Flashcards
Business Needs Flashcards D2
Cards in this deck (38)
- 1Direct Cost DefinitionA value expressed in monetary terms incurred as a result of carrying out a plan
- 2Indirect costsA value that cannot be allocated to the unit of the end product.
- 3Examples of direct costRaw materials and components i.e. production labour costs, paper needed to create the book, ink used to print the book
- 4Examples of indirect costcosts which don't contribute or need to be considered into the value and price of the end product. i.e. rental costs of building,, non production salaries (floor managers annual wage), oil to lubricate the printing machine
- 5Definition of priceWhat a supplier charges for a package of benefits offered to a buyer
- 6Zero based budgetingcreating a budget from scratch/nothing without using the prior years budget. All expenses are scrutinised and must be justified to remain in the new budget
- 7Absorption CostingTo offer a fair price when the proportion of fixed costs are absorbed into each unit of output
i.e. room hire cost - one room may be using all the facilities offered such as ovens ,lights, electricity, whereas the other room could barely use the full extent of the room but both pay the same price to cover all the cost incurred. - 8Supplier pricing strategies: full cost pricingCost, plus mark up to produce profit = selling price
- 9Supplier pricing strategies: Mark up pricingCost, plus mark up to cover overheads and a profit element = selling price
- 10Supplier pricing strategies: Marginal pricingFixed costs to yield profit (% of quoted price) To cover costs that would usually end up making a loss on. I.e. hotel rooms selling there empty rooms on sale sites rather than make a loss. A different example is charging a lower price on non seasonal items - xmas gifts in summer
- 11Supplier pricing strategies: Target return pricingBase profit on desired return rather than estimated product cost/rate of return as its also known
- 12Supplier pricing strategies: Contribution pricingPrice is less than full cost, risky as quality could be cut and isn't the standard price to pay only temporary unlike marginal pricing which happens more often
- 13The different procurement categoriesCapital Procurements - high cost most likely long term
Production materials -paint, lubricants
Maintenance Repair and operating supplies (MRO) - screws, etc
Commodities -
Goods for resale - 145 rights of procurementRight:
price
quality
quantity
product
time - 15Difference between direct and indirect costsDirect costs have a higher:
Quality - customers view of output quality which contributes to the organisations reputation and likeliness of customer satisfaction
stockholder - lack of stock delays completion and increases costs and decreases customer satisfaction
cost - higher costs are related to the output (direct costs to produce item) if the supplier has higher indirect costs it equates to reduced potential profit and may create and unsustainable selling price - 16Marginal Costingcalculating the cost of producing one or more units of goods/products. Additional costs such as factory rental, staffing costs and raw materials need to be calculated.
- 17Definition of serviceAny activity or benefit that one party can offer to another.
- 18Standards in specifications what the minimum in required in a specificationStandard terms and symbols "Fairtrade" and "red tractor"
The performance or safety requirements
Environmental requirements- prevention of pollution - look at what requirements can be put in place to prevent environmental damages
standard codes of practice - confidentiality/ethics/equality and discrimination - 19SMART KPI'SSPECIFIC - stating precisely what desired outcomes are
MEASURABLE - Monitoring and reviewing
ATTAINABLE - realistically achievable
RELEVENT - linked to strategic and success factors
Time bound -Target deadlines - 20Indemnity ClauseAssures other party it will accept liability for any loss from failure in performance of the contract and will in turn reimburse the inflicted party
- 21Types of insurancesEmployers liability insurance - will help supplier pay compensation to employees who get injured or fall sick as a result of the suppliers business activity , the employee has the right to sue, claim or demand compensation
Public liability insurance - this covers the general public in the case they want to sue or demand compensation for injuries illness occurred E.G slipping on a loose step or a burst pipe flooding the adjacent office.
Professional indemnity clause - this covers reputational damage in the event of claims made by a client (or third party) suggesting that they have suffered loss. This will cover suppliers who offer services like doctors/lawyers/dentists
Product liability insurances - When a consumer is injured or otherwise damaged, suffering in some way because of your product, they have the right to sue for compensation for their pain and difficulty. This will cover these expenses - faulty goods - 22Role/purpose of specsDefines the requirements
Communicates the requirement
Provide a way of evaluating the quality conformance - 23Performance SpecificationSpecifies what you want the product/service to do
it concentrates on the OUTPUT or the end results, this encourages supplier involvement.
Advantages - Easier to draft (if buyer has little technical knowledge) and the supplier has more responsibility - the risk mainly lies with them - 24Conformance SpecificationThese concentrates on INPPUTS and the buyer provides the exact spec.
The supplier may not know the use of the product
Product reliability relies o the buyer as the product may not work but the supplier can state they fully conformed to the specification provided - 25Contents of a specification the details/explaining what you requireIntroduction - summary of business need
identification- title/reference
Scope - aim or purpose
Definitions - explanation of technical terms used
Purpose of product/service
Reference to related documents
Material requirements
Desired appearances
Drawings/samples/models
packaging specification - china example - 26Contents of a formal business caseFILL ME!!
- 27Incremental BudgetTaking the previous years budget and adding a percentage on due to inflation
Disadvantages: this assumes the business will use the same value of spend/ remain the same. it also isn't pro active as it doesn't forecast any upcoming costs - 28Procurement Cycle
- 29Procurement Cycle Part 2Define the need
Develop contract terms
Identify potential suppliers
Appraise Suppliers
Invite quotes
Analyse
Negotiate best value
Award contract
Supplier/contract management
Identify need - 30Market driven pricing: Penetration PricingGoing into the market at a low price to appeal to buyers then increasing prices once buyers purchase the product/service
- 31Market driven pricing: Market SkimmingAppeal top customers who want/require the product/service first. then over a period decrease the price to appeal to market further
- 32Market driven pricing: Promotional pricingThis is used to clear stock quantities or appear to have a high sales analysis at the end of the month. BOGOF
- 33Market driven pricing: Differential pricingHaving fluctuating / discriminating prices at different parts of productions/delivery e.g. off peak tickets, higher prices for last minute productions or low prices if a buyer waits - hotels
- 34Market driven pricing: Competition pricingBeating other suppliers prices on tenders or E-auctions. Or beating other suppliers prices when asked - we will pay more than we buy any car.com
- 35Guarantees definitionSuppliers offer guarantees to make good of any defects or faults by replacement or repair.
If the company cannot guarantee then a guarantor/parent company can do this. Examples are flights OR when you take a loan out you need a guarantor. - 36Sub contractingThe contractor employ's a firm or person outside the company to do (work) as part of a larger project. However this has to be pre qualified and approved via a written expression:
- 37Exclusion clauseThis excludes one party from liability which would otherwise arise from a breach of contract.
- 38Kraljic matrix
Information
- Description
- Flashcards on Business Needs Flashcards D2, created by Laura Crerar on 24/10/2017.
- Created by
- Laura Crerar
- Views
- 0
- Rating