Procurement_PPT2

Procurement_PPT2 - PRICE / COST ANALYSIS Part 1 Objective...

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1 PRICE / COST ANALYSIS Part 1 Objective – Explore Basic Techniques used to Analyze Costs of Purchased Materials and Services
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2 Typical Supply Chain 4 Critical Dimensions for Competitive Success VC 1 VC 4 VC 7 VC 2 VC 5 VC 8 VC 3 VC 6 VC 9 A B C Raw Materials Supply Points Wholesaler Retailer Markets Transportation Transportation Transportation Transportation Materials / Services $$$$ Information Relationships Manufacturing
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3 Operational Procurement (purchasing) Acquisition of equipment, materials and services required to meet the day-to-day needs of an organization. Cost Revenue - Cost of Goods Sold - Overheads PROFIT Quality Delivery Technology / Intellectual Property Environmental Sustainability Managing Supply Risks
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4 manage waste and excess pay suppliers Hazardous / solid waste mgt. Dispose excess / obsolete material Manage assets Process invoices Disburse payments Provide reports Evaluate supply sources Select source Negotiate agreement Purchase Order Contract Non-disclosure Agreement Receive and release material Authorize payment Manage warehouse and inventory Manage in / outbound logistics Measure / manage supplier performance Material Purchase Release Bill of Lading Material Packing Slip manage materials and logistics acquire material or service create specifications and standards identify need - design Product and material requirements definitions Technical specifications Unique requirements Target cost Statements of Work Purchase Requisitions 70% Complex Procurement / Sourcing – A more complete definition
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5 Strategic Procurement and Supply Chain Management CREATES ENTERPRISE VALUE IN THREE WAYS For Shareholders and Customers Flexibility and responsiveness to market trends Improved product/ service quality Capital utilization Cash velocity Inventory management Cycle time reduction Continuous improvement Raise productivity Logistics efficiency Asset Management Revenue Growth New products and services First to market / volume Lower purchase price Lower transaction costs Lower overhead costs Financial Performance EPS Michigan State University Global Benchmarking Initiative
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6 How do Companies assure that they get the best price for what they buy? 2. Price and Cost Analysis 1. Competitive Bidding Process Price and Cost Analysis – Using analytical tools and techniques to evaluate the reasonableness of suppliers’ quoted prices.
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7 Competitive Bidding Quality, Service, Delivery Capability, etc are equal Supplier B $0.85 / Unit Supplier C $1.11 / Unit Supplier A $0.90 / Unit What assurance does the buyer have from this approach?
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8 Goals of Price/Cost Management Develop accurate price/cost information to enhance negotiating effectiveness Drive continuous price/cost improvement Determine type of supplier relationship
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9 What are the elements of cost that make up the price of a product or service? Revenue
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This note was uploaded on 09/25/2011 for the course BUSINESS 302 taught by Professor Smouther during the Spring '11 term at Rutgers.

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Procurement_PPT2 - PRICE / COST ANALYSIS Part 1 Objective...

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