Sourcing processes include the selection of suppliers, design of supplier contracts, product design collaboration, procurement of material, and evaluation of supplier performance.
A good supplier scoring and assessment process will primarily track performance along the price dimension when evaluating a supplier.
Design collaboration ensures that any design changes are communicated effectively to all parties involved with designing and manufacturing the product.
The goal of procurement is to enable orders to be placed and delivered on schedule at the lowest possible price.
Effective sourcing processes within a firm can improve profits for the firm and total supply chain surplus in a variety of ways.
As the replenishment lead time from a supplier grows, the amount of safety inventory that needs to be held by the buyer also grows in direct proportion to the replenishment lead time.
A reliable supplier has low variability of lead time, whereas an unreliable supplier has high variability.
As the replenishment lot size grows, the cycle inventory at the firm grows, thus increasing the cost of holding inventory.
Quantity discounts lower the unit cost and tend to increase the required batch size.
The value of better information coordination will be linked to the amount of variability introduced into the supply chain as a result of the bullwhip effect.
Supplier viability can be especially important if the supplier is providing mission-critical products and it would be easy to find a replacement for them.
Having multiple sources ensures a degree of competition and also the possibility of a backup, should a source fail to deliver.
Unless adding a supplier with a unique and valuable capability clearly adds to total cost, the firm’s supply base may be too small.
To improve overall profits, the supplier must design a contract that requires the buyer to share in some of the supplier’s demand uncertainty.
Buyback contracts counter double marginalization by lowering the cost of overstocking for the retailer.
Revenue-sharing contracts counter double marginalization by decreasing the cost per unit charged to the retailer, thus effectively decreasing the cost of understocking.
Quantity flexibility contracts counter double marginalization by giving the retailer the ability to modify the order based on improved forecasts closer to the point of sale.
Two-part tariffs and threshold contracts can be used to counter double marginalization and increase agent effort in a supply chain.
The procurement process for indirect materials should focus on decreasing the transaction cost for each order.
Supplier performance analysis should be used to build a portfolio of suppliers with similar strengths.
The process by which companies acquire raw materials, components, products, services, and other resources from suppliers to execute their operations is
The entire set of business processes required to purchase goods and services is
Using the output from supplier scoring and assessment to identify the appropriate suppliers is
well over 50% of sales for most major manufacturers
Effective sourcing processes within a firm can
improve profits for the firm and total supply chain surplus
When designing a sourcing strategy, it is important for a firm to
be clear on the factors that have the greatest influence on performance and target improvement on those areas.
Suppliers performance must be rated on many different factors because
the factors impact the total supply chain cost
Which of the following is a traditional logistics driver of sourcing?
The decision to have a third party perform a supply chain function is called
The decision to move a production facility outside of domestic boundaries and still maintain ownership is called
A third party can increase the supply chain surplus by aggregating demand across multiple firms and gaining production economies of scale that no single firm can on its own. This is called
An intermediary can increase the supply chain surplus by aggregating inventories across large numbers of customers. This is called
An third party may increase the supply chain surplus by aggregating warehousing needs over several firms. This is called
An intermediary can increase the supply chain surplus by decreasing the number of relationships required between multiple buyers and sellers. This is called
An third party can increase the supply chain surplus if it has a lower collection cost than the firm. This is called
A third party increases the supply chain surplus if it aggregates the sourcing for many small players and facilitates economies of scale in ordering, inbound transportation and production. This is called
Craigslist and eBay are examples of
W.W. Grainger and McMaster Carr stock products from more than a thousand manufacturers each to sell to hundreds of thousands of customers and are sterling examples of
transportation aggregation by storage intermediaries
Using a third party requires a firm to share demand information and in some cases intellectual property. This risk would be described as
leakage of sensitive data and information
Scoring the performance of suppliers in terms of replenishment lead time thus allows the firm to evaluate the impact each supplier has on
the cost of holding safety inventory
The selection of suppliers, design of supplier contracts, product design collaboration, procurement of material, and evaluation of supplier performance are a part of
Price has traditionally been the only dimension that suppliers have been compared on during the process of
supplier scoring and assessment
The goal of procurement is
to enable orders to be placed and delivered on schedule at the lowest possible overall cost
The role of sourcing planning and analysis is
to analyze spending across various suppliers and component categories to identify opportunities for decreasing the total cost.
Consider the factors influencing total cost and supplier performance. Which of the following is the LEAST quantifiable factor?
Sourcing a product overseas may have
lower product cost but will generally incur a higher inbound transportation cost
Quantity discounts lower the unit cost
but tend to increase the required batch size and as a result the cycle inventory
Good design collaboration for manufacturability and supply chain can
reduce product cost
The viability of suppliers is especially important for suppliers who
provide mission critical products that would be difficult to replace
Supplier performance should be compared based on
its impact on total cost
Single sourcing for a product is used to
guarantee the supplier sufficient business when the supplier has to make a significant buyer specific investment
To create a win-win negotiation, the two parties must
identity more than one issue to negotiate
The difference between the values of the buyer and seller is referred to as the
A contract that allows a retailer to return unsold inventory up to a specified amount, at an agreed upon price is a
buyback or returns contract
A contract where the buyer pays a minimal amount for each unit purchased from the supplier but shares a fraction of the revenue for each unit sold is a
A contract that allows the buyer to modify the order (within limits agreed to by the supplier) as demand visibility increases closer to the point of sale is a
quantity flexibility contract
A contract that decreases overall costs but leads to higher lot sizes and thus higher levels of inventory in the supply chain is a
quantity discount contract
A contract that is used to induce performance improvement from a supplier along dimensions, such as lead time, where the benefit of improvement accrues primarily to the buyer, whereas the effort for improvement comes primarily from the supplier is a
shared savings contract
A downside to which contract is that it leads to surplus inventory that must be salvaged or disposed?
buyback or returns contract
Which type of contract is used when agents act on behalf of a principal and the dealer’s margin is set to be the same as the supply chain margin, and the dealer exerts the right amount of effort?
Which contract increases the margin for the dealer as sales cross certain levels?
If each Jerk Store location is acting independently, how many packets of seasoning should they stock?
If each Jerk Store location is acting independently, what is their expected profit if they stock an optimal quantity?
If George and a single Jerk Store act as a vertically integrated supply chain, what is the optimal quantity for the Jerk Store to order?
If George and a single Jerk Store act as a vertically integrated supply chain, what is the total supply chain expected profit if an optimal order quantity is placed?
Sales efforts and orders peak near the end of any month, quarter, or other evaluation period. This is commonly referred to as
the hockey stick phenomenon
Understanding the impact of incentives on the actions of a supply chain partner is especially important when
the third party’s actions are not fully observable
The procurement process for direct materials should focus on
improving coordination and visibility with the supplier
The procurement process for both direct and indirect materials should work on
consolidation of orders to take advantage of economies of scale and quantity discounts