Bappy Mahmud

AIS 18-19

AIS Chapter 4

Define Purchasing
Purchasing is the process of obtaining goods or services in exchange for money. It is
the process of acquiring goods or services in order to satisfy a company’s needs or
objectives. The purchasing department is responsible for managing all aspects of the
purchasing process.
Purchasing policy
1. Authorization and Approval: Define who within the organization has the
authority to make purchasing decisions.
2. Vendor Selection: Establish criteria for selecting vendors, such as reliability,
quality, price, and past performance.
3. Competitive Bidding: Determine when competitive bidding is required.
4. Budgeting and Financial Controls: Specify budgetary limits for purchases.
5. Ethical Standards: Emphasize adherence to ethical standards and
avoidance of conflicts of interest.
6. Contractual Agreements: Define the terms and conditions that should be
included in contracts.
7. Record-Keeping: Establish a system for maintaining accurate and detailed
records of all procurement transactions.
8. Compliance: Ensure compliance with relevant laws, regulations, and
organizational policies.
9. Risk Management: Identify potential risks associated with the procurement
process.
10. Sustainability and Social Responsibility: Include considerations for
sustainable and socially responsible procurement practices.
Why is good ordering system needed?
A good ordering system is crucial for various reasons, particularly in the context of
businesses and organizations. Here are several key reasons why a robust ordering
system is needed
1. Efficiency and Accuracy: An effective ordering system streamlines the entire
process, reducing the likelihood of errors and inefficiencies.
2. Customer Satisfaction: A well-designed ordering system contributes to a
positive customer experience.
3. Inventory Management: An ordering system is closely tied to inventory
management, helping organizations maintain optimal stock levels.
4. Cost Control: Efficient ordering systems contribute to cost control by
minimizing excess inventory costs and reducing the need for rush orders.
5. Time Savings: Automation in the ordering process saves time for both
customers and internal staff.
6. Data Analysis and Reporting: A good ordering system provides valuable
data for analysis and reporting.
What are the need of receiving records?
Receiving records, often associated with the process of receiving goods or services,
are important for several reasons.
1. Verification of Deliveries: Receiving records serve as a means to verify that
the goods or services received match what was ordered. This helps prevent
discrepancies and ensures that the organization gets what it paid for.
2. Quality Control: Receiving records may include information about the
condition and quality of received goods. This is important for identifying any
damaged or defective items and allows for prompt resolution with the supplier.
3. Accuracy in Inventory Management: Receiving records contribute to
maintaining accurate inventory levels
4. Supplier Performance Evaluation: Detailed receiving records can be used
to evaluate the performance of suppliers.
5. Financial Accountability: Receiving records are essential for financial
accountability. They provide evidence of the goods or services received,
helping in reconciling invoices, managing budgets, and ensuring accurate
financial reporting.
6. Dispute Resolution: In cases of disputes with suppliers or discrepancies in
the received goods, having detailed receiving records is crucial.
What are the consideration needed in evaluating suppliers performance?
Evaluating supplier performance is a critical aspect of effective supply chain
management. Organizations rely on their suppliers to provide goods and services in
a timely and reliable manner. Here are key considerations in evaluating supplier
performance:
1. Quality of Products or Services: Assess the quality of the products or
services delivered by the supplier. This may involve evaluating the
conformance to specifications, consistency, and any instances of defects or
non-compliance.
2. On-Time Delivery: Evaluate the supplier's ability to deliver goods or services
on time. Late deliveries can disrupt production schedules and impact overall
operational efficiency.
3. Order Accuracy: Consider the accuracy of orders fulfilled by the supplier.
Ensure that the delivered items match the specifications and quantities
outlined in the purchase orders.
4. Communication and Responsiveness: Assess the supplier's
communication skills and responsiveness. A responsive supplier is more likely
to address issues promptly and maintain open lines of communication.
5. Flexibility and Adaptability: Evaluate the supplier's flexibility in
accommodating changes to orders, specifications, or delivery schedules. A
flexible supplier can better adapt to the dynamic needs of the organization.
6. Cost and Pricing: Analyze the overall cost-effectiveness of the supplier. This
includes not only the initial purchase price but also factors such as shipping
costs, terms, and any additional fees.
 7. Risk Management: Consider the supplier's ability to manage and mitigate
risks. This includes having contingency plans for potential disruptions, such as
natural disasters or geopolitical events.
What do you mean by sales and steps of sale?
Sales, in a business context, refer to the process of exchanging goods or services
for money or other value. It involves identifying potential customers, understanding
their needs, and persuading them to make a purchase.
The steps can vary depending on the industry, product, or service, but a general
sales process often includes the following stages:
1. Prospecting: Identifying potential customers or leads who may have an
interest in the product or service. This can involve researching target markets,
attending networking events, or utilizing marketing strategies to generate
leads.
2. Qualifying: Evaluating leads to determine if they meet certain criteria that
make them more likely to become customers. This may involve assessing
their needs, budget, authority to make a purchase decision, and the timeline
for making a decision.
3. Preparation and Research: Conducting thorough research on the potential
customer's business, industry, and specific needs. This information is valuable
in tailoring the sales approach and demonstrating a deep understanding of the
customer's challenges and goals.
4. Approach: Initiating contact with the potential customer. This can be done
through various means, including phone calls, emails, in-person meetings, or
through social media. The approach should be personalized and focused on
building a positive initial relationship.
5. Presentation: Showcasing the product or service to the potential customer.
This involves highlighting key features and benefits that address the
customer's needs. Presentations can take various forms, such as live
demonstrations, multimedia presentations, or detailed proposals.
6. Handling Objections: Addressing any concerns or objections the potential
customer may have. This step requires active listening and effective
communication to understand the customer's hesitations and provide relevant
information or solutions.
7. Closing the Sale: Seeking a commitment from the customer to make a
purchase. This can involve negotiating terms, discussing pricing, and
finalizing any details necessary to complete the transaction.
Define Subsystem
A subsystem is a smaller, self-contained system that operates within a larger system.
In the context of various fields such as engineering, computer science, business, and
social sciences, subsystems are components or units that perform specific functions
within the overall framework of a larger system.
In business, a subsystem is a specialized unit or department within an organization
that focuses on specific functions.
Example: In a manufacturing company, the production subsystem may include the
assembly line, quality control, and inventory management departments.
What is mean by cost benefit analysis?
Cost-Benefit Analysis (CBA) is a systematic approach used to evaluate the potential
benefits and costs associated with a specific project, decision, or policy. The goal of
a cost-benefit analysis is to determine whether the benefits outweigh the costs and
whether the investment or decision is economically justified.
Types of cost benefits analysis
There are several types of cost-benefit analysis (CBA), each tailored to specific
contexts and objectives. Here are some common types:
i. Standard Cost-Benefit Analysis: This is the most basic and widely used
form of cost-benefit analysis. It involves identifying and quantifying the costs
and benefits associated with a project or decision and comparing them to
determine if the benefits outweigh the costs.
ii. Net Present Value (NPV) Analysis: NPV analysis is a type of cost-benefit
analysis that accounts for the time value of money. It involves discount.
iii. Cost-Effectiveness Analysis (CEA): Cost-effectiveness analysis is used
when there are multiple projects or programs with different costs and similar
objectives. Instead of comparing total costs and benefits, CEA compares the
cost of achieving a specific outcome or unit of output across alternatives.
iv. Risk-Benefit Analysis: Risk-benefit analysis incorporates considerations of
uncertainty and risk in assessing the costs and benefits of a project.
Sensitivity analysis and scenario analysis are often used to explore how
variations in key assumptions impact the results.

Define sales operation

Sales operations refers to any tool, plan, or training your company uses to enable its
sales staff to deliver their best work. It may seem like a vague term, but having a
clear sales operations plan can greatly increase success rates for your sales team.
The primary focus of sales operations is to optimize the sales process, enhance
efficiency, and drive overall sales performance.
Goals of sales and operation planning
Sales and Operations Planning (S&OP) is a strategic process that helps
organizations align their sales, production, and other operational activities with their
overall business goals. The primary goals of Sales and Operations Planning include:
1. Balancing Supply and Demand: Ensure that there is a balance between the
demand for products or services and the organization's capacity to supply
 them. S&OP aims to prevent situations where demand exceeds supply or
where excess inventory is created.
2. Integrated Planning: Facilitate collaboration and communication between
different functional areas within the organization, including sales, marketing,
finance, and operations. S&OP aims to break down silos and create a unified
plan that considers inputs from various departments.
3. Resource Optimization: Optimize the utilization of resources, including labor,
materials, and production capacity. By aligning production plans with expected
sales demand, organizations can avoid overcapacity or underutilization of
resources.
4. Improved Forecasting Accuracy: Enhance the accuracy of demand
forecasts by integrating inputs from various sources. S&OP uses historical
data, market intelligence, and other relevant information to develop more
accurate and reliable sales forecasts.
5. Customer Service Levels: Maintain or improve customer service levels by
ensuring that products are available when customers need them. S&OP helps
organizations meet customer demand while avoiding stockouts or excessive
inventory levels.
6. Financial Planning and Alignment: Align operational plans with financial
goals and constraints. S&OP considers the financial implications of different
scenarios, allowing organizations to make decisions that are financially sound
and in line with overall business objectives.
7. Risk Management: Identify and mitigate potential risks in the supply chain
and operations. S&OP enables organizations to assess the impact of various
factors, such as supply chain disruptions or changes in market conditions, and
develop contingency plans.

Benefits of sales operation

1. Improve data quality and accessibility.
2. Simplify sale process.
3. Streamlining and optimizing sales processes can lead to increased efficiency.
4. Sales operations contribute to improved productivity.
5. Sales operations focus in improved sales performance, increased revenue,
and better achievement of sales targets.
6. Sales operations emphasize the use of data and analytics to make informed
decisions.
7. Facilitating collaboration between sales and other departments.
8. Sales operations play a role in selecting, implementing, and managing sales
technology tools and platforms.
Question to be answer by a good purchasing policy
A well-defined purchasing policy is crucial for organizations to ensure effective
procurement processes, manage costs, and maintain compliance. Here are some
key questions that a good purchasing policy should address.
➢ What is the Purpose of the Purchasing Policy?
Clearly articulate the objectives and goals of the purchasing policy. This helps
stakeholders understand the purpose and importance of adhering to the
policy.
➢ What Are the Authority Levels for Approving Purchases?
Define the levels of authority required for approving different types and sizes
of purchases. This ensures that purchasing decisions align with the
organization's hierarchy and financial control mechanisms.
➢ What is the Procurement Process?
Outline the step-by-step procurement process, including requisition, approval,
supplier selection, and purchase order issuance. This provides clarity on the
procedures that should be followed for each purchase.
➢ What Are the Budgeting and Spending Guidelines?
Clearly define budgeting procedures and spending limits. This helps control
costs and prevents unauthorized spending that may impact the organization's
financial health.
➢ What Are the Ethical and Compliance Standards?
Establish ethical guidelines and compliance standards for purchasing
activities. This includes addressing issues such as conflicts of interest, bribery,
and adherence to relevant laws and regulations.