Procurement Final Exam - Study
Guide with Complete Solutions
-Strategic considerations - eg. US military preparedness.
-Government regulations - e.g. MWBE commitments.
-Single supplier's production capacity may be limited.
-Opportunity to test a new supplier with trial orders.
-Volatility in the supply market makes single sourcing unacceptably risky.
(Note: MWBE stands for Minority Women in Business).
12: Arguments in favor of Single Sourcing Strategy: - ANSWER--EXCLUSIVITY: The
supplier may be the sole source.
(patent protection, exclusive distributorship).
-Outstanding quality or service --> value
-Order too small to split.
-Opportunities for discounts or lower freight costs.
-May receive more attention if only one supplier involved.
-Set-up costs for duplicate suppliers would be prohibitive.
-Easier to schedule deliveries.
-JIT production or stockless buying arrangements.
-Prefer to focus attention on one, not multiple suppliers.
-Prerequisite to key partnering status.
12: Key questions for supplier selection and sourcing strategy: - ANSWER--Single
source or multiple sources?
-Short term or long term contracts?
-Buy direct from a manufacturer or through a distributor? (Sometimes you don't have a
choice)
,-Does supplier size matter - large, medium or small?
-Is geographical location a factor to consider?
-Utilize only domestic, or also foreign suppliers?
-Expect close working relationships or arm's length?
12: Level 1 Strategic Criteria: Supply Risks and Spend Categories: - ANSWER-For
better example go to slide 7.
12: Level 2 and 3 Traditional Criteria: Evaluation of Potential Supply Sources:
MANAGEMENT PERFORMANCE AND FINANCIAL STABILITY: - ANSWER--Mission,
goals, planning, corporate culture, values.
-Organization structure and decision-making.
-Customer focused / quality focused
-Management controls, information systems, policies and procedures, e-commerce
capability
-Qualifications and background of key managers
-Financial condition (ex. annual reports, D&B's)
-Financial ratios (ex. liquidity, profitability, debt and activity)
12: Level 2 and 3 Traditional Criteria: Evaluation of Potential Supply Sources:
PRODUCTION PROCESS AND TECHNICAL CAPABILITY: - ANSWER--Previous
experience and accomplishments.
-Completed projects (talk to past customers).
-Utilization of quality processes and systems.
-Engineering, design and technical strengths.
-Capacity and flexibility to meet demand (lead time).
-Employee qualifications and capabilities.
-ISO 9000 / ISO 14000 certifications.
, -Availability and quality of technical support.
-Evaluation of samples obtained from supplier.
-Visit to supplier's facility by cross-functional team.
12: Level 3 - 10 Potential Supplier Evaluation Criteria (R. Monczka):
1) MANAGEMENT CAPABILITY: - ANSWER--Does long range planning exist?
Mission / vision?
-Is turnover high among managers?
-Professional / educational background of key managers?
-Is management customer-focused?
-History or labor / management relations?
-Is management investing in the business and its people?
-Does management practice TQM and continuous improvement?
12: Level 3 - 10 Potential Supplier Evaluation Criteria (R. Monczka):
10) LONGER TERM RELATIONSHIP POTENTIAL: - ANSWER--Does the potential
exist to move beyond the traditional arms length purchasing relationship?
-How early in the design process is the supplier willing or able to participate?
-What is unique about the supplier's contributions?
-Is there an interest in joint problem solving and process improvement?
-Is there an atmosphere which promotes free and open communication?
-What is the commitment of both top managements?
12: Level 3 - 10 Potential Supplier Evaluation Criteria (R. Monczka):
2) EMPLOYEE CAPABILITIES: - ANSWER--Are employees committed to TQM and
continuous improvement?
-How are employee / management relations?
-Is employee morale high?
Guide with Complete Solutions
-Strategic considerations - eg. US military preparedness.
-Government regulations - e.g. MWBE commitments.
-Single supplier's production capacity may be limited.
-Opportunity to test a new supplier with trial orders.
-Volatility in the supply market makes single sourcing unacceptably risky.
(Note: MWBE stands for Minority Women in Business).
12: Arguments in favor of Single Sourcing Strategy: - ANSWER--EXCLUSIVITY: The
supplier may be the sole source.
(patent protection, exclusive distributorship).
-Outstanding quality or service --> value
-Order too small to split.
-Opportunities for discounts or lower freight costs.
-May receive more attention if only one supplier involved.
-Set-up costs for duplicate suppliers would be prohibitive.
-Easier to schedule deliveries.
-JIT production or stockless buying arrangements.
-Prefer to focus attention on one, not multiple suppliers.
-Prerequisite to key partnering status.
12: Key questions for supplier selection and sourcing strategy: - ANSWER--Single
source or multiple sources?
-Short term or long term contracts?
-Buy direct from a manufacturer or through a distributor? (Sometimes you don't have a
choice)
,-Does supplier size matter - large, medium or small?
-Is geographical location a factor to consider?
-Utilize only domestic, or also foreign suppliers?
-Expect close working relationships or arm's length?
12: Level 1 Strategic Criteria: Supply Risks and Spend Categories: - ANSWER-For
better example go to slide 7.
12: Level 2 and 3 Traditional Criteria: Evaluation of Potential Supply Sources:
MANAGEMENT PERFORMANCE AND FINANCIAL STABILITY: - ANSWER--Mission,
goals, planning, corporate culture, values.
-Organization structure and decision-making.
-Customer focused / quality focused
-Management controls, information systems, policies and procedures, e-commerce
capability
-Qualifications and background of key managers
-Financial condition (ex. annual reports, D&B's)
-Financial ratios (ex. liquidity, profitability, debt and activity)
12: Level 2 and 3 Traditional Criteria: Evaluation of Potential Supply Sources:
PRODUCTION PROCESS AND TECHNICAL CAPABILITY: - ANSWER--Previous
experience and accomplishments.
-Completed projects (talk to past customers).
-Utilization of quality processes and systems.
-Engineering, design and technical strengths.
-Capacity and flexibility to meet demand (lead time).
-Employee qualifications and capabilities.
-ISO 9000 / ISO 14000 certifications.
, -Availability and quality of technical support.
-Evaluation of samples obtained from supplier.
-Visit to supplier's facility by cross-functional team.
12: Level 3 - 10 Potential Supplier Evaluation Criteria (R. Monczka):
1) MANAGEMENT CAPABILITY: - ANSWER--Does long range planning exist?
Mission / vision?
-Is turnover high among managers?
-Professional / educational background of key managers?
-Is management customer-focused?
-History or labor / management relations?
-Is management investing in the business and its people?
-Does management practice TQM and continuous improvement?
12: Level 3 - 10 Potential Supplier Evaluation Criteria (R. Monczka):
10) LONGER TERM RELATIONSHIP POTENTIAL: - ANSWER--Does the potential
exist to move beyond the traditional arms length purchasing relationship?
-How early in the design process is the supplier willing or able to participate?
-What is unique about the supplier's contributions?
-Is there an interest in joint problem solving and process improvement?
-Is there an atmosphere which promotes free and open communication?
-What is the commitment of both top managements?
12: Level 3 - 10 Potential Supplier Evaluation Criteria (R. Monczka):
2) EMPLOYEE CAPABILITIES: - ANSWER--Are employees committed to TQM and
continuous improvement?
-How are employee / management relations?
-Is employee morale high?
