quality management - 7four stage approach to assessing suppliers (supplier appraisal)1. plan & prepare
2. action & individual assessment
3. evaluate & report results
4. recommend & feedback - 8vendor performance management1. supplier management
2. incentives
3. vendor rating - 9what is sourcing?how & where services or products are maintained
- 10sources of information on potential suppliers1. buyer's current database of suppliers
2. formal RFI
3. marketing communications (advertising, brochures, catalogues)
3. internet search
4. published listings of suppliers
5.trade fairs / exhibitions
6. informal networking - 11EBI & ESIEarly buyer involvement
&
Early supplier involvement - 12supplier appraisalused to describe the assessment of potential suppliers as part of supplier selection, prior to contract award and supplier approval
- 13gathering and verifying supplier information1. self-appraisal questionnaires
2. financial appraisal
3. check supplier accreditations
4. references
5. work samples
6. audit - 14Incentive examples- staged payments
- specific KPIs
- long-term business agreements
- opportunities for innovations
- profit share - 15three different ways to monitor the performance of your supplier1. periodic reviews
2. post-completion reviews
3. continous monitoring - 16top three things to rate a vendor on1. price
2. quality
3. delivery - 17types of sourcing1. single sourcing
2. dual sourcing
3. partnership sourcing - 18definition of partnering (partnership sourcing)a commitment by both customers and suppliers, regardless of size, to a long term relationship based on clear, mutually agreed objectives
- 19key characteristics of partnership sourcing1. cultural compatibility between partners
2. a high level of trust
3. relevant expertise, resources and competencies
4. a high degree of system integration
5. clear joint objectives and meaningful performance measures - 20tendering procedures1. open procedures: open to the entire market, widely advertised
2. selective or restricted procedures: add in a pre-qualification stage. Potential suppliers who respond are already pre-qualified**often the best option**
3. restricted open procedure: invite prospective suppliers to bid
4. negotiated procedures: select a small number of suppliers to enter into negotiation with - 21intra-company tradingrefers to commercial relationships between entities which are part of the same organisation (Auckland Council & CCOs)
negative: this may not always be genuinely competitive with external suppliers - 22outsourcing & subcontracting issues1. rigorous supplier selection
2. clear & agreed service levels, standards & KPIs
3. monitoring of service delivery & quality
4. ongoing contract & supplier management
5. contract review - 23advantages & disadvantages of outsouringTBC
- 24sources of information that could be used to appraise potential suppliers1. company's own database of existing and past suppliers
2. marketing & comms from potential suppliers
3. internet searches of business directories
4. online market exchanges
5. trade & industry press
6.trade fairs, exhibitions & conferences
7. networking - 25advantages of supplier partnering1. greater stability of supply & prices
2. sharing of risk & investment
3. better supplier motivation & responsiveness
4. cost savings from reduced supplier base
5. access to the suppliers technology & expertise - 26disadvantages of supplier partnering1. risk of complacency - affects cost, quality
2. less flexibility to change suppliers when needed
3. possible risk of confidentiality
4. getting locked into a relationship with an incompatible / inflexible supplier - 27how to check new suppliers have the technical capability1. whether the supplier produces the requirements
2. if the supplier has innovation capability
3. suppliers capability to respond quickly and flexibly
4. the type of equipment a supplier uses
5. the efficiency of the suppliers factory layout & processes
6. quality control systems - 28selection criteria to identify appropriate external suppliers1. financial capabilities & stability
2. technical capability
3. production capacity
4. system capabilities
5. quality & quality assurance
6. environmental & sustainability considerations - 29M E A TMost
- 30Kraljic matrixthe importance of the item vs the complexity of the supply market (page 6)
outcomes:
1. non - critical / routine items
2. leverage items
3. bottleneck items
4. strategic items - 31reasons why buyers should appraise the financial position of potential suppliers1. to ensure the supplier can be relied upon to meet major contracts or maintain a continuous supply stream
2. a supplier with sufficient liquidity can pay is costs, e.g. staff and supply
3. - 32what are some of the sources of information for financial appraisals1. suppliers published financial statements
2. secondary data from markets & suppliers
3. published financial reports
4. credit rating companies
5. financial director presentation - 33what tools are used to analyse the supply market1. environmental analysis
2. industry analysis - looks at the key players (Porters 5 forces model is ideal for this analysis)
3. SWOT analysis
4. Competitor analysis
5. Krajlic or Pareto models - 34porters five forces modelconsiders the extent of the competition within the market. it identifies:
1. competitive rivalry within the market
2. the bargaining power of suppliers
3. the bargaining power of customers
4. threats from new entrants
5. threats from substitutes - 35ethical issues related to international sourcing1. not exploit supplier labour forces - ensure fair trade prices
2. support the raising of labour standards in developing countries
3. not degrade / pollute other environments or exhaust resources
4. protecting the brands reputation
5. supporting domestic businesses CSR - 36the purpose of Intercoms - international contract termsthe purpose of intercoms is to define areas of risk a& responsibility between the buyer & seller during the journey of the goods, clarifying their areas of risk at all stages of the journey
- 37the main elements intercoms cover1. where delivery should be made by the seller
2. who insures the goods during the journey
3. what level of insurance is required
4. who raises which documents
5. where risk & responsibility for the goods passes from seller to buyer - 38four groups of intercomsE terms: the seller's only duty is to make the goods available at its own premises
F terms: the seller will bear pre-carriage duties and costs
C terms: the seller arranges for carriage of the goods until dispatched
D terms: the sellers obligation extends to delivery of the goods to the destination - 39information a supplier database may provide1. contact details
2. terms & conditions
3. approved or preferred status
4. average value / frequency of spend with each supplier
5. special capabilities
6. results & ratings of supplier appraisals
7. vendor performance history - 40how to assess a potential suppliers systems & procedures1. compatibility - time frames
2. willingness to comply - rules and system functionalities
3. quality management systems - the suppliers accreditation, quality practices & values
4. IT development - system integration - 41credit rating agency report1. business summary & org chart
2. payment history
3. financial statements
4. credit recommendations & ratings
5. industry comparisons
6. court judgements - bankruptcies - 42why is profitability an important criteria1. profits attest to a company's performance, meaning all it's costs are covered and it's not loosing money
2. profits provide owners with dividends as a return on their investment
3. security & continuity of supply - 43sources of secondary data - information already gathered for other purposes, general reference or publication. Accessed by desk research1. websites
2. published reports
3. financial / trade industry press - newspapers, magazines
4. Statistical surveys
5. credit referencing agencies
6. specialist libraries - 44potential legal and political constraints which might impact on the sourcing process1. anti-competitive conduct - monopolies
2. protecting the rights of minority groups - to provide equal opportunity & diversity in employment
3. protecting the rights of employee - workplace h&s, working hours & leave entitlement
4. enforcement of environmental standards
5. corruption - money laundering
6. international sourcing restrictions - 45types of stakeholders1. consumers
2. potential suppliers
3. colleagues
4. consulted experts
5. banks or internal finance department
6. quality management
7. governance boards / committees - 46how you might engage with stakeholders in the sourcing process1. during the design / scope
2. for approval
3. early buyer involvement - commercial input
4. early supplier involvement - development
5. a formal team approach
6. consultation
7. focus groups and / or surveys - 47elements that may be included in a sourcing plan1. how you are going to approach the market - sourcing options
2. confirm the organisations current situation & the organisations requirements
3. research of the supply market
4. supplier appraisal process - 10 C's
5. supplier performance measures
6. post-award activities - 48types of ratios used to determine whether potential suppliers have sufficient liquidity1. current ratio
2. quick ratio
3. gearing ration - 49current ratiocalculated by dividing current assets (stock, cash) divided by the current liabilities (creditors, short-term loans). this ratio should ideally be 2:1 indicating that the supplier has current assets that are greater than current liabilities
- 50quick ratiosimilar to the 'current ratio' but excludes stock from the calculation because stock may be difficult to realise - should also be greater than 1:1
- 51gearing ratiocalculated by dividing long term loans by net worth and multiplied by 100. This ratio is an indicator of the supplier's long term liquidity in terms of financial commitments in servicing long term loans
- 52tendering procedures a public sector organisation should consider using1. open tender
2. restricted procedure
3. negotiated procedure
4. competitive dialogue - 53open tendering procedurethe primary procedure for the public sector where any potential supplier may participate. its advantage is that it has a wider supplier base and maintains maximum transparency and open competition, with the potential to achieve competitive value solutions. The main disadvantage is the lack of pre-qualified suppliers and the higher volume of bids
- 54restricted tender procedurethe initial advertisement is for pre-qualification, the bidders are required to respond to a pre-qual questionnaire. a shortlist of suitable suppliers (normally between 5 - 10) is then invited to bid. the advantage of prequalifying and shortlisting suppliers, prior to the bidding process, is that is minimises administrative burden on procurement staff & suppliers
- 55under negotiation tendering procedurethe tender may be conducted without an advertisement in strictly defined circumstances, e.g urgency, sole supply, security. if an advertisement is used, a minimum of three parties must be selected to participate in negotiations. Extreme caution is required when using this procedure to ensure that competition & best value objectives are achieved.
- 56competitive dialogue tendering procedurethis procedure is designed for large, complex projects. In these projects, the requirements & pricing cannot be predetermined clearly as specifications may change during the collaboration with suppliers. The requirement must be advertised & the buyer opens a dialogue with pre-qualified suppliers. after negotiations, suppliers are invited to submit final tenders.
- 57methods of checking a suppliers performance1. turnover (total revenue) over a three year period
2. profitability
3. liquidity ratios
4. gearing ratios
5. dependency on a small number of major customers - 58liquidity vs profitability liquidity is a measure of the suppliers ability to meet its liabilities or debts - therefore impacting on stability of businessbeing profitable does not necessarily mean a potential supplier has sufficient cash resources to meet financial obligations - it could go into liquidation if faced with a large payment to be made.
profits may have been used to purchase non-liquid assets (e.g. buildings) which cannot easily be converted into cash.
the suppliers profits may have been committed to shareholders
a supplier must have sufficient cash or 'liquid assets' to meet short-term debts & expenses - demonstrating cash flow management. - 59further disadvantages of open / competitive tendering process1. overemphasis on lowest price may not represent the best long-term value
2. not suitable for one-off bespoke contracts
3. not appropriate when only one supplier is available
4. wide competition may discourage some potentially suitable suppliers - 60topics that be be included in the de-briefing process to unsuccessful suppliers1. personnel or management may not operate in a compatible way
2. reliance on subcontractors
3. price
4. CSR
5. schedules & lead times
6. design quality
7. insufficient experience
8. inadequate quality management - 61define 'letter of credit'a letter of credit is issued by a bank to another bank (advising), usually in a different country, to serve as a guarantee for payments to be made to the specified person / supplier.
- 62letters of credit are widely used in international trade and intend to achieve...1. the seller aims to ensure they will get paid without the need for litigation (costly and time consuming)
2. the buyer aims to ensure the payment is not made until the goods have been safely transferred to their ownership - 63two types of letters of credit1. irrevocable
2. confirmed - 64advantages and disadvantages of multiple sourcingTBC
- 65advantages and disadvantages of single sourcingTBC
- 66FACE to FACE modelFixed Assets, Ability to deliver, Cost, Efficiency
VS
Financial stability, Ability to work with the buyer, Commitment to quality, Environmental / Ethics factors
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- CIPS Procurement Flashcards on D3, created by Josie Robinson on 05/11/2017.
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- Josie Robinson · Nov 2017
- Updated
- Nov 13, 2017
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