PURCHASING FINAL EXAM REVIEWER

QUALITY DEFINITION:
*ARMAND FEIGENBAUM- Defines quality as the total composite of product and service characteristics
of marketing ,engineering, manufacturing and maintenance through which the product or services in to
meet customers expectations

*JOSEPH JURAN- quality as fitness for use

*PHILIP CROSBY- quality as a compormance to requirements

SUPPLIER QUALITY DEFINITION:

 Suppliers ability to deliver goods or services that will satisfy customers need

SUPPLIER QUALITY MANAGEMENT:

 Defines as the system in which supplier quality is managed by using a proactive and collaborative
approach.

STRATEGIC COST MANAGEMENT:

 Is an approach focusing on making a business more competitive by reducing costs of operation
 Integrates cost infos into decision making

WHAT IS SUPPLY CHAIN ANALYSIS?

 The economies and trade regulations change constantly, which affect the flow of goods
 It can be handled with scm (supply chain management) analysis
 Process of gathering data from different part of supply chain, organizing and analyzing.

NEGOTIATON DEFINITION:
 Is a discussion between two or more parties who must cooperate to achieve their respective
goals
 Requires give and take by both parties to attain mutual benefits

CONTRACT MANAGEMENT DEFINITION

 Process of hanadling and carrying out the contracts obligations for vendors, clients, employees
or others
 Process of managing legality-binding agreement from initiation through to execution.

ELEMENTS OF CONTRACTS:

1. OFFER- should always be maintained

2. ACCEPTANCE- both parties must accept the contract

TYPES OF ACCEPTANCE:
  EXPRESS ACCEPTANCE- verbally or written
 CONDITIONAL ACCEPTANCE- also called qualified acceptance. Willingness to agree to original
offer with some changes
 IMPLIED ACCEPTANCE- not verbally or written but had agreement in some form

3. CONSIDERATION- a promise, performance or forbearance bargained by a promisor in exchange for

their promise.

PURCHASING AND SUPPLY STRATEGY TRENDS:

1. DIGITIZATION AND AUTOMATION- significant trends in purchasing and scm. Increase in use of
digitization and automation.

-artificial intellegence

-machine learning

-robotic process automation

2. SUSTAINABILITY- adapting sustainable procurement practices to minimize environmental impact.

3. SUPPLIER RELATIONSHIP MANAGEMENT- critical to a success of an organization

-building and maintaining strong relationship with their suppliers

-involves regular commmunication, collaboration and mutual trusr between the company and the
supplier.

4. SUPPLY CHAIN RESILIENCE- recognizing the need to build more resilient supply chains that can
withstand unexpected disruption

-Involves diversifying suppliers creating contingency plans and leveraging technology.

5. DATA ANALYTICS- to gain insights to procurement processes, identify areas for improvement and
make data driven decision

-includes analyzing supplier performance, identifying cost saving opportunities and optimizing inventory
mngt.

STRATEGIC PRICING:
1. COST-PLUS PRICING- method used by companies to determine the price of a product or services,
involves setting a price by adding a fixed amount or percentage

Advantage: simple and straight forward

2. CUSTOMER-DRIVEN PRICING- setting a price based on consumers willingness to pay, based on

perceived value

3. SHARE-DRIVEN PRICING- Seller makes decision based on the prices of competition

4. STRATEGIC PRICING- based on the products value to the customer or on competitive strategy rather
than on the cost of production. Based more on psychology than on logic.
PRICE OPTIMIZATION- Practice of analyzing customer and market data to find the most optimal
price point for a product or service. Goal is to determine the best price that will help attract customers,
maximize sales and increase profits.

VALUE CREATION- Customers pay depends upon how the product is marketed and usually
somewhat short of full value.

PRICE STRUCTURE
- It is how a company decides how much to charge for goods or services including discounts, offers
and strategy.

MECHANISM TO FORM A SEGMENTED PRICE

1. OFFER CONFIGURATION- BUNDLES
2. PRICE METRICS- UNIT BY WHICH BUYERS ACQUIRE OFFERING
PERFORMANCE-BASED METRICS- ECONOMIC VALUE PERCEIVED AND INCREMENTAL COST TO
SERVE
TIE-IN METRICS- PRODUCT THAT CONSUMER PURCHASES WITH SOME OTHER PRODUCT
3. PRICE FENCES-Means to charge customers different price levels for the same product and
services using same metric.

POLICY-BASED PRICE
PRICING POLICY- rules or habits that determine how company varies its prices when faced with factors

1. Flexible pricing policy

2. Prestige pricing policy
3. Bundle pricing policy

PRICE NEGOTIATION
VALUE BUYERS- empower him or her to make trade-offs , applying a give-get negotiation

BRAND BUYERS- well known for delivering good product and services

PRICE BUYERS- value of an offer

CONVENIENCE BUYERS- easiest source of supply

PRICE LEVEL AND COMPETITION

Price Level -is the average level of prices of goods and services in an economy and is used to measure
inflation or deflation

Price competition - is a situation where businesses compete with each other primarily on the basis of
price. This can involve offering lower prices than competitors, running sales or promotions, or engaging
in price matching.
KINDS OF FINANCIAL ANALYSIS
COST-VOLUME-PROFIT (CVP) ANALYSIS -is a way to find out how changes in variable and fixed costs
affect a firm's profit.

ALTERNATIVE PRICE'- is defined as the amount stipulated by the bidder for an alternative and can be
stated as an addition, a deduction, or no change to the base bid price. The above definition for
'alternative prices' is broad enough to also encompass what have in the past been defined as 'separate
prices'

INCREMENTAL COST- is the total cost incurred due to an additional unit of product being produced.
Incremental cost is calculated by analyzing the additional expenses involved in the production process,
such as raw materials, for one additional unit of production. Understanding incremental costs can help
companies boost production efficiency and profitability.

AVOIDABLE COST- is a business cost incurred by a firm that does not serve a purpose. It can be removed,
ceasing to conduct the specified commercial activity. The main aim of this cost is to alert the firm about
an unnecessary cost that a firm could avoid

BREAKEVEN ANALYSIS- determines the sales volume your business needs to start making a profit, based
on your fixed costs, variable costs, and selling price. Break-even analysis tells you how many units of a
product must be sold to cover the fixed and variable costs of production

NON INCREMENTAL COSTS- means the fixed cost to produce the Insured Product directly associated
with the production of one unit of Insured Product during normal operations prior to an Insured Event.

SUNK COSTS are excluded from future business decisions because they will remain the same regardless
of the outcome of a decision