CHAPTER 1

What is a business case?

'Inputs' examples

Strategic / commercial objectives

Four stages in the way procurement has developed

the procurement cycle
1. identify the need
2. define the need
3. develop contract terms
4. source the market
5. appraise the market

Three types of purchase

straight re-buy

the buyer may already have a preferred supplier

straight re-buy
(or inventory replenishment)
involves...

modified re-buy
requirements -
some of the requirements have changed

modified re-buy
involves..

New purchase

a good or service which has not been specified or purchased before

purchasing research

value engineering

eliminates waste

early buyer involvement (EBI)

influences whole-of-life impact

early supplier involvement (ESI)

Capital procurement

production materials

maintenance repair and operating (MRO)

commodities

goods for re-sale

informal business case structure

comprehensive, formal business case structure
(for high-risk, high-value procurements)

value

competitive advantage

costs

risks
(e.g. outsourcing, single sourcing, international sourcing)

cost/benefit analysis

advantages of outright purchase vs advantages of leasing

strategic alignment

environmental procurement

triple bottom line

CHAPTER 2

price vs cost

price and cost research

external factors to supplier pricing decisions

internal factors to supplier pricing decisions

cost-based pricing

market-driven pricing

price analysis

cost analysis

understanding costs - components of the cost base

overheads

***profit is not a cost - although along with cost, it is a component of price***

calculating costs

1. marginal costing
2. absorption costing

profit?

contribution analysis

total cost of ownership

Ways to calculate whole life costs

benefits of calculating whole of life costs

limitations to whole of life costing (WLC)

qualitative methods used to estimate cost

budget

procurement budget info (page 38)

primary data sources

secondary data sources

a cash budget should include...

(objective: to anticipate cash shortages or surpluses and allow time to make plans for dealing with them)

CHAPTER 3

Benefits of budgeting

limitations of budgeting

two types of budget

incremental budget

zero-based budget

two budgeting techniques...

1. forecast - at intervals during the year the budget is revisited and updated inline with new information

fixed budget

flexible budgets

variance analysis

examples of explanations for variances

CHAPTER 4

what is a specification?

a specifications must:

tolerance

a supplier can not always meet the exact requirement of a specification every time

use the 'five rights of procurement' when defining a specification

zero defects implications

why don't all specifications have zero tolerance?

specifications give purpose for what a purchased item is to be used for

advantages of specifications

disadvantages of specifications

types of specification

evaluating conformance specifications

(generally becoming less common)

circumstances where conformance specifications are appropriate...

evaluating the use of performance specifications

circumstances where performance specifications are appropriate...

specification by chemical or physical properties
(conformance specification)

Four other types of conformance specification:
1. specification by brand
2. specification by sample

output based specification (performance specification)

specifying services
services are....

outcome based specification
(performance specification)

sustainable specifications - triple bottom line

CHAPTER 5

an effective specification is...

procurement professionals provide:

Four possible approaches to organising the specification process

the buyers role in specification

early buyer involvement (EBI)

information required for specification development
(page 80)

Definition of 'standard'

two methods of minimising stock proliferation

proactive approach

reactive or remedial approach

benefits of standardisation

CSR specific specifications
best to incorporate sustainability criteria is at the need definition, specification and pre-qual stages, then again through negotiations and post-contract

waste hierarchy

Information assurance
- corporate governance
- contingency
- strategic development and management

information assurance involves these steps:

CHAPTER 6

what is supplier performance measurement

the purpose of performance measures

supplier performance appraisal can be used to...

what is a KPI

quantitative KPIs

focus on efficiency
suitable for purchase of products

qualitative KPIs

focus on effectiveness
suitable for purchase of services

advantages of using KPIs

disadvantages of KPIs

process of developing KPIs

definition of benchmarking

four types of benchmarking

the benchmarking process

(cons = can be costly and reqires effective communication internally)

focus of contractual performance in this textbook

the eight dimensions of product quality

service level agreement

the purpose of an SLA

benefits of SLAs

(communication, relationship management, conflict management, performance monitoring, review and evaluation)

limitations of SLAs

contents of SLAs should include...

(print page 107)

what is the process of developing and implementing SLAs

CHAPTER 7

What is a contract?

The information found in a contract includes...

Express terms

e.g. specify price, delivery dates, sharing of insurance costs

Implied terms

contract conditions

warrenties

general contract structure

Model form contracts - who are they published by?

advantages of using standard and model form contracts

disadvantages of using standard and model form contracts

Contract clause : time and performance

Contract clause : passing of title / property

Contract clause : liquidated damages

Contrat clause : penalty clause

Model clause examples

Contract clause : Force majeure

Contract clause : guarantees

Contract clause : exclusion

Contract clause : Indemnities

Contract clause : insurances

Contract clause : subcontracting

Ethics / CSR

CHAPTER 8

Two types of pricing arrangements

Pricing schedule

firm price agreements

firm price arrangements are appropriate when...

firm price arrangements are advantageous to the buyer because:

Pricing schedule

lump sum contracts

reasons for cost/price variations

the use of indexation and price adjustment formulae

fixed price incentive (or gainshare) contracts provides adjustment of the final price to include various supplier incentives

cost-based pricing arrangements

cost-plus pricing

(cost-based pricing arrangement)

types of cost-plus pricing

disadvantages of cost-plus pricing arrangements for the buyer

target costing

each member of the supply chain must work closely with others to identify opportunities for cost reductions, driving costs downwards

target cost with maximum price

target cost with maximum price are suitable when...

target cost without maximum price

target cost without maximum price are suitable when...

payment methods

credit terms

credit limit

stage or progress payments

commercial and legal considerations in regard to payment terms

express payment terms are used to specify

Romalpa clause

CHAPTER 9

make/do vs buy decisions

factors which influence make/do vs buy decisions

advantages of making / doing

advantages of buying in / outsourcing

supply chain management

outsourcing

subcontracting

globalisation

drivers for outsourcing

benefits of outsourcing **

can only be secured by excellent supplier relationship management because of risks of selecting the wrong supplier, service standards, ethical issues etc

risks / disadvantages of outsourcing **

costs involved in outsourcing

offshoring

advantages of 'in-sourcing'

competencies

--> non-core competencies should be outsourced

when should you out-source?

CHAPTER 10

main criteria for making a procurement proposal business case