Untitled Flashcard Set

Supply Management

Broad set of activities used to analyze sourcing opportunities, develop sourcing strategies, select suppliers, procure goods/services, and manage suppliers.

Cost of Goods Sold (COGS)

The purchased cost of goods from outside suppliers.

Profit Margin

The ratio of earnings/profit to sales revenue.

Profit Leverage Effect

Decreasing purchasing costs increases profit faster than increasing revenue through sales. Every $1 saved in purchasing adds $1 to profit.

Strategic Sourcing

Identifying ways to improve long-term business performance by understanding sourcing needs, developing sourcing strategies, selecting suppliers, and managing the supply base.

Spend Analysis

Using purchasing data to understand spending patterns and identify opportunities for improvement.

Pareto Chart

A chart that orders categories of numerical data from highest to lowest so the most important categories are easy to recognize.

Category Profile

An internal analysis used to understand all aspects of a sourcing category that could affect the sourcing strategy.

Industry Analysis

An external analysis of major forces and trends affecting an industry, such as pricing, competition, regulations, technology, and supply/demand.

Make-or-Buy Decision

Strategic decision about which products/services will be provided internally and which will be provided by outside supply-chain partners.

Insourcing

Using resources within the company to provide products or services.

Outsourcing

Using outside supply-chain partners to provide products or services.

Offshoring

Locating an insourced or outsourced operation in a foreign country.

Nearshoring

Offshoring to an adjacent or neighboring country.

Onshoring

Locating an insourced or outsourced operation in the company's own country.

Total Cost Analysis

Identifying and quantifying all major costs associated with different sourcing options.

Direct Costs

Costs tied directly to the level of operations or supply-chain activity.

Incremental Direct Costs

Costs incurred only after a certain amount of production/activity occurs.

One-Time Costs

Costs incurred only when a product or service is first produced.

Indirect Costs

Costs not directly tied to the level of operations or supply-chain activity.

Kraljic's Portfolio Analysis

A method used to develop a sourcing strategy based on the value of a purchase and its supply risk/complexity.

Routine Quadrant

Low-cost/value products with low supply risk that are readily available.

Leverage Quadrant

High-spend products that are standardized and readily available from many suppliers.

Bottleneck Quadrant

Low-cost/value products with high supply risk because only a few suppliers can provide them.

Critical / Strategic Quadrant

High-cost/value products with high risk and a limited number of qualified suppliers.

Single Sourcing

Depending on one supplier for all or nearly all of a particular item/service.

Multiple Sourcing

Sharing purchases of an item/service across multiple suppliers.

Cross Sourcing

Using one supplier for one item and another capable supplier for a different item, so they can potentially back each other up.

Dual Sourcing

Multiple sourcing using only two suppliers.