Purchasing Management Discussion Questions

1. Small Value Purchase Orders are problematic because they can overburden buyers with trivial purchases that may prevent them from focusing on crucial purchases. Purchasing can more effectively deal with this problem by: • Having a system in place to handle Small Value Purchases • Using an E-Procurement System (Makes buyers less likely to be overburdened by Small Value Purchases)

2. Centralized Purchasing – Purchasing decisions are made by a single Purchasing department (usually at the corporate office). Decisions include: Order Quantity, Pricing Policy, Contracting, Negotiations, Supplier Selection & Evaluation.

• Some advantages of Centralized Purchasing are: (1) Concentrated Volume (leveraging purchasing volume); (2) Avoid Duplication; (3) Specialization; (4) Lower Transportation Costs; (5) No Competition within Units; (6) Common Supply Base.

Decentralized Purchasing – Local Purchasing departments such as at the plant level, make their own purchasing decisions. • Some advantages of Decentralized Purchasing are:
(1) Closer knowledge of requirements,
(2) Local Sourcing;
(3) Less Bureaucracy.

3. Reasons Firms purchase from Foreign Suppliers:

• Lower price, better quality, possession of a patent, faster delivery of goods due to a more efficient transportation and logistics system, better services, and better product and process technologies.

4. Risks in Global Sourcing
• Complexity and costs involved in selecting foreign suppliers.
• Dealing with duties, tariffs, custom clearance, currency exchange
• Political cultural, labor, and legal problems. 5. An organization should invest in Supplier Development Programs because as companies outsource more, a larger portion of costs lie outside the company in a supply chain, making it increasingly difficult to achieve further cost savings internally, so it is important that companies work with their suppliers to