CPPB Exam - Domain VI - Strategic Procurement Planning Exam Questions With Correct Answers

SWOT analysis - Answer a planning tool used to analyze an organization's strengths, weaknesses, opportunities, and threats Pareto Principle - Answer 80% of purchasing cost is created by 20% of the purchase orders issued spend analysis - Answer process of collecting, cleansing, classifying and analyzing expenditure data with the purpose of decreasing procurement costs, improving efficiency, and monitoring compliance procurement profile - Answer result produced after conducting a series of various analyses on: -procurement expenditures of an organization - range of commodities & services acquired through procurement (spend analysis), -markets that provide them (market analysis) -influence of suppliers/entity in the market -risks inherent in market buying plan - Answer based on demand, market & supplier analyses. should be developed for each major type of material targeted for purchase. market research - Answer current info to identify the most beneficial method for acquiring, distributing, and supporting supplies & services. journals indexes supplier shows industry forums, websites discussions with colleagues forecasting - Answer tool to determine future needs ongoing assessment to examine opportunities and is an essential element of strategic planning requires buyers to keep abreast of market and surveys, and understand various indicators, business cycles, indexes, lead times, and price histories. affects timing of spot bids Purchasing Manager's Index (PMI) - Answer indicator that identifies highs and lows in the economy Fixed Period Average - Answer mathematical calculation used to divide total usage for a fixed period (generally 12 months), using the last fiscal calendar, by the number of months involved (generally 12) resulting average is forecast for comparable future period. ignores current trends, reflects old patterns and not the current direction. Moving Average Method - Answer continuous average method to gather most current usage information. Always uses most recent data - 12 month period would be avg monthly usage for immediately preceding 12 months; as year progresses, forecast is updating by dropping oldest month and adding most recent month. Weighted Moving Average Method - Answer gives more significance to weighting specific information such as seasonal variations. Mean Absolute Deviation (MAD) - Answer a measure of the overall forecast error MAD = absolute value of errors divided by number of errors. The smaller/lower the value of MAD, the more accurate the forecast. SD - Answer standard deviation forecast data include: - Answer new orders production employment supplier deliveries inventories Purchasing Manager's Index (PMI) forecasting techniques & strategies include: - Answer fixed period moving average weighted moving average mean absolute deviation (MAD) economic ordering quantity (EOQ) Economic Order Quanity (EOQ) - Answer ideal order quantity a company should purchase for its inventory given a set cost of production, a certain demand rate, and other variables. This is done to minimize inventory holding costs and order-related costs. The equation for EOQ also takes into account inventory holding costs such as storage, ordering costs and shortage costs. The formula assumes that demand, ordering, and holding costs all remain constant.