SCHM 2301 UPDATED STUDY GUIDE QUESTIONS AND
ANSWERS MARKED A+
✔✔Total Cost of Ownership (TCO): sum of - ✔✔• Before - Time spent and costs of
searching for, visiting, evaluating, and certifying suppliers.
• During - Purchase price and costs of ordering, transporting, expediting, receiving,
inspecting, and following up.
• After - Costs of inventory, supply risk, production downtime, defects in finished goods,
warranties, safety recalls, replacements, repairs, lost sales, liability, and damaged
reputation.
✔✔cost and price are not the same thing. - ✔✔The true cost of acquiring and using a
product is often far greater than the purchase price. Sometimes called the life cycle
cost.
✔✔Results from Sustainability - ✔✔Improves financial performance
Increases quality
Instills customer loyalty
Enhances a firm's reputation
Lower total costs
✔✔Effective Supply Management - ✔✔• Quality: A finished product's quality is tied to
the quality of its inputs, i.e. each element reflects on the company as a whole.
• Technology and Innovation: Suppliers are potential sources of innovation and new
technology.
✔✔Insourcing - ✔✔inputs from within the firm
✔✔Outsourcing - ✔✔inputs from outside the firm
✔✔Make or Buy Decision - ✔✔choosing between insourcing or outsourcing
✔✔Outsoucing Advantages - ✔✔• Cost savings
• avoid heavy capital equipment and facilities
• flexibility and access to greater capacity
• better access to higher-quality market information and technology.
✔✔Outsourcing Disadvantages - ✔✔• loss of control
• selecting the wrong supplier
• exposure of sensitive or confidential information or IP to external parties
✔✔Spend analysis - ✔✔the process of collecting, cleansing, classifying and analyzing
expenditure data with the purpose of decreasing procurement costs, improving
efficiency, and monitoring compliance.
, ✔✔three core areas of spend analysis - ✔✔visibility
analysis
process.
✔✔Supply Base Optimization - ✔✔• Number of suppliers to use?
• Too few increases shortage and price risks, innovation may be limited
• Too many increases complexity and makes supply management difficult
• Single- or multiple-sourcing
✔✔Capabilities and location are important: - ✔✔• Proximity impacts ease of
communication, transportation costs and community perceptions
• How important is physical nearness of the supplier?
• Consideration of trade barriers and incentives
• Do we need the supplier to have a global presence?
• Global presence may impact access to markets
• How well do the supplier's capabilities and location compare with cost?
✔✔Weighted Point Model - ✔✔establishes performance categories that are weighted by
importance
✔✔Information sharing - ✔✔buyers and suppliers need to share timely data about
demand, supply and delivery
✔✔Electronic Data Interchange (EDI) - ✔✔structured, secure mode of transmitting data
✔✔Supplier Scorecard - ✔✔track and report supplier performance in key areas (KPIs)
✔✔Supplier Certification - ✔✔assessment of supplier's ability to meet buyer's needs
✔✔Supplier Relationship Management (SRM) - ✔✔technology enabled data gathering
about suppliers to manage strategic relationships
✔✔Demand Planning - ✔✔both forecasting and managing customer demand to reach
operational and financial goals
✔✔Demand Forecasting - ✔✔predicting future customer demand
✔✔Demand Management - ✔✔influencing either pattern or consistency of demand
✔✔Components of Demand - ✔✔patterns of demand over time
✔✔Autocorrelation - ✔✔relationship of past and current demand
ANSWERS MARKED A+
✔✔Total Cost of Ownership (TCO): sum of - ✔✔• Before - Time spent and costs of
searching for, visiting, evaluating, and certifying suppliers.
• During - Purchase price and costs of ordering, transporting, expediting, receiving,
inspecting, and following up.
• After - Costs of inventory, supply risk, production downtime, defects in finished goods,
warranties, safety recalls, replacements, repairs, lost sales, liability, and damaged
reputation.
✔✔cost and price are not the same thing. - ✔✔The true cost of acquiring and using a
product is often far greater than the purchase price. Sometimes called the life cycle
cost.
✔✔Results from Sustainability - ✔✔Improves financial performance
Increases quality
Instills customer loyalty
Enhances a firm's reputation
Lower total costs
✔✔Effective Supply Management - ✔✔• Quality: A finished product's quality is tied to
the quality of its inputs, i.e. each element reflects on the company as a whole.
• Technology and Innovation: Suppliers are potential sources of innovation and new
technology.
✔✔Insourcing - ✔✔inputs from within the firm
✔✔Outsourcing - ✔✔inputs from outside the firm
✔✔Make or Buy Decision - ✔✔choosing between insourcing or outsourcing
✔✔Outsoucing Advantages - ✔✔• Cost savings
• avoid heavy capital equipment and facilities
• flexibility and access to greater capacity
• better access to higher-quality market information and technology.
✔✔Outsourcing Disadvantages - ✔✔• loss of control
• selecting the wrong supplier
• exposure of sensitive or confidential information or IP to external parties
✔✔Spend analysis - ✔✔the process of collecting, cleansing, classifying and analyzing
expenditure data with the purpose of decreasing procurement costs, improving
efficiency, and monitoring compliance.
, ✔✔three core areas of spend analysis - ✔✔visibility
analysis
process.
✔✔Supply Base Optimization - ✔✔• Number of suppliers to use?
• Too few increases shortage and price risks, innovation may be limited
• Too many increases complexity and makes supply management difficult
• Single- or multiple-sourcing
✔✔Capabilities and location are important: - ✔✔• Proximity impacts ease of
communication, transportation costs and community perceptions
• How important is physical nearness of the supplier?
• Consideration of trade barriers and incentives
• Do we need the supplier to have a global presence?
• Global presence may impact access to markets
• How well do the supplier's capabilities and location compare with cost?
✔✔Weighted Point Model - ✔✔establishes performance categories that are weighted by
importance
✔✔Information sharing - ✔✔buyers and suppliers need to share timely data about
demand, supply and delivery
✔✔Electronic Data Interchange (EDI) - ✔✔structured, secure mode of transmitting data
✔✔Supplier Scorecard - ✔✔track and report supplier performance in key areas (KPIs)
✔✔Supplier Certification - ✔✔assessment of supplier's ability to meet buyer's needs
✔✔Supplier Relationship Management (SRM) - ✔✔technology enabled data gathering
about suppliers to manage strategic relationships
✔✔Demand Planning - ✔✔both forecasting and managing customer demand to reach
operational and financial goals
✔✔Demand Forecasting - ✔✔predicting future customer demand
✔✔Demand Management - ✔✔influencing either pattern or consistency of demand
✔✔Components of Demand - ✔✔patterns of demand over time
✔✔Autocorrelation - ✔✔relationship of past and current demand
