Managing Purchasing and Inbound Logistics

Vocabulary flashcards covering key concepts, procedures, management tasks, and logistics elements from Chapter 10: Managing Purchasing and Inbound Logistics.

Procurement

The all-embracing or umbrella concept concerned with acquiring all goods, services, and work vital to a business, within which purchasing is located.

Purchasing

A subset of the wider procurement process comprising decisions regarding planning, organising, directing, and controlling sourcing activities to secure required materials and services from external suppliers.

Inbound Logistics

The activities encompassing the procurement, warehousing, inbound transportation, receiving, quality control, inventory management, and salvage and scrap disposal of materials where and when needed.

Logistics

The planning, movement, and forward and reverse flow of materials, components, and related information and services from point of origin to point of consumption throughout the supply chain.

Supply Chain

The group of businesses that provide all the various inputs, materials, and processes required to produce a finished product.

Profit-Leverage Effect

The principle that a modest saving in purchasing costs translates into a relatively larger increase in a business's return on investment by going directly to the bottom line.

Purchasing Multiplier Concept

The calculation used to determine the additional sales turnover required to equal a specific saving in purchasing expenditure at a given profit margin.

Requisition

A notification or request generated by a user department stating specific material requirements and the date required.

Bill of Materials (BOM)

A document or computer-generated list specifying the required materials, components, and quantities needed by a department.

Materials Requirement Planning (MRP)

A computer system for purchasing and supply management that identifies required materials, determines quantities, schedules purchases, and generates formal orders.

Advice Note

A document sent by a supplier to notify the purchasing firm that the ordered goods have been dispatched or are ready for collection.

Goods Received Note

A document issued by the buyer's receiving department verifying that delivered goods match the order in condition, quantity, and price without discrepancies.

Electronic Data Interchange (EDI)

The electronic transfer of routine transaction information and repetitive business documents, such as invoices and bills of lading, between separate trading computer systems.

Just-in-Time (JIT)

An approach to regulating material and product flow to ensure sufficient quantities are available precisely when and where needed, aiming to eliminate waste and unnecessary inventory.

Standardisation

The process by which businesses or authorities establish or accept specific dimensions, norms, or standards intended for recurrent use according to which products are made or assessed.

Value Analysis

A post-production activity focused on cost correction to identify waste from designs and improve the value/cost relationship without compromising quality or performance.

Value Engineering

The application of value analysis at the pre-production, design, or product development stage focused on cost avoidance.

Quality Assurance

Planned, systematic corrective and preventive actions, policies, and practices implemented across a business to ensure goods and services meet specified requirements.

Quality Control

A traditional quality management method that entails inspecting and measuring quality against established standards after a product or service has been produced.

Economic Order Quantity (EOQ)

The order quantity that minimises total holding costs and ordering costs, occurring where carrying costs intersect ordering costs.

Survey Stage

The first stage of supplier selection, involving exploring all possible product sources and gathering information on potential suppliers.

Inquiry Stage

The second stage of supplier selection, in which potential suppliers are analysed, site visits are conducted, unsuitable candidates are rejected, and a qualified supplier list is compiled.

Negotiation and Selection Stage

The third stage of supplier selection, involving detailed negotiations with qualified suppliers leading to the placement of an initial purchase order.

Relationship Stage

The final stage of supplier selection, wherein supplier contract performance is continuously evaluated to maintain long-term relations and classify suppliers as approved, preferred, or certified.

Competitive Bidding

A transparent procurement method where bids are invited by openly advertising contract specifications, terms, and evaluation criteria to competing vendors.

Materials Management

The inbound logistics management function concerned with the flow of products and materials into the business to supply manufacturing with adequate raw materials when and where needed.

Logistics Management

The management of the movement and storage of goods from point of origin to final user in a cost-effective manner to achieve optimal customer satisfaction.

ABC Analysis

An inventory categorisation method dividing items into Category A ($70\%\text{--}80\%$ of value, $10\%\text{--}20\%$ of items), Category B ($15\%\text{--}25\%$ of value, $30\%$ of items), and Category C ($5\%$ of value, $50\%$ of items) based on annual consumption value.

Total Quality Management (TQM)

A business-wide philosophy centered on continually improving the quality of products, services, and processes to meet and exceed customer expectations through all-employee involvement.

Salvage and Scrap Disposal

The final activity of materials management responsible for selling, discarding, or recycling surplus and scrap materials to regain capital and preserve the environment.