IDIS 424 EXAM 3 VERIFIED STUDY GUIDE
Price Analysis - Answers - The process of comparing supplier prices to external price
benchmarks without the knowledge of supplier cost
Cost Analysis - Answers - The process of analyzing each individual cost element that
adds up to final price
Total cost analysis - Answers - applies the price/cost equation across multiple
processes that span two or more organizations across supply chain
Strategic Cost Framework - Answers - Critical products, commodities, unique products,
generics
Critical Products - Answers - high value and low number of available suppliers
Commodities (Leverage) - Answers - High availability and value
generic - Answers - high availability and low value
Unique Products - Answers - low value and number of suppliers
Market structure Analysis - Answers - number of competitors in the industry, similar or
lack of competitive products, barriers to entry
Monopoly - Answers - A market in which there are many buyers but only one seller.
Oligopoly - Answers - A market structure in which a few large firms dominate a market
Perfect Competition - Answers - many small suppliers and price based on supply and
demand
economic conditions favorable to supplier - Answers - -high level of capacity utilization
-tight supply
-strong demand
economic conditions favorable to buyer - Answers - -low level of capacity utilization
-high level of supply
-weak demand
price volume model - Answers - -Maximizing profit, Lowering price, Greater volume,
Quantity price breaks(buy this much get % off)
Market Share Model - Answers - "Start low to grow"
Long run profitability, penetration pricing
, Lower margins initially to increase market share, Eventually spreads out indirect costs
over greater volume
market skimming model - Answers - "skimming the top of the market"
Prices Set for High, Backdoor Selling, buyer should Carefully Analyze Price to Ensure
Validity Through Greater Benefits of Product
Revenue Pricing Model - Answers - "just survive cover cost"
Obtain sufficient current revenue in market downturns.
Supplier concerned with generating revenue to cover out-of-pocket costs
Promotional Pricing Model - Answers - Prices set to enhance overall product line
profitability, not individual products within line
Competition Pricing Model - Answers - Focuses on reacting to actual or anticipated
competitor pricing. Whats the highest price to be at to be just below competition
Cash Discounts - Answers - reductions in price to encourage buyers to pay their bills
quickly
Cost Analysis Techniques - Answers - Cost-based pricing models
-cost markup, margin price, rate or return
Cost Markup Pricing Model - Answers - estimate costs and add markup % from cost
Margin pricing model - Answers - Establish profit margin that is predetermined % of
quoted price
Rate-of-return pricing model - Answers - Desired profit is added to estimated cost
bullwhip effect - Answers - order variability is amplified as it moves up the supply chain
bullwhip causes - Answers - promotional sales, inflated orders, high demand
Bullwhip Effects - Answers - increase in: manuf cost, inventory cost, lead time
Decrease in: level of product availability
In optimization, ______ are related to certain _____ to calculate an objective function to
be optimized (total sourcing cost) - Answers - decision variables(quantities) and
Parameter(cost)
EOQ - Answers - Economic Order Quantity-Order quantity that minimizes the total cost
while meeting demand
category strategy - Answers - a decision process used to identify which suppliers should
provide a group of products or services.
Price Analysis - Answers - The process of comparing supplier prices to external price
benchmarks without the knowledge of supplier cost
Cost Analysis - Answers - The process of analyzing each individual cost element that
adds up to final price
Total cost analysis - Answers - applies the price/cost equation across multiple
processes that span two or more organizations across supply chain
Strategic Cost Framework - Answers - Critical products, commodities, unique products,
generics
Critical Products - Answers - high value and low number of available suppliers
Commodities (Leverage) - Answers - High availability and value
generic - Answers - high availability and low value
Unique Products - Answers - low value and number of suppliers
Market structure Analysis - Answers - number of competitors in the industry, similar or
lack of competitive products, barriers to entry
Monopoly - Answers - A market in which there are many buyers but only one seller.
Oligopoly - Answers - A market structure in which a few large firms dominate a market
Perfect Competition - Answers - many small suppliers and price based on supply and
demand
economic conditions favorable to supplier - Answers - -high level of capacity utilization
-tight supply
-strong demand
economic conditions favorable to buyer - Answers - -low level of capacity utilization
-high level of supply
-weak demand
price volume model - Answers - -Maximizing profit, Lowering price, Greater volume,
Quantity price breaks(buy this much get % off)
Market Share Model - Answers - "Start low to grow"
Long run profitability, penetration pricing
, Lower margins initially to increase market share, Eventually spreads out indirect costs
over greater volume
market skimming model - Answers - "skimming the top of the market"
Prices Set for High, Backdoor Selling, buyer should Carefully Analyze Price to Ensure
Validity Through Greater Benefits of Product
Revenue Pricing Model - Answers - "just survive cover cost"
Obtain sufficient current revenue in market downturns.
Supplier concerned with generating revenue to cover out-of-pocket costs
Promotional Pricing Model - Answers - Prices set to enhance overall product line
profitability, not individual products within line
Competition Pricing Model - Answers - Focuses on reacting to actual or anticipated
competitor pricing. Whats the highest price to be at to be just below competition
Cash Discounts - Answers - reductions in price to encourage buyers to pay their bills
quickly
Cost Analysis Techniques - Answers - Cost-based pricing models
-cost markup, margin price, rate or return
Cost Markup Pricing Model - Answers - estimate costs and add markup % from cost
Margin pricing model - Answers - Establish profit margin that is predetermined % of
quoted price
Rate-of-return pricing model - Answers - Desired profit is added to estimated cost
bullwhip effect - Answers - order variability is amplified as it moves up the supply chain
bullwhip causes - Answers - promotional sales, inflated orders, high demand
Bullwhip Effects - Answers - increase in: manuf cost, inventory cost, lead time
Decrease in: level of product availability
In optimization, ______ are related to certain _____ to calculate an objective function to
be optimized (total sourcing cost) - Answers - decision variables(quantities) and
Parameter(cost)
EOQ - Answers - Economic Order Quantity-Order quantity that minimizes the total cost
while meeting demand
category strategy - Answers - a decision process used to identify which suppliers should
provide a group of products or services.
