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Title: Global Procurement Exam 2 Review
Capital Purchases & Procurement
Q: Why do companies make capital purchases?
A: To expand capacity, improve productivity, save costs, enhance quality, and ensure durability.
Q: How do capital goods purchases differ from other items?
A: They have higher costs, longer life cycles, require technology forecasting, involve integration challenges, and have a total cost of ownership (TCO) consideration.
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Quality & Six Sigma
Q: What are the eight dimensions of quality?
A: Performance, Features, Reliability, Durability, Conformance, Serviceability, Aesthetics, Perceived Quality.
Q: How does quality control for services differ from goods?
A:
• Services: Intangible, perishable, customized, difficult to measure quality.
• Goods: Physical, measurable, defined by conformance to specifications.
Q: What are the challenges of procuring services?
A: Complexity in specification, reliance on personal relationships, unpredictable demand, and difficulty in measuring quality.
Q: What is Six Sigma?
A: A data-driven quality improvement approach that reduces defects to 3.4 per million opportunities using the DMAIC process (Define, Measure, Analyze, Improve, Control).
Q: What is Total Quality Management (TQM)?
A: A management approach focusing on customer satisfaction, continuous improvement, and supplier partnerships.
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ISO Standards & Process Capability
Q: What is the difference between ISO 9000 and ISO 14000?
A:
• ISO 9000: Focuses on quality management and process control.
• ISO 14000: Focuses on environmental management.
Q: What does it mean for outputs to be “within tolerances”?
A: It means the product meets acceptable variation limits within a given specification.
Q: When is a process considered “capable”?
A: When it consistently produces outputs within the specification limits with minimal variation.
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Inventory & Material Planning
Q: What is Material Requirements Planning (MRP)?
A: A system that ensures materials are available for production at the right time and quantity.
Q: What are the key inputs to an MRP system?
A: Master Production Schedule, Inventory Records, Bill of Materials.
Q: What are the Just-in-Time (JIT) requirements for a supplier?
A: Reliable delivery, high quality, short lead times, and low inventory levels.
Q: What is the Economic Order Quantity (EOQ) model?
A: A formula that balances order costs and holding costs to determine the optimal order quantity.
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Inventory Management
Q: What are the differences between fixed quantity and fixed period inventory models?
A:
• Fixed Quantity: Orders are triggered when stock reaches a reorder point.
• Fixed Period: Inventory is reviewed at set intervals and replenished as needed.
Q: How are ABC inventory classifications determined?
A:
• A Items: High-value, strict control.
• B Items: Moderate-value, periodic monitoring.
• C Items: Low-value, minimal oversight.
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Logistics & Transportation
Q: What are the primary modes of transportation and their pros/cons?
A:
1. Air: Fast but expensive.
2. Truck: Flexible and common (80% of transport).
3. Rail: Slower, higher risk of damage.
4. Marine: Slow but essential for global trade.
5. Pipeline: Limited to liquids/gases.
6. Intermodal: Combines multiple modes for efficiency.
Q: What does FOB (Freight on Board) determine?
A:
1. Who pays the carrier.
2. When legal title transfers to the buyer.
3. Who files freight claims.
4. Who routes the shipment.
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Pricing & Supplier Costs
Q: What are the components of price?
A: Fixed Costs, Variable Costs, Direct Costs, Indirect Costs.
Q: What are the differences between fixed, variable, direct, and indirect costs?
A:
• Fixed Costs: Do not change with output (e.g., rent).
• Variable Costs: Change with production volume (e.g., materials).
• Direct Costs: Assigned to a specific product (e.g., raw materials).
• Indirect Costs: Cannot be directly assigned (e.g., overhead).
Q: What are the different contract pricing options?
A:
• Firm-Fixed-Price (FFP): Price remains unchanged.
• Cost-Plus-Fixed-Fee (CPFF): Reimbursed costs + fixed fee.
• Cost-No-Fee (CNF): Only costs are reimbursed.
• Cost-Plus-Incentive-Fee (CPIF): Shared cost overruns/underruns.
Q: What are the best conditions for competitive bidding?
A: Clear specifications, multiple qualified bidders, no collusion, buyer’s market.
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