Midterm Review Guide - S upply Chain M idterm Review...

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Supply Chain Midterm Review Chapter 2: 1. Know what terms of sale are: i.e. FOB, 2/10, 1/40 EFT a. In many cases, the supplier’s terms of sale affect transportation costs. b. FOB destination (free on board to the shipment’s destination) happens if when products are purchased from a supplier, they charge a price that includes transportation to the buyer’s location. This also means that the supplier will be the legal owner of the product until the product safely reaches its destination. This is usually preferred for high value shipments or when the buyer has little transportation expertise. c. FOB origin is when the goods become the legal responsibility of the buyer at the shipment pick-up location or after the goods hit the carrier. d. Freight prepaid: Means the sending party pays the freight- This allows the company to invoice right when they ship. This will look better on the books. Terms of sale can have a big effect on prices. e. 2/10: You will get 2% of your purchase if you pay within 10 days of the shipping date. Otherwise you will have to pay the full price within 30 days. f. 1/40 EFT: 1% discount if you pay within 40 days. EFT=Electronic Funds transfer. 2. Every time you put technology into the system, you take out cost. 3. RFI, RFP, RFQ a. RFI: Request for Information is a business process whose purpose is to collect information about the capabilities of various suppliers. Primarily used to gather information on what step to take next. Used to prepare for RFP or RFQ. b. RFQ: If the material is not available in the warehouse, the material requisition is channeled to the purchasing department. If there is no
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current supplier for the item, the buyer must identify a pool of qualified suppliers and issue a request for quotation. c. RFP( Request for Proposal): May be issued instead for a complicated and highly technical componenet part, especially if the complete specification of the part is unknown. A request for proposal allows suppliers to propose new material and technology, thus enabling the firm to exploit the expertise of suppliers. 4. Inventory Turnover a. The ratio of the cost of goods sold over average inventory at cost. The higher the turnover ratio, the more efficient and profitable the company is. Theoretically, you can turn inventory as quickly as you sell your products. Inventory represents cash and the more effectively you use cash, the more “competitive” your advantage is. b. To minimize inventory, you can put things on consignment. Reverse of consignment is factoring. 5. Uniform Commercial Code a. Governs the purchase and sale of goods.. The UCC applies only to legal situations arising in the US, except in the state of Louisiana, which has a legal system based on the Napoleonic code. 6. E-PROCUREMENTS: Page 49, 8 things a. Advantages of the E-procurement system are… i. Time savings ii. Cost savings iii. Accuracy iv. Real time v. Mobility vi. Trackability
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vii.Management viii. Benefits to the Suppliers 7. Pg. 53-54-the reasons for buying or outsourcing a. The reasons for buying or outsourcing are… i. Cost advantage ii.
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