BTEC - The Way Through The Woods

2009-12-14T20:45:00.000-08:00

Below is assignment guide for students from Sri Lanka taking BTEC's Purchasing module

Assume you are one of the key shareholders and a director of a medium scale manufacturing company which will start operations in the near future. After realizing that the purchasing and procurement activities will be critical for the company the Board has asked you to look after the purchasing, procurement activities of the company.

You are required to provide the following background information about your company in the introduction area.

• Brief introduction to your company
• Nature of the Business
• Nature of the products
• Organizational structure
• Any other specific characteristics of the organization.

Clearly state all relevant assumptions regarding the nature of the business and any other information applicable for the selected organizational context and answer the following task.

Task 1

1.1 Develop purchasing systems for standard and non-standard items (25.1.2)

1.2 Explain the organizational structure and possible organizational configurations (25.1.1)

1.3 Describe how the efficiency of purchasing functions will be analyzed in your organization? (25.1.2)

1.4 Briefly explain the involvement of Human Resource Management in your organization’s purchasing functions? (25.1.3)

1.5 Briefly explain the utilization of IT in the procurement and supply chain management activities (25.1.4)

Task 2

2.1 Describe the different types of sourcing available and strategies formulated to manage them in your organization.( i.e. Consumables, capital goods, goods for resale) (P25.2.1, 25.2.5)

2.2 What are the strategies used by the organization to develop and maintain effective supplier relationship and list the ways for vendor appraisals? (P25.2.2, 25.2.3)

2.3 What are the issues identified by your organization when sourcing decisions made?
- Tendering
- Make or buy decision
- Subcontracting or outsourcing (P25.2.4)

Task 3

3.1 Describe how negotiations with suppliers are conducted to obtain goods and services at accepted costs. (P25.3.1)

3.2 What are the channels of distribution for the different types of goods (P25.3.2)

3.3 Briefly describe the procedures used by the organization to ensure the security and safety (P25.3.3)

Task 4
4.1 Does the company’s purchasing activities influenced by national and transnational organizations? Briefly explain. (P25.4.1)

4.2 Investigate the relationship with the foreign suppliers, Compare and contrast the relationships with the foreign suppliers with the competitors (P25.4.2)

4.3 Explain the role and the service provided by the specialist in international purchasing? (P2.4.1)

4.4 Describe the negotiations carried out with external parties to ensure that goods and services purchased to budget (P2.4.2)

4.5 Asses the advantage of global sourcing strategy. (P2.4.2)

Guide

- As required, the organization that is suitable for this assignment should be a medium size manufacturing company. E.g. Foods, household products, office products etc.

- The company needs to purchase for various purposes.

o Some as inputs (E.g. Raw materials) for the manufacturing; and

o Some for office use.

- These purchases may be made:

o In bulk quantity or loose form;

o Regularly or on adhoc basis;

o Locally or internationally.

- Your answer is dependent upon your assumptions of the company.

- You can find most of the answers at this blog: http://btechnd.blogspot.com/search/label/Purchasing

Good luck.

Discuss any of the two policies of the government and the implications to the business organizations.

2009-12-12T02:57:00.000-08:00

Discuss any of the two policies of the government and the implications to the business organizations. (P4.2.3)

- Two possible policies would be as follows:

+ Singapore policy toward foreign investment. E.g. How does the open policy affect Royal business? Are there potential new entrants setting up similar business to compete against Royal?

+ Singapore policy toward local SMEs. Are there support from the government to encourage local SMEs to go overseas given Singapore market is small in size? E.g. Are there opportunities for Royal to open more shops in overseas?

+ ................ etc

Select a country in your own and list down the recent developmental issues and discuss the possible effects it has on the organizations.

2009-12-12T02:40:00.000-08:00

Select a country in your own and list down the recent developmental issues and discuss the possible effects it has on the organizations. (P4.2.4)

- You need to research Singapore's recent development since Royal is in Singapore.

- Some possible issues would include:

+ Aging issue: Royal has to cater suitable foods to the aging population

+ Urbanization resulting into more smaller family size, busy working lifestyle etc. Explain how this implicate Royal

+ ................ etc

What competitive strategy is being adapted by this organization? Discuss.

2009-12-12T02:36:00.000-08:00

What competitive strategy is being adapted by this organization? Discuss. (P4.3.3 )

- This is a discussion about Porter's 3 generic strategies.

- Propose a strategy for this restaurant business. Justify your answer.

Discuss the reactions and responses of the market forces towards the Royal Bakers?

2009-12-12T01:57:00.000-08:00

Discuss the reactions and responses of the market forces towards the Royal Bakers? (P4.3.2)

- Define market forces.

- What are the market forces that can influence Royal?

- How would Royal react or respond to these market forces?

Market forces influence demand and supply, e.g. Lower demand for LPG gas in residential household sector may be due to increase of people eating outside instead of cooking at home. As a result, Royal may respond to more food business opportunities in the country.

Consider the 5 forces, government regulation etc

Discuss the market in which the “Royal Bakers” is operating?

2009-12-12T01:53:00.001-08:00

Discuss the market in which the “Royal Bakers” is operating? (P4.3.2)

- Identify the market structure of your organization - the market structure of restaurant business is usually monopolistic competition

- Justify your answer with a discussion about the identified market structure. E.g. Many buyers and many sellers etc

Briefly explain the Market Structures

2009-12-12T01:43:00.000-08:00

Briefly explain the Market Structures?(P4.3.1)

Market structure describes three things about a market:
1. The number of buyers and sellers;
2. The extent to which the market is concentrated in the hands of a small number of buyers or sellers;
3. The degree of collusion or competition between buyers or sellers.

Market structures range from the theoretical extremes of perfect competition to monopolistic competition, to oligopoly, to ..... and pure monopoly.

Royal Bakers

2009-12-12T00:00:00.000-08:00

Below is assignment guide for students from Sri Lanka taking BTEC's Business Environment module

Royal Bakers is a well known successful food restaurant which located in Singapore with several branches in all over the cities. For the last five years their performance was said to be successful in catering the food items. There were only few small competitors in the market.

Recently the following changes were identified

* The food prices have been increased.
* There were long queues for the food items.
* New food items have been introduced.
* Introduction of new machines for the production purpose.
* More tax on flour by the government.
* Demand for the LP Gas has been reduced by the house hold sectors.

Task 3

3.1 Briefly explain the Market Structures?(P4.3.1)
http://btecexpert.blogspot.com/2009/12/briefly-explain-market-structures.html

3.2 Discuss the market in which the “Royal Bakers” is operating? (P4.3.2)
http://btecexpert.blogspot.com/2009/12/discuss-market-in-which-royal-bakers-is.html

3.3 Discuss the reactions and responses of the market forces towards the Royal Bakers? (P4.3.2)
http://btecexpert.blogspot.com/2009/12/discuss-reactions-and-responses-of.html

3.4 What competitive strategy is being adapted by this organization? Discuss. (P4.3.3) (You are encouraged to use Porters Generic Strategies)
http://btecexpert.blogspot.com/2009/12/what-competitive-strategy-is-being.html

Task 4

4.5Select a country in your own and list down the recent developmental issues and discuss the possible effects it has on the organizations.(P4.2.4)
http://btecexpert.blogspot.com/2009/12/select-country-in-your-own-and-list.html

4.4Discuss any of the two policies of the government and the implications to the business organizations. (P4.2.3)
http://btecexpert.blogspot.com/2009/12/discuss-any-of-two-policies-of.html

Explain the responsibilities of the selected organisation and the stratergies used in meeting them?

2009-12-11T23:31:00.000-08:00

Select an organisation in your choice and discuss the followings

1.1 Identify the type of organisation?
1.2 Identify objectives of the organisation?
1.3 List down the stakeholders of the selected organisation and discribe three stakeholder objectives and evaluate the extent to which they are achieved?
1.4 Explain the responsibilities of the selected organisation and the stratergies used in meeting them?

The first three questions are easy to answer. I will not provide any guide unless you need help (Help at email: btecexpert@gmail.com).

Guide to 1.4

- Some responsibilities can be social responsibility, environmental responsibility, workplace responsibility, business ethic etc

- Strategies used to meeting them: Research on how the organization did to fulfill its responsibilities.

"Strategies" means in what way the organization did to achieve its objectives. E.g. To raise funds for charity with some social organizations. Or save $X on energy through using solar energy saving building. Or the policy of procurement to protect environement etc.........

Importance of terms and standard form contract

2009-09-13T00:35:00.000-07:00

Importance of terms in a contract

Terms in the contract are obligations that the contracting parties are to fulfill.

Terms in the contract between Keith and John spelt out the obligations for them to fulfill. E..g. One of the terms is that John needed to order 300 tones of plaster from Keith on exclusive basis in year 2000, i.e. John cannot buy from other sources. This may have an implication to John when Keith, for example, not able to supply plaster in future(Plagarism is a serious offence. This content can be found at http://btechnd.blogpot.com) . This restriction of supply to John may appear to be anti-competition and unreasonable if Keith cannot give a good reason for that.

It is therefore important that terms are to be clearly understood by contracting parties before they sign on the agreement.

When terms are broken

When the terms in the agreement are broken by a party, the other party may seek for remedies through legal action. Thus, when John stopped ordering plaster from Keith after the 4th order, he has breached the agreement and Keith wanted to take legal action against John.

When terms are broken, it may lead to impact including lawsuit and dispute between parties. This may further lead to termination of relationship between parties and both may incur expenses for costly legal tussles.

Standard form contract

The agreement between Keith and John gave rise to an issue, i.e. if the agreement is fair. This is because there are two clauses in the agreement appeared to be unfair and unreasonable, i.e.

1. Keith restricted John from buying plaster from another party;

2. John has no control over the quality of product supplied by Keith.

If these 2 terms can be proved to be fair and reasonable at the time of signing the contract by Keith, John may have to honor the terms.

Assuming the agreement is a standard form contract, generally, for the case of unfair contract terms, the court would rule based on the following:

1. If the unfair terms are void by the statute. E.g. a clause which restricts supply may be seen as anti-competition, thus, an unfair term.

2. Test of reasonableness. E.g. Are there any benefit John getting from Keith in return for not undertaking the quality of plaster by Keith?

Again, even Keith has won the case, Keith may not be able to claim for his loss of remaining 220 tones plaster unless he can prove his loss. Keith, however, can claim for his payment for the 4th delivery of goods since he has already delivered the goods to John.

Employer's liability

2009-08-23T23:50:00.000-07:00

An employer may be liable for tort of an employee under the principle of vicarious liability.

This means that where an employee commits a tort, the company may be liable jointly with the employee, or even separately on its own if the employee has disappeared.

To make the employee liable for a tort of the employee, it is necessary that:
1. Proof of relationship between them as employee and employer; and
2. the employee's tort is committed in the course of his employment

An employer is also liable for workers' health and safety Health and Safety Act. The Act provides that an employer should:
1. Secured health, safety and welfare of a person at work;
2. Protect persons against risks to health and safety arising out of or in connection with activities of persons at work
3. Control an duse of explosive or highly flammable or otherwise dangerous substances, and generally preventing the unlawful acquisition, possesion and use of such substances

Strict liability and general tortious liablity

2009-08-23T03:08:00.000-07:00

Strict liability is different from general tortious liability in that it is based on breach of a absolute duty.

In other words, you may escape general tortious liability if you can prove that you have acted with reasonable care and that you are not acting unintentionally.

In strict liability, you are liable even if you have taken reasonable care.

For example, polluters may be strictly liable for the tort of nuisance, i.e. gas or other materials which may cause damage to environment if they escape from the factory.

Occupiers' liability to visitors

2009-08-23T02:57:00.000-07:00

An occupier of premises is a person who has control or possession of the premises.

An occupier owes a duty to all visitors to the premises. He must take precautions as are necessary to make the premises reasonably safe for the purpose for which the visitor is permitted to enter.

The occupier can discharge his duty of care to visitors by:
1. taking reasonable measures, such as repair work, to eliminate a hazard.
2. giving warnings to visitors where necessary to enable the visitors to be reasonably safe.

Tortious and contract liability

2009-08-23T02:36:00.000-07:00

Similarity

Both tortious and contractual liability are under civil law and the person wronged sues in a civil court for compensation.

Difference

However, tortious liability is different from contract liability in that:
1. The defendant in a tort may have no prior relationship with the claimant whereas
2. The defendant in the case of breach of contract must be the subject to the obligation of a contract and he has failed to perform those obligations.

For example, a tort is committed when someone, who might not have prior relationship with the landlord, trespasses a property. A seller who sues the buyer for breach of contract is, however, having a prior relationship with the buyer who has the contractual liability of performing the obligations of the contract.

Exclusion clauses

2009-08-23T02:21:00.000-07:00

For exclusion clauses in the standard form contract to be considered in the court, the exclusion clauses should be:
1. not against statute; and
2. not ambiguous; and
3. reasonable.

Those exclusion clauses in the standard form contract may be void if they are against statute. E.g. a clause to exclude death or personal injury resulting from negligence is void.

If the terms are ambiguous, the court may interpret any ambiguity against the person at fault who relies on the exclusion.

The law also seeks to protect consumers who are usually the weaker party to the contract from the full force of exclusion clauses. The person who uses a standard form contract in dealing with a consumer cannot, unless the term is reasonable, restrict liability for his own breach. For example, a clause attempts to restrict liability for other loss or damage arising from negligence is void unless it can be shown to be reasonable.

Standard form contract

2009-08-23T01:16:00.000-07:00

The standard form contract is a standard document containing terms and conditions on which they contract with their customers.

The individual must usually take it or leave it probably because the supplier is the only supplier in the market.

For example, you have no choice but to sign on the standard form contract if you want to advertise in, say, newspaper or TV station even though if you don't agree with some of the terms.

One of the problems with standard form contract is that the dominating party tries to exclude liability for the terms in the contract (Exclusion clauses).

Capacity to contract

2009-08-22T03:39:00.000-07:00

Capacity refers the fact that a person may not in a position to enter into an agreement. In other words, a person is lack of capacity when he has disability in entering into a legal contract.

For example, a unsound minded person may be said to be lack of capacity to sign a legal agreement. Another example will be a minor under the age of 18, in the case of Singapore, is said to be lack of capacity legally to enter an contractual agreement. Casino control act has stipulated that a minor would be banned to enter casino in Singapore.

Should a contract is entered between a person who lacks the capacity and another party, the contract may be void or voidable or unenforceable. For example, generally, contracts entered into by a minor are described as unenforceable, in which case, the minor is not bound but the other party is bound.

Consideration

2009-08-22T03:26:00.000-07:00

Consideration is the price of the other person's promise. That is, contracting parties must either suffer something or gain something in the transaction.

E.g. In the case of a property transaction, the seller's consideration is a promise of selling his house at a certain amount to the buyer whose consideration is to buy the house at the negotiated price.

A contract that provides consideration is known to be a simple contract.

A contract that provides no consideration is known to be a specialty contract, e.g. granting a deed to a charity.

Intention to create legal relations

2009-08-22T03:18:00.000-07:00

When business people enter into commercial agreement, it is presumed that there is an intention to enter legal relations unless expressly indicate otherwise.

This is known to be the rule of "rebuttable presumptions". The court always presumes that there is a legal relations in a commercial agreement. The party seeking to escape liability should produce the burden of proof to show that the legal relations are not intended.

Practical legal issues selling online

2009-08-22T03:04:00.000-07:00

A set of practical legal issues may be used by a seller selling online.

1. Websites should be construed as shop windows, i.e. invitations to treat rather than offer.
2. Explicit and clear terms and conditions on website.
3. An indication of interest by a buyer visiting the website is taken as an offer, not an acceptance.
4. Sellers may display clearly the disclaimers of liability on the website subject to the usual consumer protection laws on unfair terms.
5. The law of jurisdiction governing the transaction should be made clear.
6. No contravention to local law in the countries targeted.
7. All offers must have a time limit.

Legal issues about contracting online

2009-08-22T02:15:00.000-07:00

Two of the major issues, from the legal perspective, concerning about business agreement over the new technology - ecommerce are as follows:

1. How does law look at the perspective of agreement between a buyer and a seller over Internet?
2. Is electronic contractual agreement over Internet recognised legally?

For the first issue, the seller in the Internet is said to the party initiating a negotiation making an invitation to treat. This is something similar to auction sales, advertisements, exhibition of goods for sale and invitation for tenders. The seller is inducing for an offer and a contractual agreement is formed when the seller accept the offer.

For the second issue, it is argued that electronic contract provides evidence of terms of the contract, similar to the traditional way of business dealing supported by legally recoginsed digital signature, timing of acceptance, the use of postal rule, consideration, use of credit cards and etc fulfilling the key elements of agreement, consideration and intention to create legal relations.

A set of practical legal issues may be used by a seller when contracting online.

Offer and acceptance

2009-08-22T02:12:00.000-07:00

In an agreement, you need:

- An offer by an offeror; and
- An acceptance by the offeree

Offer and acceptance can be in
- Oral form or
- In writing

The importance of the key elements

2009-08-22T01:54:00.000-07:00

A valid contract is one contain certain certain key elements.

A contract without key elements may become an invalid contract.

An invalid contract may be:
- Void: The parties are not bound by it.
- Voidable: A party may terminate at his option.
- Unenforceable: It is a valid contract but if either party refuses to perform the contract, the other party cannot compel him to do so.

In case of a invalid contract, an organization may not recover, for example, property that was transferred to a third party. Both time and money may be lost dealing with an invalid contract.

It is therefore important that key elements are required for the formation of a valid contract.

Key elements

2009-08-22T01:41:00.000-07:00

There are three key elements in a contract:

1. Agreement
- The parties contracting must have made an agreement, else, it is not a valid contract. The rules of offer and acceptance apply, i.e. one party must offer something and the other party must accept the offer.

2. Consideration
- The parties contracting must agree to give consideration to the other. Consideration is the “price” of the other person’s “promise”. A price can be forbearance, detriment, loss, responsibilities given and suffer a person has. A promise can be right, interest, profit or benefit a person receives.

3. Intention to create legal relations
- That is, the intention of their promises to be legally binding.

If one of the three elements of contract is absent, there is no contract.

Business agreement

2009-08-22T01:27:00.000-07:00

A business agreement is a contract between, say, a seller and a buyer, which legally binds the parties on a business transaction.

Types of business agreement include the following:
- Sale agreement
- Rental agreement
- Employment agreement
- Employment contracts
- Franchise agreement
- Licensing agreement
- Sub-contracting agreement

The role of law

2009-08-22T01:07:00.000-07:00

The law is a body of rules for the guidance of human conduct.

The role of law includes the following:

- It provides ethical standards and expectations, rules of conduct, measures to enforce those rules, and a means for settling disputes.

- It protects people's right.

- It also maintains peacekeeping; checking government power and promoting personal freedom; facilitating planning and the realization of reasonable expectations; promoting economic growth through free competition; promoting social justice; and protecting the environment.

It is important to note that without laws to govern the actions of people and businesses, society would not be able to function effectively, and commerce would likely collapse. Chaos may occur if there is no legal system.

The law is a fundamental part of a civilised society.

Relationship with suppliers

2009-07-22T22:53:00.000-07:00

211 relationshiwithsuppliers

View more presentations from btecexpert.

Influences on purchasing activities

2009-07-22T07:26:00.000-07:00

205influencing Factors Overseas

View more presentations from guestf2ccf6.

TQM

2009-07-20T19:48:00.000-07:00

Quality may be define as fitness for use, i.e. the features that bear the ability to meet the expectation of customers.

To meet the desired quality, a concept called Total quality management, TQM, comes into place.

TQM is about ensuring every job, every process, is carried out right the first time and every time.

It focuses on product improvement from customer’s viewpoint. TQM emphasizes shared responsibility for product quality at all levels.

To achieve the objectives of TQM, it is, therefore, essential that managers are provided with the necessary information to plan, control and evaluate performance.

In the case of DimS, TQM may be implemented by both IBM and Keytronics with a common objective, i.e. do it right the first time and every time. Also, both companies should also recognize the fact that they share the responsibilities for product quality at all levels.

Specifically,

1. At Keytronics, being a supplier to IBM, has to ensure it meets the specified product quality. Further, Keytronics has to meet the scheduled delivery from the factory in China via transport channels and finally reaching IBM warehouse in Vietnam.

2. IBM has to ensure a lean production floor to achieve the desired product quality of DimS as part of the inputs to the finish product to be sold to IBM's customers.

3. To ensure product quality, both Keytronics and IBM may adopt international practices of JIT, ISO9000 and Six Sigma to meet their desired standard requirements.

In short, all procedures must be done right the first time and every time and right tools are used by both IBM and Keytronics.

JIT

2009-07-20T19:36:00.000-07:00

JIT production is about making what the customer needs, when it is needed and in the quantity needed using the minimum resources of people, materials and machinery.

The objectives of JIT are to achieve zero defects, zero set-up time, zero inventory, zero handling, zero lead time and lot size of one, i.e. EOQ.

JIT is an appropriate scheduling technique meeting the needs of IBM lean production system.

Costs of inventory

2009-07-20T18:56:00.000-07:00

The costs of inventory include the following:

1. Acquisition costs - These are preliminary costs such as costs of vendor selection, negotiation, placement etc

2. Holding costs - When the goods are held in the warehouse, the company may have to incur costs on storage, handling, light, power, documentation. In addition, capital may be tied up that otherwise could have been released for other investment purpose. Some goods might also have been bought with financial loan, thus, financial interest may also incur as a result of inventory.

3. Costs of stockouts - These refer to the loss of production output as a result of out of stock situation. Further, time and action taken to rectify shortage of inventory are also considered costs.

Capital equipment purchase techniques

2009-07-16T20:26:00.000-07:00

Capital equipment purchase may involved a large sum of money. Management is usually treating it as an investment and is therefore concerned about the return of investment.

There are some techniques to calculate the return of investment.

1. Payback approach
- It looks at time required for cash returns to equal the initial cash expenditure.

2. Average rate of return
- It would be either in the form of depreciation per year or Return on capital employed.
> Annual rate of depreciation = (Cost – residual value) / Lifespan(Years)
> ROCE = Average annual profit after depreciation/Capital invested

3. Net present value
- In NPV, the present value of the future anticipated cash return is discounted at a certain rate. Then we look at the sum of the discounted cash return to see if it is higher than the initial capital. If it is, then the investment is considered as a good investment.

In IBM case, the the total discounted cash return for X years is calculated to be $XX. This is higher/lower than the initiate investment.

Make or buy

2009-07-16T19:31:00.000-07:00

Make or buy decision is dependent upon a number of factors including cost.

IBM's decision making process would likely to be as follows:

1. Is it the component core business? If yes,
2. Does IBM have the design capacity? If yes,
3. Does IBM have the manufacturing capability? If yes,
4. Is the component made by IBM competitive? If yes,
5. Other factors including financial consideration, i.e. whether IBM feels spreading the financial risk is important.

Analysis
1. Based on the information given, it appears that it is _______ decision due to the cost consideration.

(Show your calculation)

2. In additional, other operational factors are to be taken into consideration for IBM. E.g. The cost of production will be 100% to be absorbed by making since no idle production capacity will be allowed(Plagarism is a serious offence. This content can be found at http://btechnd.blogpot.com) . Further, IBM also needs to employ professional personnel (e.g. R&D engineers/warehousing personnel etc). This professional additional cost is on top of intensive R&D research on the production methods and special facilities for inventory storage are needed.

3. It is worth noting that IBM is only requesting for an initial 100,000 pieces subject to the success of the new project. As this is a small quantity, it would be to the advantage of IBM to spread the risk to supplier since the supplier already has the facility to handle such project.

In view of the above, my recommendation would be a buy decision for IBM.

Sourcing process and strategies

2009-07-16T18:50:00.000-07:00

A sourcing process consists of steps from identifying needs of sourcing tol choosing a supplier and finally post purchase performance evaluation.

Steps of sourcing are as follows:
1. Identify needs
2. Define requirements
3. Decide to make or buy
4. Identify type of purchase
5. Conduct market analysis
6. Identify possible suppliers
7. Pre-screen possible sources
8. Evaluate remaining supply base
9. Choose supplier
10. Deliver product/perform service
11. Post purchase performance evaluation

There are two perspectives to the sourcing strategies to develop effective relationship in the sourcing process for IBM.

First, due to the nature of DimS, a close relationship between IBM and Keytronics in the form of strategic alliance is needed to support their sourcing needs(Plagarism is a serious offence. This content can be found at http://btechnd.blogpot.com) . In this case, steps 1 - 3 and are not needed if there is no new needs identified.

Paul may use the e-procurement system to communicate with Keytronics at step 4 for straight re-buy. Some documentations may be needed if the re-buy is modified or if it is a new buy. Assuming it is a straight re-buy, Paul's strategies would be to ensure the goods are delivered on scheduled and quality of the goods are per specifications. A constant feedback from IBM production about quality such as packaging, cold room requirements and functionality of DimS is essential.

Paul may also constantly stay contacted with Keytronics by either providing performance evaluation or obtaining information about improving work flow and product development.

Second, IBM may also work with Keytronics in an effort to obtain better sources of supply. In this case, both parties can go through the 11 steps from identifying the needs to the final step of post purchase evalutuion. For example, they can constantly source for alternative transport channels which would contribute better value to customers.

Sourcing

2009-07-16T18:40:00.000-07:00

Sourcing is the process of identifying, selecting and developing suppliers.

Sourcing decision can be made at:
- Tactical and operational level; and
- Strategic level.

At tactical and operational level, sourcing decision usually involves tasks at low level decision, short term: non-critical, high-profit, low risk. E.g. “To buy” decision may be reversed due to supplier failure or work shortage.

At strategic level, sourcing decision making involves tasks at top-level decision, long term and high supply risk. E.g. To enter into partnership with supplier or to acquire a supplier with backward integration.

Relationship purchase

2009-07-16T07:25:00.000-07:00

Relationship purchase focuses on supplier retention. It emphasizes on closeness with suppliers with long-term orientation. Both parties have a complex, including internal relationships. Frequently, they work on improving price, quality, delivery and other factors such as innovative design as a collaborative exercise between purchaser and supplier. The purchaser seeks for high supplier contact, with each contact being used to gain information and strengthen the relationship. As such, significant sharing of information including cost information, transparency are required.

In IBM case, a long-term relationship with Keytronics is important to ensure the quality supply of OEPs and case at a competitive pricing. IBM needs to work with Keytronics together for competitive sourcing which either contribute to lower price at same quality or same price at higher quality. Only relationship purchase would bring forth the desire win-win outcome.

Transactional purchasing

2009-07-16T07:09:00.000-07:00

In a transactional purchasing, the purchaser seeks to maximize gain in usually low price or extra services in the deal.

Specifically, the purchaser focuses on short, discrete purchasing with short-term orientation. It is just a simple buyer/seller relationship. The emphasis is on price, quality and delivery in the offered product. There is usually no innovation and it comes with moderate supplier contact and little sharing of information. An example will be the reverse auctions.

For IBM, certain standard items such as office supply may be suitable to be purchased in the transactional manner.

Negotiation with suppliers

2009-07-12T06:12:00.000-07:00

Broadly, there are two types of negotiation depending upon the objectives of relationship both the buyer and seller intend to build.

1. Adversarial negotiation
- Win-lose negotiation
- Emphasize on competing to attain goals at the adversary’s expense

2. Collaborative negotiation
- Win-win negotiation
- Emphasize on ascertaining goals held in common with other party

(Page 549, more details on the comparison between the two types)

Importance of a vendor appraisal system

2009-07-12T06:11:00.001-07:00

Importance of a vendor appraisal system

i) A vendor appraisal system serves as an important tool of buyer to provide feedback to vendors about their performance against the expected performance level both have agreed. The appraisal report may be used to support selection of vendors or for future management sourcing decision.

ii) There are essentially two types of vendor appraisal: Selection of vendors; and continuous appraisal of vendor performance

Effective vendor appraisal system

Transport channels

2009-07-12T05:59:00.000-07:00

Major transport channels include the following:

-Air
-Land
*Trucks
*Rail (Trains)
-Water
*Boats
*Vessels
-Pipeline

In deciding transport channels, you need to consider 2 major issues:
1. Operating characteristics of the channels; and
2. The freight costs of these channels.

Operating characteristics:
-Speed
-Availability
-Dependability
-Capability
-Flexibility
-Environmental

Freight costs
- Fixed vs variable costs
- Critical transport elements
- Rates
- Service factors
- Packaging
- Insurance
- Pilfering
- Others

Effective Vendor appraisal system

2009-07-10T23:52:00.000-07:00

Importance of vendor appraisal

i) In Paul's case, a continuous appraisal of Ketronic performance is needed since Ketronic is already the vendor of "DimS".

ii) I recommend four major areas for continuous appraisal:
(1) General management
(2) Financial capability
(3) Quality
(4) Delivery

iii) It is assumed that IBM has already appraised the general management and financial capability of Ketronic in the early selection stage(Plagarism is a serious offence. This content can be found at http://btechnd.blogpot.com) . That leaves only quality and delivery to be appraised in the implementation by Paul.

iv) The objectives of the continuous appraisal, thus, may include the following:
(1) An audit requirement by IBM
(2) Tracking progress
(3) Trigger for corrective action in case there is a lapse of performance

v) For Paul, an effective vendor appraisal system should be one that set clear criteria for performance measurement of Ketronic.

vi) First, cold room requirement (Quality) - As a requirement, DimS is a special part, a small, light and fragile part to be kept constantly under negative temperature (less than 0 Degree Celsius) throughout

(1) production,
(2) storage and
(3) transportation.

vii) Second, the delivery – This means Ketronic would be appraised on:
(1) Schedule adherence
(2) Right quantity
(3) Flexibility
(4) Dispatch information
(5) Follow-up required

Conclusion
The objectives of IBM’s vendor appraisal system for Ketronic are to provide feedback of vendor performance to both companies and to facilitate communication in their long-term close working relationship. Where there is a lapse on Ketronic, a corrective action can be taken immediately to rectify the problem. (358 wors)

IT and supply chain management

2009-07-10T22:13:00.000-07:00

Supply chain management deals with integrating and managing business process across supply chain.

In a network of a organization, it involves linkages of upstream and downstream of processes and activities producing value in the form of products and services in the hand of customers.

IT, particularly the Internet, can be used to enhance the supply chain management efficiency in many ways due to their advantages of:
-Connectivity
-Integration
-Visibility
-Responsiveness

In the case of IBM, the following IT applications may be considered:

1. E-catalogue
- What is it?
- How is it to add efficiency?

2. E-payment
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-

3. E-procurement
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-

4. E-auction
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Electronic purchasing system

2009-07-10T21:55:00.000-07:00

One of the electronic purchasing systems commonly used is e-procurement.

The main strengths of e-procurement are:
- Efficiency
- Speed
- Cost saving
- Connectivity and
- High compliance level

Its main disadvantages are:
- Initiate cost of system
- The need of electronic or Internet connectivity
- Cost of training of HR

E-procurement is useful for IBM purchasers whose buying objectives are for:
- Standardized components such as OEP and casings that are
- Needed regularly in
- high volume

Traditional purchasing system

2009-07-10T21:33:00.001-07:00

The main strengths of traditional purchasing system are:
- It is simple to use;
- It is a common and acceptable way of buying and selling;
- It is visible and no software system training and Internet connection required.

The main weakness is its inefficiency to support complex, large scale purchase and sourcing to multiple suppliers across countries such as that of IBM's.

Traditional system is useful to purchasers whose buying objectives are for:
- MROs of small orders;
- Low value;
- Less frequent; and
- Urgent purchase.

What it takes is a few manual steps with perhaps a few phone calls to the suppliers to request and confirm the orders. In places where no electronic system is available or no internet connection, a traditional system is still needed.

Benchmark criteria

2009-07-10T20:27:00.000-07:00

A benchmark may be defined as a reference for comparison that is recognized as the standard of "best in class" for a specific business process.

In IBM case, the benchmark criteria for measuring purchasing performance can be as follows:

1. For OEPs and casing:

OEPs and casing are major "components" to finished product. Any cost reduction resulting from these purchases would add value to IBM. The costs may come from the components, the purchasing personnel, the purchasing process and management, the quality and delivery and customer satisfaction.

a. Price and cost comparisons -
E.g. Average price paid in period/Average market price in period

b. Purchasing personnel
E.g. Total expenditure on purchased supplies / Total expenditure on purchasing personnel

c. Purchasing process and management
E.g. Purchasing operating costs / Total organizational ezxpenditure

d. Supplier performance regarding quality and delivery
E.g. Value of supplies rejected / Value of supplies recieved
E.g. Number of suppliers with ISO 9000 certification/ Total number of suppliers

e. Customer satisfaction
E.g. Number of valid complaints made by customers

2. For MRO items:

If the value of the MRO items are high, IBM may select the one with the best price based on the usual practice of quotations from 3 suppliers. The benchmark criteria, in this case, will be based on comparison of price.

However, if the value of the MRO items are low, the purchaser may be allowed to make discretion based on such factors as urgency, availability and convenience of the supplies. In this instance, the effectiveness to satisfy internal requirements would be more important than any benchmark comparison.

Purchasing performance measurement

2009-07-10T07:59:00.001-07:00

There are three major criteria used in purchasing measurement:

1. Economies
2. Efficiency; and
3. Effectiveness.

Economies mean purchasing at lower cost with no loss of quality. IBM may review the existing quantity of order to see if the unit cost of OEPs and casings can be further lowered in relation to a higher volume purchased.

Efficiency means a higher productivity is achieved with same effort. For example, IBM purchasing department may be able to handle more jobs with the same number of staff.

Effectiveness is about measuring actual results against intended results. That is, it may be considered ineffective when an urgent MRO purchase with low value is to be completed through the standard procedures which may take a longer delivery time resulting a substantial loss of production time.

Purchasing of MRO

2009-07-10T07:44:00.000-07:00

A traditional purchasing system is recommended for purchasing of MROs. This is due to the facts that:

- MROs are usually in small orders in low volume, sometimes in one or two pieces;
- The urgent nature of requisition of parts for repair work always involves non-standardized service needed;
- In some cases, the frequency of purchase of certain MRO items may be once in a life time. It may be more effective to make a call or two by phone to regular suppliers to meet the needs of internal requirements instead of using any complicated electronic purchasing system.

Purchase of original equipment parts

2009-07-10T07:29:00.000-07:00

E-procurement purchasing system is recommended for purchasing of OEP items because of the following reasons:

1. OEPs are usually standard components to be use in a finished product;
2. They are likely to be needed continuously in manufacturing;
3. Components likely to remain the same over years;
4. Same items may be purchased over many years and for different purposes
5. They are needed in high volume.

By using e-procurement system, both supplier and buyer are able to reduce cost of transaction and increase higher efficiency creating better value of products for the customers.

Purchasing systems

2009-07-10T07:12:00.000-07:00

Purchasing systems are procedures, manual or computerized, followed by an organization to achieve the following basic objectives:
–to determine the quality and quantity needed and the time when an item is needed;
–to obtain the best possible price; and
- to maintain information on sources of supply

There are two broad types of purchasing systems:
1. Traditional system; and
2. Electronic system

In a tradition purchasing system, three phases of purchasing are done manually;
Phase 1: Requisition
Phase 2: Order
- Request for quotation (RFQ)
- Quotation
- Purchase order
- Order acknowledgement
Phase 3: Post-order
Delivery, receipt, invoice etc

In a electronic purchasing system, most if not all of the above steps of purchasing are carried out electronically by using either electronic technology such as Internet or private network.

EOQ

2009-07-02T01:34:00.000-07:00

EOQ (Economic order quantity) is the level of inventory that minimizes the total inventory holding costs and ordering costs.

In other words, EOQ is the optimal quantity at which inventory should be held.

The basic formula for EOQ is

The formula and the details of which can be obtained at wikipedia: http://en.wikipedia.org/wiki/Economic_order_quantity

Purchase procedures

2009-07-01T00:01:00.000-07:00

Purchase procedures can be manual or electronic.

Typically, purchase procedures consist of steps to complete a purchase transaction. The usual three steps are:

1. The identification step
2. Ordering step
3. Post-ordering step

A user is usually the one who initiates the purchase by making a requisition. Then, it is processed by sending RFQs to various suppliers. Once quotations are received, the buyer will select the seller following by sending a purchase order. Vendor will then acknowledge the order and begin the making of the order.

In the post-ordering stage, the supplier delivers the order and buyer will receive the goods ensuring goods delivered have met specifications.

That completes the purchasing procedures.

Purchasing procedures are also known as purchasing sytems.

Industrial purchasing

2009-06-27T02:40:00.000-07:00

Buyers in the industrial purchasing department are usually classified either as:

1. MRO (Maintenance, repair and operating supplies) buyer,
2. Capital equipment buyer, or
3. Production buyer.

The reason for the distinction involves different buying techniques and different types of suppliers.

1. Most MRO items are frequently purchase in low volumes, sometimes as one or two pieces. Most of the time, the price of the product is of low value. For some infrequent repair items, though the costs may be high, they are purchased probably once a while of machine life. A supplier may be needed once and never again. MRO buyers are under pressure to obtain such products by the requestors. They are not really too concerened about the price. Their objective is to satisfy the requestor. As much of the costs are related to placing and documenting the order, most purchasing managers look for ways of reducing transaction costs by using EDI or system contracts.

2. Capital equipment are usually infrequent purchase. Some of the previous capital goods suppliers may have also gone out of business or changed their products. Large capital expenditures frequently require more approvals.

3. Production and raw materials are the frequently purchased. The same item may be purchased again and again over many years. Consequently, it is easier to stay with the same suppliers although it is not neccessary. There are times not wise to do so.

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Centralised or decentralised purchasing

2009-06-27T01:52:00.000-07:00

Centralised purchasing allows organization to leverage its purchasing power for negotiating quantity discounts, rebates and special trade treatment.Also, centralisation permits the employment of purchasing professionals who can be the expert in procurement of special classes of materials following market trends and development of reliable and economic supply sources where there is substantial global sourcing. In addition, centralised purchasing tneds to have a gretaer strategic focus than divisionalised purchsing due to the proximity to major organiztional decision makers. Unifirm policies can be adopted. Further, centralized purchasing allows greater control of such activities as inventories, pricing and perforamnce.

On the other hand, decentralised purchasing may be adopted due to local requirements, e.g. rapid response time needed to the divisional needs, political considerations and close relationship with suppliers.

What are the usual practice for purchasing? It depends.

The usual practice is that some of the purchases are centralised and some decentralized. The company usually will lay down some purchasing policies on centralization vs decentralization, e.g. Are the items unusual? Is it ready very urgent to buy from local? Any local political considerations?

In addition, the following are other models of purchasing organization:
1. Centralised coordinator model - A centralised purchasing manager in the HQ provides services and information to the individual plant.
2. Area planner concept model -
3. Supply manager concept model
4. Commodity teams
5. Market segmentation model

Organizational structure

2009-06-26T05:07:00.000-07:00

Organizational structures to manage the purchasing function

- Basically, there are two approaches to organizational structures:

1. Mechanical structure and
2. Organic structure

In a mechanical structure, authority is centralised and vertical authority is used to control human and material resources. It operates most effectively in stable environment.

In the organic structure, authority is decentralised and employees are empowered to share information and make decision usually on cross functional perspective. It operates best in conditions of uncertainty and turbulence.

How purchasing function is organized depends on the overall organizational structure which is determined by business environmental factors including downsizing, ecommerce, global sourcing, partnering and outsourcing.