purchasing & storage management summery & questions

Purchasing & Storage Management

Summery & Questions

Q: What do we mean by business-to-business in e-commerce (B2B EC)?

• Transactions between businesses conducted electronically over the Internet, extranets, intranets, or private networks; also known as eB2B (electronic B2B) or just B2B

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Q: E-commerce that focuses on a single company’s buying needs (many-to-one, or buy-side) or selling needs (one-to-many, or sell-side)

(True)

Q: What do we mean by private e-marketplaces?

• Markets in which the individual sell-side or buy-side company has complete control over participation in the selling or buying transaction

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• Q: Many-to-many e-marketplaces, usually owned and run by a third party or a consortium, in which many buyers and many sellers meet electronically to trade with each other; also called trading communities or trading exchanges .

• (True)

Q: What are the Benefits of B2B? (any five will be ok)

1. Creates new sales (purchase) opportunities2. Eliminates paper and reduces administrative costs3. Expedites processing and reduces cycle time4. Lowers search costs and time for buyers to find

products and vendors5. Increases productivity of employees dealing with

buying and/or selling6. Reduces errors and improves quality of services

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7. Reduces marketing and sales costs (for sellers)

8. Reduces inventory levels and costs9. Enables customized online catalogs with

different prices for different customers10.Increases production flexibility, permitting

just-in-time delivery

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11.Reduces procurement costs (for buyers)

12.Facilitates mass customization13.Provides for efficient customer service14.Increases opportunities for

collaboration

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Q: The following are Goals of E-Procurement, except:

Select one answer

1. Increasing the productivity of purchasing agents 2. Increasing purchase prices through product

standardization, reverse auctions, volume discounts, and consolidation of purchases

3. Improving information flow and management4. Minimizing the purchases made from noncontract

vendors5. Improving the payment process and saving due to

expedited payments (for sellers)

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Q: The following are Goals of E-Procurement, except:Select one answer

1. Lowering the productivity of purchasing agents 2. Increasing purchase prices through product

standardization, reverse auctions, volume discounts, and consolidation of purchases

3. Improving information flow and management4. Minimizing the purchases made from noncontract

vendors5. Improving the payment process and saving due to

expedited payments (for sellers)

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• Q: e-sourcing means the process and tools that manually enable any activity in the sourcing process, such as quotation/tender submit and response, e-auctions.

• (False)

Q: What does Economic Order Quantity (EOQ) mean?

• The Optimal order quantity that will minimize total inventory costs.

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Q: The following information has been taken from Stars Co. for the Item A of inventory:

Cost of placing order $50, Annual demand 10000 Pcs., Annual per-unit carrying cost %10, Daily usage of A = 100 Pcs. Unit price $20,

Calculate the following:1.Economic Order Quantity (EOQ)?2.The value of EOQ?3.Safety or security stock, when the order of new

quantity needs 2days managing in the company, and 5days in supplying and manufacturing co., and 10days transportation?

4.Reorder point when the company's management added 3days more for closing the boards?

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• Q: Calculate Reorder Point, When:• Demand = 10,000 yards/year• Store open 311 days/year• R = dL where d = demand rate per period ,

L = lead time• Daily demand = 10,000 / 311 = 32.154

yards/day• Lead time = L = 10 days• R = dL = (32.154)(10) = 321.54 yards

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1. Q: Safety stock: buffer added to on hand inventory during lead time

2. Q: Stock out: an inventory shortage3. Q: Service level: probability that the

inventory available during lead time will meet demand

4. Q: Reorder Point: Level of inventory at which a new order is placed

Q: What are the main elements of the TQM system?

1. Teamwork 2. Commitment 3. Communication 4. Organization 5. Control and monitoring

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Q: What are the benefits of TQM system?1. Focuses individuals’ roles on customers and

constant improvement.2. Develops teamwork and commitment and

innovation as vehicles for employee ownership of improvement process.

3. Identifies and eliminates waste of resources and costs.

4. Provides a basis for management development and training focused on company values and the shift from policing to enable style.

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Q: TQM is an approach aimed at the following except:Select one answer1. Improving the effectiveness.2. Flexibility of business as a whole.3. Elimination of wasted effort.4. Elimination of physical waste.5. Results are achieved in more time and at less

cost.6. All of above.

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Q: The TQM system needs a more anticipative style of control. (True)

Q: The TQM system needs a less anticipative style of control. (False)

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Q: Poor communication can result in organizational problems, information being lost and gaps occurring in the system. (True)

Q: A Weak flow of accurate information, instructions and feedback is vital in maintaining the cohesion needed by the system. (False)

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Q: Middle management have an important role to play in not only grasping the concepts themselves but also explaining them to the people for whom they are responsible. (True)

Q: Middle management have an important role to play only grasping the concepts themselves and will not explaining them to the people for whom they are responsible. (False)

What is the Objective?

To ensure credibility of the lab and generate confidence in lab results

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Q: Objectives of quality system are the following except:

Select one answer1. To prevent risks2. To detect deviations3. To correct errors4. To Resources5. To improve efficiency6. To reduce costs

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Afifi, Purchase, 2nd Semester 2009/2010

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Q: How does good equipment management affect Quality assurance?

1. Ensures reliable test results and customer satisfaction thus credibility of the lab.

2. Reduces interruption of services and delays in reporting due to breakdowns.


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Q: What are the quality assurance equipment criteria?

1. Selection2. Purchase / Acquisition3. Installation4. Calibration /Validation5. Maintenance - Service and repair6. Replacement


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Q: What are Benefits of a Maintenance Program?

1. Greater confidence in the results2. Safety3. Fewer interruptions of work4. Lower repair costs5. Elimination of premature replacement6. Reduction of variation in test results

Supply Chain Logistics Management

How Much to Order Economic Order Quantity (EOQ)

EOQ = Economic Order QuantityCo = Cost per Order (Ordering Cost)Ci = Annual Inventory Carrying Cost %D = Annual Product Sales (in units)U = Cost per Product

EOQ =2Co D

Ci U



EOQ = Economic Order QuantityCo = $19.00 (ordering cost)Ci = 20% (annual carrying cost %)D = 2400 (annual number of products soldU = $5.00 (cost of each product)

EOQ =2 * $19.00 * 2400

20% * $5.00



EOQ = Economic Order QuantityCo = $19.00 (ordering cost)Ci = 20% (annual carrying cost %)D = 2400 (annual number of products sold)U = $5.00 (cost of each product)

302 rounded to 300 =2 * $19.00 * 2400

20% * $5.00

How Much to Order Considering Transportation Rates

Order Quantity = 300 products per orderNumber of orders placed per year = 2400/300 or 8Ordering Cost per year = 8 orders * $19.00 = $152.00Average Inventory carrying = 300/2 = 150Inventory Carrying Costs per year = 150 * $5.00 * 20% = $150.00Transportation Costs (per year) for Small Shipments:$1.00 (per product) * 2400 (products purchased per year) = $2400.00TOTAL COSTS = $150.00 + $152.00 + $2400.00 = $2702.00



Order Quantity = 480 products per orderNumber of orders placed per year = 2400/480 or 5Ordering Cost per year = 5 orders * $19.00 = $95.00Average Inventory carrying = 480/2 = 240Inventory Carrying Costs per year = 240 * $5.00 * 20% = $240.00Transportation Costs (per year) for Large Shipments:$0.75 (per product) * 2400 (products purchased per year) = $1800.00TOTAL COSTS = $95.00 + $240.00 + $1800.00 = $2135.00



TOTAL COSTS (480 product order size) $95.00 + $240.00 + $1800.00 = $2135.00

TOTAL COSTS (300 product order size)$150.00 + $152.00 + $2400.00 = $2702.00


How Much to Order Considering Transportation Rates & Price/Quantity Discounts

Order Quantity = 300 products per orderNumber of orders placed per year = 2400/300 or 8Ordering Cost per year = 8 orders * $19.00 = $152.00Average Inventory carrying = 300/2 = 150Inventory Carrying Costs per year = 150 * $4.00 * 20% = $120.00Transportation Costs (per year) for Small Shipments:$1.00 (per product) * 2400 (products purchased per year) = $2400.00Product Cost per year = 2400 * $4.00 = $9600.00TOTAL COSTS = $120.00 + $152.00 + $2400.00 + $9600.00 = $12,272.00


Order Quantity = 480 products per orderNumber of orders placed per year = 2400/480 or 5Ordering Cost per year = 5 orders * $19.00 = $95.00Average Inventory carrying = 480/2 = 240Inventory Carrying Costs per year = 240 * $3.00 * 20% = $144.00Transportation Costs (per year) for Large Shipments:$0.75 (per product) * 2400 (products purchased per year) = $1800.00Product Cost per year = 2400 * $3.00 = $7200.00TOTAL COSTS = $95.00 + $144.00 + $1800.00 + $7200.00 = $9239.00

How Much to Order Considering Transportation Rates & Price/Quantity Discounts

Q: What is the economic-order-quantity?Video store sells packages of blank video tapesVideo purchases packages of video tapes fromOaks, Inc., at $15/package.Annual demand is 12,844 packages, at the rate

of 247 packages per week.Video requires a 15% annual return on

investment.

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• Relevant ordering cost per purchase order: $209

Relevant carrying costs per package per year:Required annual ROI (15% × $15)

$2.25

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Economic-Order-QuantityDecision Model Assumptions

1. The same quantity is ordered at eachreorder point.

2. Demand, ordering costs, carrying costs,and purchase-order lead time areknown with certainty.

3. Purchasing costs per unit are unaffectedby the quantity ordered.


4. No stockouts occur.

5. Quality costs are considered only to theextent that these costs affect orderingcosts or carrying costs.


The EOQ minimizes the relevant orderingcosts and carrying costs.

Video store sells packages of blank video tapes.

Video purchases packages of video tapes fromOaks, Inc., at $15/package.


Annual demand is 12,844 packages, at therate of 247 packages per week.

Video requires a 15% annual return on investment.

The purchase-order lead time is two weeks.

What is the economic-order-quantity?


Relevant ordering cost per purchase order: $209

Relevant carrying costs per package per year:Required annual ROI (15% × $15) $2.25Relevant other costs 3.25Total $5.50

Economic-Order-Quantity Decision Model Example

EOQ =2DP

C

D = Demand in units for a specified time period

P = Relevant ordering costs per purchase order

C = Relevant carrying costs of one unit in stock for the time period used for D


2 12 84450

x x, $209$5.

976144, = 988 packages

EOQ =


What are the relevant total costs (RTC)?

RTC = Annual relevant ordering costs+ Annual relevant carrying costs

RTC=

Q can be any order quantity, not just the EOQ.

DQ × P +

Q2 C× DP

Q +QC2or


Reorder Point FormulaR = D X TR = Reorder Point in Units (of product)D = Average Daily Demand in Units (of product)T =Average Performance Cycle in Days (i.e., order

cycle time, or the number of days between placing an order and receiving the order)

When to OrderWhen There is No Demand Uncertainty


Reorder Point FormulaR = D X T

D = 20 products/dayT = 10 days (time between

placing order and receiving order)R = 20 X 10Reorder Point = 200 productsThat is, an order is initiated whenever there are 200 products left in inventory

When to OrderWhen There is No Demand Uncertainty


R = D X T + SSD = 20 products/dayT = 10 days (time between placing order and receiving order)SS = 100 products

R = 20 X 10 + 100Reorder Point = 300 productsThat is, an order is initiated whenever there are 300 products left in inventory

When to OrderWhen Demand is Uncertain

purchasing & storage management summery & questions

Documents

benefits of b2b

goals of e

order of new quantity

economic order quantity

following information

optimal order quantity

private emarketplaces

purchase prices