Quiz - Day 2

Student First Name: Dawit

Student Last Name: Amare
Student ID Number: 60438204
Instructor Name: Ashok Bhandari
Date: 23 April 2024
1..Describe and discuss the differences and relationships between purchasing, procurement, and
strategic sourcing. How have these concepts evolved?

Think of it as a pyramid:

● Purchasing (Bottom): Executes transactions - issuing orders, and negotiating

basic terms. It's the tactical, day-to-day buying.
● Procurement (Middle): Oversees all acquisition - sourcing, managing suppliers,
and contracts. It's the strategic arm, ensuring efficient resource acquisition.
● Strategic Sourcing (Top): Takes a long-term view - analyzing spending,
researching markets, and developing sourcing strategies. It optimizes the entire
supply chain for the best value.

Evolution: The focus has shifted from just cost (purchasing) to overall value (strategic
sourcing), with a growing emphasis on risk management and supplier collaboration.

2. Using the quadrant or risk/value technique, categorize the importance of the following items
for an automobile manufacturer: engine, tires, gasoline, paper for the employee newsletter, a
uniquely designed and engineered muffler, and rail car service to dealers. Describe the rationale
you used to ascertain each categorization.

Here's the categorization of the items for an automobile manufacturer using the
risk/value technique:

High Risk / High Value:

 ● Engine: The engine is the core component of a car, directly impacting
performance, fuel efficiency, and overall value proposition. A malfunctioning
engine poses a high risk of customer dissatisfaction and safety concerns.

High Risk / Low Value:

● Paper for Employee Newsletter: While communication is important, the

newsletter itself is a low-value item. Disruptions wouldn't significantly impact core
functionalities. However, a cyberattack compromising data through the newsletter
paper trail could be a high risk.

Low Risk / High Value:

● Tires: Tires are essential for safety and performance. While not as critical as the
engine, faulty tires can lead to accidents and customer dissatisfaction.

Low Risk / Low Value:

● Gasoline: Although crucial for operation, gasoline is a commodity readily

available from various sources. Disruptions wouldn't significantly impact the
manufacturer itself.
● Uniquely Designed Muffler: A unique muffler might contribute to performance
or brand identity, but alternative muffler options likely exist, keeping the risk low.

Medium Risk / Medium Value:

● Rail Car Service to Dealers: While disruptions could delay deliveries, alternative
transportation methods might exist. The value depends on the efficiency and
cost-effectiveness of rail compared to alternatives.

Rationale:

● Risk considers the potential impact on core functionalities, safety, brand

reputation, and customer satisfaction.
● Value considers the item's contribution to the car's core functionalities,
performance, brand identity, and overall customer experience.
3. The MSSP process can be described in terms of a series of elements that should be used in the
purchase of goods and services. Briefly discuss these elements.

While MSSP (Managed Security Service Provider) selection isn't exactly a traditional

purchase, it can benefit from a structured approach similar to strategic sourcing. Here

are some key elements to consider during the MSSP selection process:

● Needs Assessment: Identify your organization's specific security needs and

vulnerabilities.

● Vendor Research and Shortlisting: Evaluate potential MSSPs based on their

capabilities, experience, and reputation.

● Security Service Definition (SSD): Clearly define the security services you

expect from the MSSP in a Service Level Agreement (SLA).

● Pricing and Contract Negotiation: Negotiate pricing models and contract terms

that align with your needs and budget.

● Due Diligence: Conduct thorough reference checks and assess the MSSP's

financial stability and security practices.

● Implementation and Onboarding: Ensure a smooth transition to the MSSP's

services with proper training and configuration.

● Performance Monitoring and Ongoing Management: Continuously monitor

the MSSP's performance and maintain a strong working relationship.

By focusing on these elements, you can select an MSSP that effectively addresses your

security needs and provides optimal value.

4. Maximizing the effectiveness of the procurement process is a major goal of an organization.
What steps can be taken to help ensure that the process is maximized?

Here are some key steps to maximize the effectiveness of your procurement process:

Strategic Sourcing:

● Spend Analysis: Analyze spending patterns to identify areas for cost savings

and consolidation opportunities.

● Market Research: Gain a deep understanding of the supplier landscape and

identify the best partners for your needs.

● Develop Sourcing Strategies: Craft strategies based on factors like cost,

quality, risk, and innovation to optimize sourcing decisions.

Process Optimization:

● Standardization and Automation: Implement standardized processes and

leverage technology to automate repetitive tasks, improving efficiency and

reducing errors.

● Supplier Relationship Management: Build strong relationships with key

suppliers to foster collaboration, transparency, and better pricing.

● Contract Management: Negotiate and manage contracts effectively to ensure

clear terms, risk mitigation, and optimal value.

Continuous Improvement:

● Performance Measurement: Establish key performance indicators (KPIs) to

track procurement performance and identify areas for improvement.

 ● Risk Management: Proactively identify and mitigate potential risks throughout

the supply chain.

● Supplier Development: Work with suppliers to improve their capabilities and

performance, creating a mutually beneficial partnership.

By implementing these steps, organizations can achieve a more efficient, cost-effective,

and strategically aligned procurement process, ultimately contributing to a stronger

bottom line and a more resilient supply chain.

5. A key part of the procurement process is the selection of suppliers. What criteria are
commonly used in this selection process? Which criteria should be given the highest priority?
Why?

Selecting the right suppliers is crucial for an effective procurement process. Here's a

summary of common criteria and prioritization:

Common Criteria:

● Price and Cost Competitiveness: Getting a good deal is important, but not the

only factor.
 ● Quality: Consistent delivery of high-quality goods and services is essential.

● Reliability: On-time delivery and dependable performance are key for smooth

operations.

● Capabilities: The supplier's ability to meet your current and future needs is

crucial.

● Financial Stability: A financially sound supplier reduces risks of disruptions.

● Service and Responsiveness: Effective communication and support from the

supplier are valuable.

● Ethical and Social Responsibility: Aligning with your organization's values can

be important.

Prioritization:

The most important criteria depend on your specific needs. However, some general

principles apply:

● High priority: Quality, reliability, and capabilities. These directly impact your

core functionalities and customer satisfaction.

● Balanced approach: Price should be considered alongside other factors. The

cheapest option might not be the most reliable or offer the best quality.

● Strategic sourcing: Tailor your prioritization based on the good or service being

procured. For example, for a unique engine component, quality and capabilities

might outweigh the price, while for office supplies, the cost might be a bigger

factor.

By carefully considering these criteria and prioritizing them based on your specific

needs, you can select suppliers who become valuable partners, contributing to a

successful and efficient procurement process.