Solution Manual for Purchasing and Supply Chain Management 4th Edition by W. C. Benton

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Instructor Manual Chapter 1: Purchasing and Supply Chain Management Learning Objectives and Resource List 1.1: Identify the role of the purchasing manager, buyer, and purchasing agent in an organization. 

Article: The Role of Procurement Quality Controls in Procurement Performance in the Energy Sector in Zimbabwe

1.2: Describe the evolution of the purchasing and supply management function as organizations become more globalized. 

Article: Supply Chain Management: Technology, Globalization, and Policy at a Crossroads

1.3: Explain the relationship between the purchasing function and inventory, ordering, and transportation costs. 

Article: ―Supply Chain Operations: Strategies for Long-Term Success

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Article: ―Foreign Trade Zones‖

1.4: Explain the purchasing function’s contribution to profitability. 

Article: Improving Operations and Profitability With Cross-Functional Analytics.

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Article: The Impact of Strategic Purchasing on an Organization’s Profitability

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Article: Supply Chain Excellence: A Critical Link to Driving Profitability

1.5: Identify the relationship between the purchasing function and other functional areas. 

Reading: Relations With Other Functions

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Article: Making the Transition to Strategic Purchasing

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Article: Procurement-Challenges Facing Procurement Organizations

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

1.6: Identify the advantages and disadvantages of various purchasing organizational designs. 

Article: Inventing the 21st Century Organization

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Article: Global Organizations Designs in Purchasing and Supply Management: Headquarter and Subsidiaries in a Contingency Perspective.

1.7: Describe the reporting structures common in the purchasing profession. 

Article: Size and Structure in the Purchasing Function: Evidence From German Municipalities

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Article: Designing the Perfect Procurement Operating Model

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Article: Building a procurement Team

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Article: Procurement Reporting Alignment

1.8: Identify careers in purchasing and supply management. 

Article: Career Patterns of Supply Chain Executives: An Optimal Matching Analysis

Teaching Strategies for Part One--Chapters 1–3 Since this is an introduction of new concepts and terminology as currently used in purchasing and supply management to students a method for the student to interact with other students can be followed: a. Research Log: Documenting and commenting on student’s thought process, tools, search methods, and judgment criteria throughout all stages of their work in Part 1. b. Reflection Paper: Learner can complete online internet search on topics relating to supply management ON THEIR OWN.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

c. Casework Project: The learner will follow casework project guidelines written by the instructor. d. Discussions. Learners participate in discussions forum and critique at least two classmate’s response.

Suggested Exercises or Projects a. An in-depth analysis casework project in Purchasing and Supply Management. It will analyze the Purchasing and Supply Management process in a local company or organization. The casework project will be a team (five minimum) effort in collaboration with classmates. The casework project will be done in phases (Report 1–5). This suggested exercise depends on time--for example, it could be assigned for Part 1 Chapters 1–3.

Discussion Questions 1. Compare and contrast the two unique types of purchasing categories in the business world.

The two unique types of purchasing categories in the business world. These are goods and services and both a company’s outputs produced to meet customers’ needs. Goods are tangible objects that can be seen, felt, tasted, and touched. Services are intangible products, thus they cannot be seen, felt, tasted, tasted, and touched. Goods are separate from production. Services are not separate from production. Goods are less heterogenous than a service, because the quality standard among different producers may be similar. Service are highly heterogenous, because its quality and essence vary among producers. Both are business’s products that aim at satisfying’s

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

customer’s needs. They both differ in terms of intangibility, inseparability of production and consumption, and heterogeneity.

2. The purchasing function can easily contribute to profitability. Please discuss this statement.

What is the profit leverage effect of purchasing?

Since purchasing is responsible for controlling part of a company’s revenue share in dollars, the effect of purchasing in regards to profit leverage is (1) through purchasing policies can improve sales margins through realizing substantial cost savings, (2) through better quality with suppliers, purchasing can contribute to a higher capital turnover ratio, and (3) suppliers can contribute when a good relationship is established significantly to the company’s innovation processes.

3. What is meant by ―integrative materials management?‖ This is an integrative philosophy to manage the total flow of distribution channel from suppliers to customers. Integrative materials management is planning (materials requirements planning) providing an estimate of the volume that managers think with materials. To be effective, the purchasing function and processes should be linked and interrelated to materials management.

4. What is meant by ―supply management?‖ Can be described as external integration (a conceptual model) in which purchasing becomes supply management. For example, the purchasing function works to facilitate the purchasing process for customers (e.g., systems contracts, EDI). Companies use the word supply chain management in describing how supply processes are managed and structured, the way in which materials processes are managed in a company. Therefore, supply chain management can be seen as how it optimizes materials processes throughout a supply chain.

5. Describe how purchasing interacts with other functional areas of the firm.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Purchasing interacts with other functional areas in the following ways: (1) purchasing contributes in securing continuity in the company’s primary activities (supplies), (2) reduction and cost control of all purchased-related costs (lowest total cost), (3) reduction of risk exposure in the supply markets (e.g., not becoming too dependent on one supplier), and (4) contribution to innovation in product and process (suppliers are source of improved processes and products).

6. Discuss the issue of centralization versus decentralization as it applies to the purchasing function. What are the advantages of centralized purchasing organizations? What are the disadvantages of centralized purchasing?

As applied to the purchasing function the issue of centralization versus decentralization is to achieve a balance between both. When deciding the question of to centralize or not to centralize must be considered using criteria such as supply market structure, saving potential, customer demands, and price fluctuations. Also the advantages and disadvantages of both need to be considered. One advantage of decentralization is direct communication with suppliers. On the other hand, one disadvantage of decentralization is scattered market research. With centralization of the purchasing function one advantage is focused market research. However, a disadvantage to centralization is no direct communication with suppliers.

7. Discuss the specific objectives of purchasing and supply management. Relate these to (1) the automobile industry, (2) a hospital, and (3) a pizza shop.

Two specific objectives of purchasing and supply management include: (1) determining the specification of the goods and services that need to be bought considering quantities and quality and at the same time selecting the most suitable supplier, (2) conducting negotiations with suppliers to establish a legal agreement (contract). In a hospital setting, the purchasing of quality

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

materials is a must because of liability. Quality materials also applies to the automobile industries (safety) and a pizza shop (fresh ingredients).

8. What are some of the careers in purchasing?

Some careers in purchasing include: As a purchasing agent, you may work for a company in trying to find various items or goods that are key to the operation of an organization. Buyers work for companies and stores to source goods that will be sold directly to consumers. As a purchasing manager, you can expect to manage both buyers and agents and may plan and direct the overall purchasing agenda for the company.

9. What are the most well-known professional purchasing associations?

Several professional purchasing organizations include: Institute for Supply Management, Professional and Purchasing Professionals Association, American Purchasing Society, National Procurement Institute, Council of Supply Chain Managers, and the Association for Supply Chain Management.

Suggested Cases Case 2: BSD AT 777-Holdings Case 8: GRC Systems, Inc. Case 21: Tom & Jerry (T&J) Construction, Inc.

Instructor Manual

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Chapter 2: Purchasing Decisions and Business Strategy Learning Objectives and Resources 2.1: Explain the relationship between purchasing and competitive strategy. 

Case Study: CEMEX: Globalization ―The CEMEX Way

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Case Study: DeBeer’s Diamond Dilemma

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Article: The Future of Purchasing and Supply Management

2.2: Describe the impact of competitive strategy and purchasing strategy on the supply chain and supplier relationships. 

Article: A Portfolio Model for Component Purchasing Strategy and the Case Study of Two South Korean Elevator Manufacturer

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Article: Turning Corporate Compliance Into Competitive Advantage

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Article: The Impact of Buyer-Supplier Relationship and Purchasing Process on the Supply Chain Performance: a Conceptual Framework

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Article: Strategy and Competitive Advantage

2.3: Discuss the competitive ranking system used to control quality relationships between suppliers and buyers. 

Article: The Power of Rankings: Quantifying the Effect of Rankings on Online Consumer Search and Purchase Decisions

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Article: The Research of Supplier Quality Based on the Supplier Relationship: Theoretical Definition and Construction of Evaluation Dimension

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Article: Performance Measurements and Metrics: An Analysis of Supplier Evaluation

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2.4: State the decision-making factors that impact a buying decision.

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Article: A Model of Industrial Buyer Behavior

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Article: The Consumer Is Changing

 2.5: Demonstrate how to develop a strategic sourcing plan. 

PowerPoint: Strategic Plan Template

2.6: Identify the continuing trends of purchasing and supply chain management.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

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Article: Game-Changing trends in Supply Chain

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Article: The Changing Landscape of Supply Chain Management

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Article: The Top Supply Chain Trends That will Impact Supply Chain Management in 2018

Teaching Strategy Since this is introduction of new concepts and terminology as currently used in purchasing and supply management to students a method for the student to interact with other students can be followed: a. Research Log. Documenting and commenting on student’s thought process, tools, search methods, and judgment criteria throughout all stages of their work in Unit One. b. Reflection Paper. Learner can do Online Internet search on topics relating to supply management ON THEIR OWN. c. Casework Project. The learner will follow casework project guidelines written by the instructor. d. Discussions. Learners participate in discussions forum and critique at least two classmate’s response.

Suggested Exercises or Projects: a. An in-depth analysis casework project in Purchasing and Supply Management. It will analyze the Purchasing and Supply Management process in a local company or organization. The casework project will be a team (five minimum) effort in collaboration with classmates. The casework project will be done in phases (Report 1-5). This suggested exercise depends on time…for example, it could be assigned for Unit One Chapters 1-3.

Discussion Questions 1. Why should the purchasing professional be concerned with strategic planning?

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

The way a company does its purchasing is a huge part of the business’ success. Purchasing is the biggest part of many companies because that has a big part to do with the company’s bottom line. You must keep a finger on the pulse of an item and its price. Another company may have a lower price that could amount to millions at the end of the year.

2. How does purchasing fit into a firm’s overall strategic plans?

Give a specific framework for the linkage between purchasing and competitive strategy.

In doing so purchasing managers need to devise purchasing actions such that they are consistent with each other and with the firm’s competitive strategy. The framework for purchasing strategy: The competitive priorities operationalize the firm’s competitive strategy. The two generic competitive advantages, delivery speed and reliability are operationalized in terms of cost quality performance quality, conformity product flexibility, volume flexibility, and customer service, when assigning priorities to these dimensions, the firms operationalized its strategy.

3. What are the components of purchasing strategy?

Vendor consolidation. If you work with a select few maintenance, repair, and operational (MRO) vendors, then you can negotiate better prices, because you are offering a higher volume of business.

Product standardization. There should be a standardization of all product purchasing so you can record actual costs Compliance communication. Everyone should be educated on policies and procedures regarding all products Group purchasing organization (GPO).

4. What decision areas are associated with purchasing strategy?

Supplier development, supply management, scope of manufacturing activities, and buying.

5. What is the impact of purchasing strategy on manufacturing inventory?

Table 2.3: Purchasing Strategy and Inventory Investment Inventory Classification

Raw Work in Process Materials and Parts

Finished Goods

Spare Parts

Low cost make-to-stock

Low

Low

Medium

Low

Narrow product line make-stock

Low

Low

Medium

Medium

Wide product line make-to-stock

Medium/high Medium

Medium

High

Rapid customer response with

High

None

Low

Strategy

Low

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

customized product Level production for seasonal demand

Low

Low

High/low

High/low

Quick spare parts response

Low

Low

--

High

6. What is meant by ―partnership?‖ Please categorize the four factors of partnerships.

A partnership is an arrangement between different departments to make for a smoother process in buying.

7. Discuss the elements of the proposed buying model mentioned in this chapter.

The integrated buying plan model elements include cost, quality, and lead time. The cost is always dependent upon the number of units, volume, or amount purchased. The quality level must meet a firm competitive priority. And lastly lead time affects the flexibility to services their customers.

8. Describe the elements of a strategic purchasing plan.

The elements include a clearly identified goal which is aligned with the organization's mission; measurable objectives; strategies and tactics that are aligned with internal and external factors; and a measurement plan to ensure that results are attained.

9. Describe the supply chain relationship quality indexing process.

The purpose of supply chain relationship quality indexing is to drive the supply chain toward continuous improvement. Each member (suppliers, buying organizations, customers) of the supply chain are stakeholders. The objective is to provide a valued product or service to the ultimate stakeholder, the customer. Supply chain relationship quality indexing is a methodology that may provide the manufacturer with the information needed to make the hard decisions about balancing the needs of the buying organization and the needs of the supply chain itself. SRQ indexing seeks to assess the supplier–buyer relationship from the supplier’s point of view.

Specifically, SRQ indexing is concerned with the extent to which cooperation, trust, commitment, and performance expectations influence the relationship between supplying and buying firms competing in the same industry. An example of the SRQ indexing process for the automobile industry. The import of high-quality, fuel efficient and competitively priced automobiles from Japan in the 1970s and 1980s forced American automobile manufacturers to become more competitive or go out of business. Subsequently, one critical success factor in the industry has proved to be effective supplier partnering.

Suggested Cases Case 9: Industrial Heating Systems Case 12: McGruder Pavers, Inc.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Case 22: Worldwide Auto Manufacturers, Inc.

Instructor Manual Chapter 3: The Legal Aspects of Purchasing Learning Objectives and Resources 3.1: Define the extent of the purchasing professional’s legal authority.

For Various Articles: Search Proquest.com 

Law and the Legal System

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Contractual Remedies

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Principles and Agents

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Making It Legal

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Business Crimes and Business Torts

3.2: Identify the requirements and terms necessary for a purchase contract to be legally enforceable.

For Various Articles: Search Proquest.com 

Types of Contracts

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Effects of Manufacturing technology on contracts

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Court-error recession of purchase contract

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Inventory Risk in Supply Chain

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A Purchase order is a contract

3.3: Define what makes an offer legally valid and the terms that may be aligned with the offer.

For Various Articles: Search Proquest.com 

Essence and legal value of the offer (critical analysis of doctrinal approaches

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The conclusion of the contract from the perspective of the new civil code

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Legal department of VVA offers aid

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Is it profitable to offer paid leave? A case study of the legal profession

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

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The Hindu business line: Revoking job offers get Grofers into tangle

3.4: Explain the role of the purchasing manager in the execution of contracts and purchase orders.

For Various Articles: Search Proquest.com 

Can a negotiation support system help a purchasing manager

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Purchasing manager’s guide to model letters, memos, and forms

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Do purchasing managers discriminate against supply firms owned and run by women?

3.5: Express the legal impact of the information age.

For Various Articles: Search Proquest.com 

Article: Dimensions of information synergy between legal practitioners and law librarians in the digital age

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Article: Informed citizens‖ A knowledge of rights and resolutions of civil justice problems

3.6: Discuss the importance of ethics in purchasing.

For Various Articles: Search Proquest.com 

Article: How ethical are ethical purchasing policies

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Article: The impact of locus of control, moral intensity, and microsocial ethical environment on purchasing-related ethical reasoning

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Article: Perceived ethical leadership affects purchasing intentions beyond ethical marketing in advertising due to moral identity self-congruence concerns

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Article: BMA launches campaign to promoted ethical purchasing of NHS medical supplies

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Article: How ethical are purchasing management professionals

3.7: State factors needed to be in compliance with women business enterprise (WBE), minority business enterprise (MBE), and disadvantaged business enterprise (DBE) programs.

For Various Articles: Search Proquest.com 

Article: Good business-the potential of women-owned business enterprises

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Article: Women’s business ownership and women’s entrepreneurship through the lens of U.S. policies

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Article: Assessing the impact of federal policy on minority business enterprise: Characteristic of minority business enterprises

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

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Article: Government purchasing and disadvantaged business enterprises: Are competitive disparities being reduced

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Article: Affirmative action in construction contracting and New Jersey’s emerging small business program

Teaching Strategies Since this is introduction of new concepts and terminology as currently used in purchasing and supply management to students a method for the student to interact with other students can be followed: a. Research Log. Documenting and commenting on student’s thought process, tools, search methods, and judgment criteria throughout all stages of their work in Unit 1. b. Reflection Paper. Learner can do online internet search on topics relating to supply management on their own. c. Casework Project. The learner will follow casework project guidelines written by the instructor. d. Discussions. Learners participate in discussions forum and critique at least two classmate’s response.

Suggested Exercises or Projects a. An in-depth analysis casework project in Purchasing and Supply Management. It will analyze the Purchasing and Supply Management process in a local company or organization. The casework project will be a team (five minimum) effort in collaboration

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

with classmates. The casework project will be done in phases (Report 1–5). This suggested exercise depends on time…for example, it could be assigned for Part 1 Chapters 1–3.

Discussion Questions 1. What tasks are allocated to the purchasing function? What are the legal issues associated with the purchasing function?

The tasks are as follows: With regard to the allocation of purchasing tasks and responsibilities and authority, they are three different ones, depending on the purchasing function is perceived.

For example, when management considers the purchasing function mainly as an operational activity, this results in the purchasing department viewed in a low position in the organizational hierarchy. Generally, the purchasing function or department is responsible for procuring raw materials and other resources at the best possible price.

2. What is meant by purchasing authority? Give examples of each type of purchasing authority.

There are several types of purchasing authority. In purchasing a contract is enforceable in a court of law. In general there are three kinds of purchasing authority: implied, emergency, and express.

An example of an emergency authority is when a requirement such as purchasing or construction contracts costing US$30,000.00, which are subject to either informal or formal competitive bidding requirements do not apply. This could result because of ―cases of special emergency involving the health and safety of the people or their property.‖ Implied authority means an agent figures who have the ability to make a legally binding contract on behalf of another person or company. For example, a buyer is hired to buy on behalf of the company. Express authority is authority conferred to by the purchasing manager by the principal, for example, a contract in real estate.

3. How does implied authority relate to express authority? Give specific examples.

An example of this relationship is in real estate. In this relationship express authority means the agent has been given authority to act on behalf of the principal. Another example is in insurance.

In this case the implied authority is authority that not express or written in a contract, but the insurance agent is assumes in order to transact the business.

4. Discuss the liability issues associated with purchasing agents’ actions.

There are several issues in this relationship. This includes (1) the principal liability depends on whether the agent was authorized to make the contract, (2) the agent’s authority is required either expressly, implicitly or in an emergency, and (3) both the principal and agent may be liable, even if the agent had not authority, if the principal ratifies the agent’s contract after the fact.

5. What are the requirements of an enforceable contract? Provide specific examples.

How is an offer related to a contract? There are four elements of a contract. These are capacity, legal or valid, consideration, and agreement (mutual assent). An offer is related in a contract because an offer is initiated by the offeree, and the offeree has to agree to the offer. At least two

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

parties (an offerer, who initiates the contract and the offeree who agrees to the terms of the contract). These two parties REQUIRED are in all contracts. The elements required in a legal contract include agreement, which in purchasing are the performance obligations, consideration (bargain theory can be and is used to isolate and identify the valued used by consideration), valid or legal (most people assume a legal contract is between the offerer and the offerre), in practice there is a third party--the courts of justice. Finally, in contract law is the issue of capacity to contract. For example, a minor cannot enter into a contract or a mentally challenged person.

6. Compare and contrast an invitation to bid with an offer.

An invitation to bid is used in situations where potential vendors or services providers differ principally in price. Issuance of invitation to bid allows a company to provide detailed specifications including all terms and necessary conditions for work. An offer is different from a bid because in an offer there has to be a meeting of the minds and mutual assent between the two parties. The steps leading to mutual assent start with the offer and acceptance process. An invitation to bid is not enforceable in a court a law. An offer if it is a written in legal terminology is enforceable in a court of law.

7. What are the four outcomes of an offer?

The four outcomes are that the offer may lapse; the offer may be rejected; the offer may be revoked; the offer may be accepted.

8. Explain how the purchasing agent can protect the company against a revoked offer.

Offer is revoked, offeror takes it back before the offeree accepts. ―sorry but the deals off.‖ The purchasing manager can revoke an offer before it is accepted, and the manager protects by only accepting firm offers, write an option contract, and secure a bid bond.

9. Discuss the legal impact of the information age on the purchasing function.

In the information age precedent of law has good value in balancing the needs of business and consumers. The art of teaching the law of ecommerce and the internet is basically the same since the beginnings of law. For example, we have the longstanding UCC Uniform Commercial Code, the newer Uniform Computer Uniform Transactions ACT (UETA), and the newer UEITA Uniform Electronic Transmission Transactions Act. These are evolutionary efforts to protect commerce.

10. What is an electronic signature?

An electronic signature is authentication (signing the contract or executing the electronic symbol, sound, or message attached to, included in, or linked with the record).

Suggested Cases Case 20: Simpson Hospital Systems Case 21: Tom & Jerry (T&J) Construction, Inc.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Instructor Manual Chapter 4: Materials Management Learning Objectives and Resources 4.1: Explain the relationship between materials requirements, capacity planning, and inventory.

4.2: State the relationship of throughput time to inventory. 

For Various Articles: Search Proquest.com o Taking the lead--Above and Beyond: Managing for productivity o Amazon o Robbing the Cradle o Implication of theory of games on inventory control policies: pricing strategies, inventory levels, and remanufacturing o EOQ-based inventory control policies for perishable items: the case of blood plasma inventory management

4.3: Compare the order cycle as a link and as a set of activities.

4.4: Identify the components that impact customer satisfaction.

4.5: Compare objective and subjective measures of quality. 

For Various Articles: Search Proquest.com o Admission assessment and quality reporting: reporting quality data o Prescription quality control o Business--the right choice o Professional competencies of specialists in purchasing as a factor of purchasing activity quality o Statement of values--purchasing’s role in quality

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

4.6: Discuss the concepts of conformance and specifications as they relate to the quality of materials. 

For Various Articles: Search Proquest.com o Quality requirements to the application of the private investor test? o Water and energy linkages for groundwater exploitation: a case study of Gujarat State, India o Quality in Construction: quality in materials and construction products o Optical diacritic function database facilities compound semiconductor material quality control o The changing materials quality lab

4.7: Define maintenance, repair, and operating supplies by how they factor into materials management. 

For Various Articles: Search Proquest.com o Management of procurement and material resources--a guarantee for quality: performance management of the process of procurement and of management of material resources o Integrated supply: supply chain management in materials management and procurement o Total cost management via effective materials management o Logistics cost control of railway construction projects based on material classification management and material supply plan o Preserving the legacy: introduction to environmental technology--hazardous materials

4.8: Define standard and nonstandard tooling related to specifications.

Teaching Strategies For Chapter 4 (Materials Management), it is suggested that the emphasis should be on providing hands on experience with working with the MRP records and lot-sizing techniques. As the MRP process involves multiple plans originating from the MPS plan, working with MRP records and bill of materials (BOM) will help to understand MRP on a conceptual level. In regard to the lot-sizing techniques, many techniques exist with varying performance results.

During the initial phase of getting comfortable with using MRP records, limiting the static techniques such as EOQ, lot for lot, and POQ will facilitate the learning process.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Additional teaching strategies: a. Research Log. Documenting and commenting on their thought process, tools, search methods, and judgment criteria throughout all stages of their work. b. Reflection Paper. Learner can do online internet search on topics relating to supply management. c. Casework Project. The learner will follow casework project guidelines. d. Discussions. Learners participate in discussions forum and critique at least two classmate’s response.

Suggested Exercises or Projects: a. An in-depth analysis casework project in Purchasing and Supply Management. It will analyze the Purchasing and Supply Management process in a local company or organization. The casework project will be a team effort in collaboration with classmates.

The casework project will be done in phases (Report 1–5).

Discussion Questions 1. Discuss the relationship between material requirements planning and capacity planning.

Capacity planning is a plan to maximize unit of capacity. It can be placed within your building.

Once that is set a manager can start to determine the material requirements that are needed for a job. Questions can be asked: for example, do you have the required materials on hand. When do I need to order to make sure our stock doesn’t run low, so we aren’t outrunning our lead times?

It’s a matter of determining what the right amount of a product and how long it gets to you. To determine how successful a job can get done in the right time period.

2. What is the relationship between capacity planning and inventory management? Capacity planning is inventory management. You need to set a limit of an item how much you need. It can’t be too much for fear of it turning into dead stock, but you need enough to have enough supply to finish jobs. So the inventory management controls the size of materials held in the warehouse.

3. What are the costs associated with quality? How does quality relate to the purchasing function? Cost and quality are under a subjective feel that relates to if something is handmade, it is higher quality. If you have a poor quality, the cost of the object maybe cheaper. With handmade items you will see them higher priced than their manufactured counterparts. They maybe pristine quality with the perfect craftmanship. The quality is always compared to price.

When a consumer picks a product, they want to have the best buy. Whereas the quality and price

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

are put together to make value. The customers are looking for a product where they can say it was worth it.

4. Explain at least three expert views of the quality function. Which view do you agree with?

Why? (1) Technical matter or how it’s engineered. The process on how it's made and the design.

Is it functional, does it serve its purpose? (2) Statistical measure to reduce inferior related product isn’t seen from the plant. Only the best of products is used. (3) Quality and motivation.

You motivate your customers by making slogans and making the claims for consumers to show your quality.

5. Quality is a subset of customer satisfaction. What is meant by this statement? What is the definition of value? If a customer is satisfied the quality maybe advertised which brings in a reputation made from their product. The definition of value is meant as the best buy where the ratio of quality and price are compared to determine how valued is the product.

6. What is meant by specifying materials? It is a matter of materials quality based upon the design and execution. Is the design amazing, does it hold together well are there no structural flaws? How about the execution, was it finished in a timely manner?

7. How are maintenance, repair, and operating (MRO) supplies different from purchased components? They are the aftereffects, the wear and tear that comes with usage. They are quantified product expected after purchase to be bought to resupply the customer with parts to bring back the product into working order. Then you have repair which is the unexpected damages or product failures.

8. What skills are required to be an effective materials manager? Knowledge is power when it comes to a product. You need to know all the specifications. Logistics, how a product moves and controls. IF your customer isn’t satisfied you need to be able to identify where it went wrong.

Most importantly, adaptability to situations.

Suggested Cases Case 5: Central Texas Wine Distributors (CTWD) Case 7: Delta Construction Systems (DCS) Case 16: Morgan Summerfield (CCS)

Instructor Manual

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Chapter 5: Inventory Management Learning Objectives and Resources Upon completion of this chapter, the reader should be able to: 5.1: Explain the differences between independent and dependent demand. 

Search proquest.com for the following articles or videos: o Supply chain single vendor--single buyer inventory model with price-dependent demand o Join optimal production planning for complex supply chains by carbon emission abatement policies o Demand forecasting and measuring forecast accuracy in general fare structures o Synchronizing supply chain operations with consumer demand using customer data o Itinerary-based nesting control with upsell

5.2: Determine what to stock, how much to stock, and how much service to offer customers. 

Search proquest.com for the following articles or videos: o Influence of store characteristics on product availability in retail business o EPQ model for returned/reworked inventories during imperfect production process under price-sensitive stock-dependent demand o Multisite production planning in hybrid make-to-stock/make-to-order production environment

5.3: Demonstrate use of an ABC analysis to determine which inventory items account for the greatest dollar value. 

Search proquest.com for the following articles or videos: o ABC analysis in manufacturing company o ABC analysis technique of materials toward inventory management

5.4: Demonstrate how to manage inventories for independent demand using EOQ, EOQ for discounts, and calculation of safety stock. 

Search proquest.com for the following articles or videos: o Optimization research of construction inventory management on site based on inventory theory

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

o EOQ-based inventory control policies for perishable items: the case of blood plasma inventory management o Inventory management for minimum cost o Seven inventory management success stories o A literature review on models of inventory management under uncertainty 5.5: Demonstrate how to manage inventories for dependent demand systems. 

Search proquest.com for the following articles or videos: o A return policy contract with a stock-dependent demand and inventory shrinkages o An integrated just-in-time inventory system with stock-dependent demand o Simple modeling techniques for base stock inventory systems with state-dependent demand rates o Something Ventured: the money flow: management of working capital o Sales connection: the sales engine

Teaching Strategies In this chapter, there are a lot of mathematical equations given. It is important to avoid just memorizing equation. Rather, the underling concept for those equations needs to be emphasized.

For example, for EOQ, the balance between ordering cost and holding cost is the underlining concept. Once you understand, working with EOQ and its relaxed variants are easier. It is also important to emphasize the assumption involved with EOQ as the relaxations are difficult to handle without a firm understanding. Once you have those understandings, several problems need to be practiced as it is difficult to get a firm grasp of the inventory model without hands on practice with the equations.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Additional Teaching Strategies a. Research Log. Documenting and commenting on their thought process, tools, search methods, and judgment criteria throughout all stages of their work. b. Reflection Paper. Learner can do online internet search on topics relating to supply management. c. Casework Project. The learner will follow instructor’s casework project guidelines. d. Discussions. Learners participate in discussions forum and critique at least two classmate’s response.

Suggested Exercises or Projects: a. An in-depth analysis casework project in Purchasing and Supply Management. It will analyze the Purchasing and Supply Management process in a local company or organization. The casework project will be a team effort in collaboration with classmates.

The casework project will be done in phases (Report 1–5).

Discussion Questions 1. Why is inventory management important to the efficiency of the purchasing function?

Inventory management is an essential prerequisite for the efficiency of the purchasing function.

Good inventory management improves the precision of inventory orders by figuring out exactly how much inventory is required. It helps in ordering exact amount just enough so that there are no shortage or excess costs involved. It improves cash flow and thus profitability. Good inventory management leads to a more structured stockroom and increases effectiveness and

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

yield. It creates a kind of arrangement that acts as a central source for the management of the resources, information, and functions across a business. A good inventory management strategy keeps customers coming back for more by allowing them to have the right products on hand as soon they need. Inventory management software is used to save time by keeping record of all the products that are currently in stock , what amount is about to arrive and how much quantity we have to reorder. So it can help employees by avoiding problems faced in inventory recounts. .It makes inventory management precise and accurate. Good inventory management increases employee efficiency as by using inventory management software employees save their time and it helps business make better use of its resources, both human and technological.

2. What are the differences between independent and dependent demand?

An inventory of an item is categorized independent demand when the demand for such an item is not dependent upon the demand for another item. In contrast independent demand is categorized dependent when demand for such an item is dependent on another item.‖ 3. Discuss the various inventory costs.

Inventory costs are defined as the costs that are associated with the procuring, storing, and managing the inventory. Among the various inventory costs are carrying costs, shortage costs, and carrying costs.

4. What is the relationship between purchasing and the classical EOQ model?

Economic order quantity (EOQ) is a model that constitutes the quantity purchased of either stocks or raw materials that is considered optimum; quantity that minimizes both holding and ordering costs. In many cases, the EOQ will change in the event that the cost of placing an order or the cost of carrying inventory in stock changes.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

5. How are inventory decisions related to forecasting?

To figure out what inventory you should have on hand, start with a forecast of future sales.

Sales for the coming 30, 60, or 90 days are based on past sales velocity and seasonality of products. For an accurate forecast, consider sales velocity is the rate of sales omitting stockouts (out of stock days) 6. How are quantity discounts evaluated when using the classical EOQ model?

Quantity discount model. Quantity discounts are price reductions designed to induce large orders. If quantity discounts are offered, the buyer must weigh the potential benefits of reduced purchase price and fewer orders against the increase in carrying costs caused by higher average inventories.

7. What is meant by ABC analysis?

In materials management, ABC analysis is an inventory categorization technique. ABC analysis divides an inventory into three categories--"A items" with very tight control and accurate records, "B items" with less tightly controlled and good records, and "C items" with the simplest controls possible and minimal records.

8. How is safety stock determined in the classical EOQ model?

Safety stock formula: How to calculate safety stock: (1) multiply your maximum daily usage by your maximum lead time in days. (2) Multiply your average daily usage by your average lead time in days. (3) Calculate the difference between the two to determine your safety stock. There are other factors that influence the safety stock quantity are the lead time for replenishment and the order quantity. Increasing lead time requires more safety stock as well

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

as decreasing order quantity. Therefore, the calculation of the economic order quantity (EOQ) and the safety stock are performed in one service.

9. What are the differences between the classical EOQ inventory system and MRP? A maximum retail price (MRP) is a manufacturer calculated price that is the highest price that can be charged for a product sold in India and Bangladesh. However, retailers may choose to sell products for less than the MRP. . . . Shops cannot charge customers over the MRP. In contrast, the economic order quantity is a formula used to calculate inventory stocking levels. Its main purpose is to help a company maintain a consistent inventory level and to reduce costs. EOQ uses variable annual usage amount, order cost, and warehouse carrying cost.

10. What are the cost implications of various lot-sizing methods.

Fixed order quantity, or FOQ for short, which involves setting a lot size and then calculating how often to restock. The economic order quantity, or EOQ, which involves lot sizing based on the cost of setup and materials, as well as the demand for the product. The implications are that it depends on the variables that are used in the calculations.

Suggested Cases Case 5: Central Texas Wine Distributors (CTWD) Case 13: Medical Laser Equipment, Inc. (C) Case 18: Philadelphia Aircraft Equipment, Inc.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Instructor Manual Chapter 6: Just-in-Time (Lean) Purchasing Learning Objectives and Resources 6.1: Describe lean production systems. 

Search proquest.com for the following articles of videos: o Comparison of maintenance operations in lean versus nonlean production systems o Design and analysis of lean production systems

6.2: Explain the differences between JIT and MRP. 

Search proquest.com for the following articles of videos: o Supply chain inventory control: a comparison of JIT, MRP, and MRP with information sharing using automation o Integrating MRP, Kanban and bar coding systems to achieve JIT procurement o The transfer of manufacturing processes and standards in the U.S. plants operating in the United Kingdom

6.3: Explain the relationship of the Kanban production control system to the JIT system. 

Search proquest.com for the following articles of videos: o An analysis of dual-Kanban Just-in-Time systems in a nonrepetitive environment o How does Kanban work in American companies

6.4: Discuss the relationship between JIT and purchasing. 

Search proquest.com for the following articles of videos: o Small suppliers and JIT purchasing o Defense contracting impediments to supplier productivity and quality improvement o JIT implementation: a growth opportunity for purchasing o Switching rules for JIT purchasing

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

6.5: Name critical JIT purchasing advantages. 

Search proquest.com for the following articles of videos: o A review of review of the adoption of just-in-time method and its effect on efficiency o Implementing JIT purchasing: Does the level of technical complexity in the production process make a difference?

6.6: Identify the activities needed to implement JIT purchasing. 

Search proquest.com for the following articles of videos: o Effects of human factors and lean techniques on just-in-time benefits o A method of identifying critical success factors of JIT implementation in different circumstances o Integrated just-in-time: a total business approach o JIT manufacturing in Mexico: obstacles to implementation o Toward a deeper understanding of JIT: a comparison between APICS and logistics managers

6.7: Determine the role of culture in the implementation of JIT purchasing. 

Search proquest.com for the following articles of videos: o Just-in-time Education 1 o Just-in-time management: a critical assessment o Lean organizational culture as an example of a positive organizational culture o The adoption of just-in-time purchasing practices and its impact on firm performance in a developing country o The extent of best practice implementation in European manufacturing enterprises: the effect of culture

6.8: Analyze the impact of JIT purchasing on a buying firm. 

Search proquest.com for the following articles of videos: o Just-in time purchasing and supply: a supply chain analysis o Evaluation of strategies for repeat procurement o Small suppliers and JIT purchasing o Buyer experiences with JIT: some new roles for buyers

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

o Purchasing has a crucial impact on profit

Teaching Strategies For Chapter 6 Inventory Management and Just-in-Time and Lean, this chapter introduces the concepts of just in time (JIT) and lean production which is been popularized over the last few decades. Rather than being just production techniques, both JIT and lean could be understood as philosophies. While the two are sometimes treated as beings synonymous to each other, this understanding is not fully true even though there is a significant overlap between the two.

Compared to the JIT philosophy, the lean philosophy is more comprehensive including JIT as an element.

The JIT philosophy is based on eliminating wastes which adds cost without adding value and the concept of continuous improvement of the system and processes. Examples of waste are the unnecessary movement of materials, the accumulation of excess inventory, and the use of faulty production methods that create products requiring subsequent rework. JIT focuses on reducing such factors as inventory levels, variability, delivery lead times, and setup costs. Not only does this reduces costs but also improves product quality. Thus JIT improves profits and return on investment. JIT is applied primarily to repetitive manufacturing processes in which the same products and components are produced over and over again. The lean philosophy shares JIT’s objectives in the reduction of waste and continuous improvement. It uses kaizen events to initiate changes the systems and also uses the concept of paper kaizen to eliminate waste from the process by design before the process is implemented. It also uses value stream mapping (VSM) to understand and visualize processes and its flow. It has the objective of eliminating waste from the processes. The chapter also focuses on how JIT influences purchasing.

JIT or lean is not a simple tool set that could be just implemented. Rather, it is a culture and a philosophy that requires a system-wide and a company-wide acceptance and change to make it successful. It is also not universally applicable as the evidence shows that it is suited to environments characterized by low variability in demand.

Additional Strategies a. Research Log. Documenting and commenting on their thought process, tools, search methods, and judgment criteria throughout all stages of their work. b. Reflection Paper. Learner can do online internet search on topics relating to supply management. c. Casework Project. The learner will follow casework project guidelines. d. Discussions. Learners participate in discussions forum and critique at least two classmate’s response.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Suggested Exercises or Projects: a. An in-depth analysis casework project in Purchasing and Supply Management. It will analyze the Purchasing and Supply Management process in a local company or organization. The casework project will be a team effort in collaboration with classmates.

The casework project will be done in phases (Report 1–5).

Discussion Questions 1. What is meant by just-in-time (JIT) purchasing?

Just-in-time (JIT) purchasing is a systems approach for developing and operating the purchasing function. JIT purchasing along with the total quality management in many industries has been successful in reducing inventory and increasing the overall effectiveness of purchasing function and hence the productivity of manufacturing.

2. What are the elements of JIT purchasing?

The major elements of JIT purchasing include locating, choosing, and then developingmutual relations with the suppliers the number of the suppliers should be limited and both the buyer and the supplier should possess mutual dependence, having long term contracts which results in reduction of the lead time, aiming at finding solutions to the problems by involving participation of the supplier at an earlier stage during the decision making process.

3. What are problems associated with implementing JIT purchasing?

Lack of cooperation from suppliers. In a detailed survey of U.S. firms involved with just-in time manufacturing, 47% of the respondents indicated that they had serious problems with some of their suppliers. The suppliers see little incentive in adopting the JIT approach when the primary benefits of the program go to the buyer 4. What are some of the expectations of the suppliers?

Supplier relationships, and preventive maintenance systems. In addition to the necessity of improving operations to set up JIT, the pull system itself encourages continuous improvements.

Inventory is held only to satisfy demand during lead time (i.e., until a replacement order arrives).

To reduce inventory further, one must reduce lead time or the components of lead time, such as processing time, transit time, setup time, and inspection time. JIT touches every area of operations. What is the role of culture in the implementation of JIT? A crucial issue to be considered is the relevance of culture in the successful implementation of the just-in-time system in a country. For example, Honda's culture and its focus on group-oriented activities are particularly suitable to the implementation of the just-in-time production control system in that environment."

5. What are some of the advantages of JIT purchasing?

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Just-in-time (JIT) purchasing refers to a purchasing management scheme with aims of having stock readily available to meet daily demand, except not to a point of excess where the company must stockpile the extra superfluous products. Retaining a proper stock takes time and has costs, which is what inspires most companies to execute JIT programs. Please compare JIT purchasing with traditional purchasing. In JIT purchasing acquiring, attaining product or service of good quality by having a long-term long-term contract at the sensible selling price gets the highest priority. The information of a review disclosed that both the United States and the United Kingdom businesses have put a high priority on superb quality as well as in shipping and delivery in discussions interactions. IN traditional purchasing this might not be the case.

6. How does JIT purchasing affect order costs and lead time?

A substantial decrease in the ordering costs permits a greater number of orders to be placed over shorter intervals. Shortened lead times.

7. Does JIT really provide the solution to most manufacturing problems in the United States?

It is hard to say, granted there are benefits to it but there are also risks. I think that the benefits outweigh the risks. Even though the benefits will take some time to be seen.

Suggested Cases Case 5: Central Texas Wine Distributors (CTWD) Case 7: Delta Construction Systems (DCS) Case 16: Morgan Summerfield (CCS)

Instructor Manual Chapter 7: Purchasing Procedures, E-Procurement, and Systems Contracting Learning Objectives and Resources 7.1: Identify the steps in the standard purchasing cycle. 

Search proquest.com for the following articles and videos: o Strategic procurement planning across the product’s life cycle: a conceptualization o Purchasing involvement in time-based strategies o Study on two-echelon centralized inventory management based on supply chain

7.2: Describe systems contracting and the efficiencies achieved by using it.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021



Search proquest.com for the following articles and videos: o Analyzing efficiency of public procurement contracting system o Understanding contracting performance: an analytical analysis

7.3: Identify the technical requirements for e-procurement. 

Search proquest.com for the following articles and videos: 

Transparency in public procurement through e-procurement in India



Identifying operational requirements to select suitable decision models for public sector e-procurement decision support system

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Quality in e-procurement success

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7.4: Explain the advantages and disadvantages of reverse auctions.

Search proquest.com for the following articles and videos: o The truth about reverse auctions o Deciding on the mode of negotiation: to auction or not to auction

7.5: Define EDI and state its roll in e-procurement. 

Search proquest.com for the following articles and videos: o Private network EDI versus internet electronic markets: a direct comparison of fulfillment performance o e-Procurement implementation in selected industrial giants of Gujart o The application of EDI: empirical evidence

7.6: Explain RFID technology. 

Search proquest.com for the following articles and videos: o Biometric passport validation scheme using radio frequency identification o Conceptual designing and technology: short range RFID as design manual

7.7: Discuss the challenges to consider when introducing new technologies. 

Search proquest.com for the following articles and videos: o New technologies--NEW OSH challenges o Luciana Caenazzo, Lucia Mariani, and Renzo Pegorato (eds.). Convergence of new emerging technologies: ethical challenges and new responsibilities

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

o New technologies lead to new challenges for outsourcing providers o Charting a new course o Preserving the legacy II: Introduction to Environmental Technology

Teaching Strategies Suggested Teaching Strategies for Chapter 7-9. a. Research Log. Documenting and commenting on their thought process, tools, search methods, and judgment criteria throughout all stages of their work. b. Reflection Paper. Learner can do online internet search on topics relating to supply management. c. Casework Project. The learner will follow casework project guidelines. d. Discussions. Learners participate in discussions forum and critique at least two classmate’s response.

Suggested Exercises or Projects: a. An in-depth analysis casework project in Purchasing and Supply Management. It will analyze the Purchasing and Supply Management process in a local company or organization. The casework project will be a team effort in collaboration with classmates.

The casework project will be done in phases (Report 1–5).

Additional Teaching Strategies: Students should be asking the following questions: Chapter 7 Purchasing Procedures, e-Procurement, Systems Contracting: 1. What are the basic purchasing procedure? Following purchasing procedure is generally followed: (1) determining purchase budget, (2) receipt of purchase requisition, (3) determining sources of supply, (4) placing order, (4) follow-up of purchase order, (5) receipt and inspection of materials, and (6) checking invoices.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

2. What is electronic purchasing? e-Procurement involves the online conduct of business-to-business procurement processes using web-based applications. The significance of e-Procurement is that it enables buyers to locate potential suppliers, review product choices, select products, and make purchasing transactions directly over the internet.

3. What is a contract? System contracting involves the development of a corporate agreement with a supplier to purchase a large quantity of items or raw materials on a continuous basis. The goal is to reduce cost and streamline these procurements. These contracts can range from 1 to 5 years in length. The items to be purchases are usually detailed in a catalog that becomes part of the contract. This type of contracting system usually requires close coordination between buyer and supplier. If done properly, each side can reduce administrative cost substantially. This is sometimes called ―Stockless Purchasing.‖ Chapter 8 Supplier Selection and Evaluation: 1. What is the process followed in supplier selection: The process of the optimum selection of the supplier how a long-term nature. The selection process plays an important role in reducing the cost and time to market and also improves the quality of the products. The paper considers the choice of supplier due to the most significant criteria for producer.

2. What is supplier evaluation? Supplier evaluation is the process to access new or existing supplier base on their delivery, price, production, and quality of management, technical, and services. A standard supplier evaluation framework shall be used in all cases for the existing and potential suppliers.

Chapter 9 Strategic Outsourcing: 1. What is strategic outsourcing? Strategic outsourcing is the process of engaging the services of a provider to manage essential tasks that would otherwise be managed by in-house personnel.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Many people tend to associate outsourcing with small companies that operate with limited budgets.

2. What are the key elements of effective outsourcing? The key elements of effective outsourcing include (1) educe cost, (2) increase efficiency, (3) focus on core areas,; (4) save on infrastructure ad technology, (4) enable risk-sharing opportunities, and (5) access to effective resources.

Chapter 10 Global Sourcing: 1. What is global sourcing? Global sourcing refers to seeking goods and services beyond one's borders, that is, from the global market. It is a procurement strategy in which companies try to find the most cost-efficient place globally for manufacturing goods. . . . Most companies choose a global sourcing strategy because costs are lower abroad.

2. Why is global sourcing important? Because companies sourcing from both inside and outside their country borders are better able to compete. As international demand grows for more and better products and services, competition becomes more intense.

Chapter 11 Supply Partnership and Supply Chain Power: 1. Why a partnership? (AKA) Supplier partnership is a commitment over an extended time to work together to the mutual benefit of both parties, sharing relevant information and the risks and rewards of the relationship.

2. The definition of ―power‖ is: ―one channel member's ability to influence the behavior and decision of other members.‖ Companies in a supply chain must integrate with each other to be able to operate as efficiently as possible.

Chapter 12 Total Quality Management (TQM) and Purchasing:

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

1. What is TQM? A core definition of total quality management (TQM) describes a management approach to long-term success through customer satisfaction. In a TQM effort, all members of an organization participate in improving processes, products, services, and the culture in which they work.

2. When do we know a company has TQM? Total quality management (TQM) is achieved and becomes part of the overall organizational culture when the five principles--produce quality work the first time, focus on the customer, have a strategic approach to improvement, improve continuously, and encourage mutual respect and teamwork--are practiced by all ...

Discussion Questions 1. What are the procedural objectives for sound purchasing systems? What are the procedural objectives for sound purchasing systems?

Work area involved: training; material required: three-hole binders; specifications: three holes, inside pocket, company logo; point of need: training department; procedure: Training manager determines need for binders and issues a materials requisition; this sort of simple transactions is repeated daily in every firm. The routine practice of this type of transaction is the basic motivation for establishing system contracts.

2. What are the main functions of a purchasing department?

The main functions of the purchasing department are to:

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

1. Determine the supplier.

2. Negotiate the actual price.

3. Determine the delivery date.

3. What is systems contracting?

It is a stockless inventory method for ordering and stocking MRO and related items. The use of systems contracting will aid the firm in reducing ordering and inventory costs. The process requires the use of a negotiated agreement between buyers and sellers. It is an efficient form of purchasing that is based in reductions in processing and administrative costs. It is also a purchasing management technique that seeks overall reduction in the cost of an item from the time a need is a recognized to the time that the need it fulfilled.

4. What is meant by total cost of ownership?

It is a concept that has been used in business around the world. The basis of the concept is that the full cost of accord should be assessed, rather than concentrating on the original purchase price (of hardware and software for example). The term TCO is approximately new (probably but the path is similar to approach of life cycle costs and other valid economic criteria for properly evaluating business decisions).

5. What are reverse auctions?

A reverse auction is a type of auction in which sellers bid for the prices at which they are willing to sell their goods and services. In a regular auction, a seller puts up an item and buyers place bids until the close of the auction, at which time the item goes to the highest bidder. What is electronic data interchange (EDI)? EDI is the electronic interchange of business information using a standardized format; a process which allows one company to send information to another

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

company electronically rather than with paper. Business entities conducting business electronically are called trading partners. How have they changed the purchasing function?

6. What are the steps in the Lewin–Schein theory of change?

Kurt Lewin developed a change model involving three steps: unfreezing, changing and refreezing. For Lewin, the process of change entails creating the perception that a change is needed, then moving toward the new, desired level of behavior and, finally, solidifying that new behavior as the norm.

7. What is RFID? Radio frequency identification (RFID). How does it work? It uses electromagnetic fields to automatically identify and track tags attached to objects. An RFID tag consists of a tiny radio transponder, a radio receiver, and transmitter. What are its advantages and disadvantages? The advantages include: RFID technology automates data collection and vastly reduces human effort and error; RFID supports tag reading with no line-of-sight or item-by-item scans required; RFID readers can read multiple RFID tags simultaneously, offering increases in efficiency.

Disadvantages include: materials like metal and liquid can impact signal, sometimes not as accurate or reliable as barcode scanners, cost--RFID readers can be 10 times more expensive than barcode scanners, implementation can be difficult and time consuming.

8. What are the advantages and disadvantages of purchasing technologies?

Advantages include: improved spend visibility and lower costs, global procurement, better operational performance, standardized workflow, simplified processes, improved data accuracy, internal integration, electronic catalogs. Disadvantages include: error and production cessation.

Technology in the workplace is common. However, some employees may overly rely on their

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

business technology to complete tasks and services. This may lead to employees not catching errors that might have been caught had the task been done manually.

9. How has the internet changed the purchasing function?

New technology provides opportunities for procurement to boost market coordination, introduce new suppliers, enable better compliance, increase capacity and speed, minimize risk, and increase trust by removing human error. These advancements not only enhance the performance of the buyer’s organization but also enhance the performance of the suppliers--helping improve the buyer–supplier relationship, collaboration, and innovation.

Suggested Cases Case 6: Custom Doors, Inc. Case 7: Delta Construction Systems (DCS)

Instructor Manual

Chapter 8: Supplier Selection and Evaluation Learning Objectives 8.1: State the reasons a corporation may decide to outsource production. 

Search proquest.com for the following articles and videos: o Make or Buy? Ow it’s data-processing question o Strategic sourcing: developing a framework for make-or-buy decisions o To Make or to Buy o Taking stock: purchasing and inventory control

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

8.2: Identify sources businesses can use to make informed supplier decisions. 

Search proquest.com for the following articles and videos: o The exporting jobs canard; repeated research shows that multinational hiring abroad does not come at the expense of U.S. workers o Is decentralization inevitable? o Impact of outsourcing on competitive advantage of U.S. multinational corporations o Outsourcing: How corporations take their business elsewhere o Out of India (Outsourcing)

8.3: Explain the importance of a strategic match between the buyer and supplier. 

Search proquest.com for the following articles and videos: o The intersection of power, trust, and supplier network size: implications for supplier performance o Supplier selection using grey theory: a case study from Indian Banking industry

8.4: Discuss the need for efficient supply chain management relationships. 

Search proquest.com for the following articles and videos: o Buyer–supplier alliances in the automobile industry: how exit voice strategies influence interpersonal relationships o Portfolios of buyer–supplier relationships o Long-term manufacturers–supplier relationships: do they pay off for supplier firms?

8.5: Describe the approach to a supplier relationship management program.s 

Search proquest.com for the following articles and videos: o Creative industries value chain: the value chain logic in supply chain relationships o Evaluating the relationship between questionable business practices and the strength of supply chain relationships

8.6: Explain how to implement a supplier development program. 

Search proquest.com for the following articles and videos:

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

o Developing buyer–supplier relationships o Buyer–seller relationships in business markets o Exploring salespersons’ customer orientation as a mediator of organizational culture’s influence on buyer–-seller relationships o An empirical investigation on the importance of intangible values in buyer–seller relationships 8.7: Explain how to implement a supplier evaluation program.

8.8: State the factors that should be considered when determining the number of suppliers to work with. 

Search proquest.com for the following articles and videos: o Benchmarking supplier development: an empirical case study of validating a framework to improve buyer–seller relationship o Supplier knowledge management for supplier development o Supplier development programs: an empirical analysis

8.9: Compare how different industries select and evaluate suppliers 

Search proquest.com for the following articles and videos: o The radical market-oriented policies of the Alternative for Germany (AFD) and support from nonbeneficiary groups--discrepancies between the party’s policies and supporters o Quantity discount-based inventory coordination: effectiveness and critical environmental factors

8.10: Learn how different industries select and evaluate suppliers. 

Search proquest.com for the following articles and videos: o Green supplier selection based on green practices evaluated using fuzzy approaches to TOPSIS and ELECTRE with a case study in a Chinese internet company. o Benefiting from supplier operational innovativeness: the influence of supplier evaluations. o Supplier evaluation systems.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Discussion Questions 1. What is meant by make or buy? Make-or-Buy decision is also known as the outsourcing decision. It refers as a judgment that is made via the management in order to make a component internally or buy it from the marketplace. What are the key make-or-buy success factors?

2. What is meant by outsourcing? In the current business environment, outsourcing is an agreement in which one company provides services for another company.

3. What are some of the sources of supplier information? There are numerous sources that provide business data as well as information for the success of the business organizations.

Furthermore, the major challenge for a business is to detain and use information that is relevant and trustworthy.

4. Discuss three common supplier evaluation systems. In today’s business scenario, there are a lot of supplier evolution systems that enhance the efficiency of an organization in an effective and a more comprehensive manner. Along with this, the three most common supplier evaluation systems are the categorical system, weighted point average system, and the cost-based system.

5. What are the advantages of single and multiple sourcing? Single sourcing advantage include: A single-source model saves costs as everything is executed by the vendor, thus cutting down additional handling charges and delivery costs. A business is also relieved from the pressure of paying each partner individually as pricing may differ with each service provider in case of multisourcing. Key advantages of multiple sourcing when compared to single sourcing include (1) low dependency of suppliers, (2) spreading risks, and (3) encourages price competition. What is the trend? The trend is toward a balance of both.

6. What is meant by cross-sourcing? Cross Sourcing—a sourcing strategy in which a company uses a single supplier for one particular part or service and another supplier with the same capabilities for a different part or service, with the understanding that each supplier can act as backup for the other supplier.

7. Discuss the recent trend of supplier reduction. As a company reduces its supplier base, purchasing power increases. By allocating more resources to fewer suppliers, companies can receive better prices for a product. Overall freight, handling and other related shipping fees will reduce in cost as well.

8. Discuss how supplier selection and evaluation strategies vary across different industries.

Supplier evaluation is the process to access new or existing supplier base on their delivery, price, production, and quality of management, technical, and services. The company can decide to reward supplier based on their excellence performance and penalizing or de-listing them if the performance is not in standard. However, there is the difference between a service and product

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

industries to consider.

Suggested Cases Case 11: The Kemper Engine Plant

Instructor Manual Chapter 9: Strategic Outsourcing Learning Objectives and Resources 9.1: Describe why organizations outsource manufacturing and services business processes. 

Search proquest.com for the following articles and videos: o Framework for Democracy--Balancing Act o The workplace, the society, and the wider world: the offshoring and outsourcing industry o Companies and markets.com: Business process outsourcing market forecast to total US$220B by 2020: Business Process. o Review of empirical business services sourcing literature: an update and future directions.

9.2: Identify the hidden cost of strategic outsourcing. 

Search proquest.com for the following articles and videos: o Unexpected consequences in their zeal to cut costs and improve efficiency, too many companies outsource functions without fully considering the consequences o Trumpism and global sourcing o Outsourcing on the rise: Companies are outsourcing as a cost cutting strategy

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

9.3: Identify the differences between core and noncore competencies. 

Search proquest.com for the following articles and videos: o Core competency: true to its name, core competencies shed its unwanted companies and concentrated on its strengths o A framework for strategic sourcing o Thinking clearly about outsourcing

9.4: State the trends of strategic outsourcing. 

Search proquest.com for the following articles and videos: o Strategic outsourcing trends to be examined by top companies at conference board meeting June 26–27 in New York o Southeast Asia in global wave of outsourcing: trends, opportunities, and challenges o International sourcing trends create growing opportunities for Asian firms

9.5: Explain the elements of strategic outsourcing. 

Search proquest.com for the following articles and videos: o Purchasing outsourced services from offshore suppliers o What are the key elements to consider when outsourcing

Discussion Questions 1. What is outsourcing?

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

“Outsourcing (also sometimes referred to as "contracting out") is a business practice used by companies to reduce costs or improve efficiency by shifting tasks, operations, jobs, or processes to an external contracted third party for a significant period of time.‖ 2. Why do firms outsource business processes?

Organizations use outsourcing to improve their performance and capabilities and decrease operational costs.

3. How is outsourcing similar to, or different from, contracting, make versus buy, and joint venturing?

Outsourcing and contracting are two different things. This is due to the fact that when one is a contractor, your engagement with the company is limited and restricted while in outsourcing the engagement with the organization is not fixed and you are engaged fully as a staff. Make and buy in in-house activity. Joint venturing is done interdepartmental in house or at another location.

4. What are some of the strategic benefits of outsourcing?

Outsourcing have several benefits which include the following: (1) cost saving, (2) focus, (3) staffing levels, (4) flexibility, (5) morale, (6) knowledge, and (7) accountability.

5. Discuss in detail three ―hidden costs‖ of outsourcing.

(1) Deciding that driving cost to the lowest level possible is your primary goal, (2) the cost of selecting the right a vendor, (3) project initiation.

6. How does supply chain risk management relate to outsourcing?

Supply Chain risk management relate to outsourcing in a way where by managements always need to let the service of product supply to be handled by outside firms so that they can reduce the operational cost.

7. Discuss in detail what is meant by ―core competence.‖ A core competency is a concept in management theory introduced by C. K. Prahalad and Gary Hamel. It can be defined as ―a harmonized combination of multiple resources and skills that distinguish a firm in the marketplace‖ and therefore are the foundation of companies' competitiveness.

8. What are the elements of strategic outsourcing?

Common strategic outsourcing elements are as follows: global strategies, procurement specifications, supplier management plan, quantity commitment, schedule stability, long-time cost reduction, long-term buyer/seller relationship, nonproduct expenditures.

Suggested Cases Case 15: Microfuse, Inc. (B)

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Case 22: Worldwide Auto Manufacturers, Inc.

Instructor Manual Chapter 10: Global Sourcing Learning Objectives and Resources 10.1: Identify the costs associated with global sourcing and provide an example of each. 

Search proquest.com for the following articles and videos: o Nine hidden costs of global sourcing o Foreign direct investment and global choices of firms in the United States. o Global sourcing: Is it right for your company? o Rising costs have not stopped solar entrepreneur from sourcing products in Guangdong?

10.2: Explain the impact the exchange rate can have on overall costs. 

Search proquest.com for the following articles and videos: o The cost of admission o Two essays in international economics. o Next up, the currency war. o An empirical analysis of the renminbi: Exchange rates and cross-border trade settlement.

10.3: Discuss the challenges experienced in global sourcing in terms of ethics, lead times, and communication. 

Search proquest.com for the following articles and videos: o On optimal expediting policy for supply systems with uncertain lead times o An empirical investigation of global sourcing strategy effectiveness o From Wordsmith Communication strategists: Heresthetic and Political Maneuvering in Technical Communication o Worldwide sourcing: facilitating continued success o International purchasing: benefits, requirements, and challenges.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

10.4: State the qualitative and quantitative factors impacting risk assessment in the strategic planning for global sourcing. 

Search proquest.com for the following articles and videos: o Development of risk assessment model for global information technology outsourcing o An ontological supported risk assessment approach for the intelligent configuration of supply networks o Survey of supply chains risk assessment approaches

10.5: Define protectionism and its impact on global sourcing. 

Search proquest.com for the following articles and videos: o Salmon in the sea o Preserving the Legacy II: Introduction to Environmental Technology--health effects of hazardous materials

10.6: Describe negotiation techniques for various cultures. 

Search proquest.com for the following articles and videos: o The negotiation dance: time, culture, and behavioral sequences in negotiation. o Communication is key in multicultural negotiation: Handbook of Global and Multicultural Negotiation o The best vendor negotiation strategies for procurement executives for 2011--tips and techniques to give you the upper hand

10.7: Explain opportunism and provide an example of poaching and shirking. o Search proquest.com for the following articles and videos: o Documenting entrepreneurial opportunism in action o Opportunism in interfirm relationships: forms, outcomes, and solutions 10.8: Identify the procedures necessary for importing goods to the United States. o Search proquest.com for the following articles and videos: o The most expensive food in the world o Prescriptions and profit o Import procedures related to EU financial losses

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

o Affordability and availability of off-patent drugs in the United States--the case for importing from aboard: observational study o Something wicked this way comes: U.S. government’s response to unsafe imported Chinese toys and subsidized Chinese exports 10.9: Describe how to effectively use foreign trade zones. o Search proquest.com for the following articles and videos: o When procedural legitimacy equals nothing: civil society and foreign trade policy in Brazil and Mexico o Factors affecting the use or nonuse of free trade agreements in the Philippines o International regulation of free trade zones: an analysis of multilateral customs and trade rules

Discussion Questions 1. How should purchasing managers train buyers for global sourcing?

Global sourcing--involves proactively integrating and coordinating common items and materials, processes, design, technologies and suppliers across the worldwide purchasing, engineering, and operating location. The purchasing manager needs to train the buyer in the following: education and training, (2) publicizing success stories, (3) globally linked system, (4) foreign suppliers with domestic-based support personnel, (5) measurement and reward system that encourage worldwide sourcing, and (6) use third-party agents that have more experience.

2. What are some of the advantages of global sourcing?

(1) Low cost manufacturing, (2) tapping skills and resources that are not available in the home nation, (3) seeking the benefit of alternate suppliers, (4) utilizing an efficient supply chain management system, (5) learning global business skills, and (6) meeting competition prudently and efficiently.

3. How do exchange rates impact global sourcing?

Wherever the exchange rates are high, people tend to buy less because the value of their currency is lower compared to the other currency to which a nation/business buys from. The reverse is also true.

4. Discuss some of the behavioral issues associated with global sourcing.

The behavioral issues associated with global sourcing include the following: The resistance that arises from the firm’s buyers who thinks if a product is bought here it cannot be bought elsewhere.

5. What are some of the attributes associated with global sourcing?

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Material cost, transportation cost, inventory holding cost, cross-border taxes, tariffs and duty cost, supply and operational risk, lower labor cost, and exchange rate.

6. Discuss how offshore quotas should be evaluated.

Consider both qualitative and quantitative implications. Quotas can refer to measures that sets the limit either minimum or maximum for a particular activity. Quotas are usually set by government or by an organization of production. A quota is a government-imposed trade restriction that limits the number or monetary value of goods that a country can import or export during a particular period. Countries use quotas in international trade to help regulate the volume of trade between them and other countries. Therefore, the evaluation can be done by using a quantitative or qualitative method.

7. Discuss the differences and similarities of negotiating strategies for the United Kingdom, Germany, Mexico, and China.

Similarities: Their negotiations tend to seek a clarified information about the subject of concern.

They all tend to seek straight forward answers to various issues or tasks at hand.

Differences: The Germans’ behaviors are difficult to understand and to characterize because they fall toward the center the continuum. The Briton’s behaviors are remarkably similar to the Americans’ in all respects. They have a strong sense of the right way to negotiate and the wrong.

French negotiators are the most aggressive of all because in their negotiations they use highest percentage of threats and warnings. The behaviors of the negotiators from China are the most remarkable in the emphasis on asking questions.

8. What is meant by a foreign trade zone?

An isolated policed area adjacent to a port of entry (as a seaport or airport) where foreign goods may be unloaded for immediate transshipment or stored, repacked, sorted, mixed, or otherwise manipulated without being subject to import duties.

Suggested Cases Case 15: Microfuse, Inc. (B) Case 22: Worldwide Auto Manufacturers, Inc.

Instructor Manual

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Chapter 11: Supply Partnerships and Supply Chain Power Learning Objectives and Resources 11.1: Identify the elements of the supplier chain partnership Chrysler initiates with its suppliers that makes it an industry benchmark. 

Search proquest.com for the following articles and videos: o Company looks to alliances and partnerships o Corporate news: Chrysler seeks partnerships to expand globally o Andy Rooney gets mail from angry viewers o Downshifting o Supplier Alliances--Chrysler and MAGNA International

11.2: Describe the levels of supply chain partnerships and give an example of each 

Search proquest.com for the following articles and videos: o The importance of partnerships in supply chains o The role of carriers in buyer–supplier strategic partnerships: a supply chain management approach o Modeling the benefits of information sharing-based partnerships in a two-level supply chain o How to measure the social capital in a supply chain?

11.3: Explain how supply chain partnerships can lead to a reduced supplier base. 

Article: Supply base optimization: 4 steps to ensure success

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Article: Supply Chain Integration: The National Academic Press

11.4: Discuss the potential benefits of buyer–supplier partnerships. 

Search proquest.com for the following articles and videos: o A model of buyer–supplier relationships in a transnational company: the role of the business network context o Portfolios of buyer–seller relationships o The strategic value of buyer–supplier relationships

11.5: Discuss the power component of supply chain relationships. 

Search proquest.com for the following articles and videos:

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

o Supply chains and power regimes: toward an analytic framework for managing extended networks of buyer and supplier relationships o The existence of buyer power in the Italian fresh mild supply chain o The configuration of power in vertical relationships in the food supply chain in the Canary Islands

Discussion Questions 1. What is the definition of a supply partnership?

This represents the extent to which a company has influence on the other member of the supply chain 2. What are some of the benefits of supplier partnerships?

A partnership can give suppliers greater visibility into how you operate, enabling you and your suppliers to collaborate by reducing costs, improving service and quality, and even innovating.

3. What are the critical implementation factors?

The critical implementation factors are business plan and vision, effective communication, project management, and change management program and culture.

4. What are some of the risks associated with supplier partnerships?

(1) Power: The buyer’s dependence on the supplier is a source of power for the supplier and vice versa. (If A depends on B more than B depends on A, than B has power over A.) Asymmetric--the most independent partner dominates the exchange. Balanced relationships refer to the domination of neither parties.

Buyer–supplier relationships that are characterized by asymmetric interdependence are more dysfunctional because the independent partner experiences high power and will be attempted to

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

exploit it (Anderson, 1989). In respect of power imbalances within buyer–supplier relationship can lead to unproductive partnerships. In the long term, the position of the weaker party will be eroded too much and the partnership will be destroyed.

5. What is the definition of supply chain power?

These include pricing control, inventory control, operations control, channel structure control, and information control. Also, it is the area or group of people that provides the main support for a particular part.

6. What are the critical success factors for supply chain partnerships?

Partnerships or collaborations are basically defined business relationships that are tailored or founded on openness, shared risk, mutual trust, and shared rewards that translate to yielding of a competitive advantage. Partnering supply chains improves the overall performance of the supply chain by creating capabilities that are new as well as increasing operating efficiencies. Stronger partnerships in the supply chain are developed based on measurements that are definable, greater transparencies, and through the encouragement of supply chain practices that are more effective.

7. What factors do power have influence over in the supply chain?

Right power: relationship with the company's position in the supply chain, historically this power was held by manufacturers, but since l990, it has been made by retailers. These include compensation power: With the reward ratio for the reward to achieve goals or objectives, this power may be from the sellers, who will receive a bonus; or even consumers who can benefit from shrinking miles with an airline; coercive power: relates to the ability to avoid positive results or harass the other members of the supply chain. For example, a manufacturer could delay production to harm a retailer; expert power: information and knowledge effect the flow of the

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

supply chain; reference power consist sizing personal relationships between members of the chain, it is said that it is better to work with the one you like; expert power is the scope of health, this can be seen when marketing has been seen for health companies.

8. How is supply chain power associated with the purchasing function?

Extremely complex in nature, power serves as a composite relationship–oriented variable, affecting both the target and the source in many transparent as well as concealed ways. The following section will examine the effects of influence strategies on critical relationship factors including dependence, commitment, compliance, cooperation, conflict, satisfaction, performance, and profitability. Exploration of the effects of power on factors of the supplier–buyer alliance provides the key to understanding the concept of the power–partnership link that is under investigation.

Buying organizations tend to use non-coercive influence strategies, which are logically supported by the idea that use of coercion may risk the buying organization’s power advantage. The use of mediated power by the buying organization forces the supplying organization to be committed to maintain the relationship for its sustenance, but genuine psychological commitment is lower due to the resentment over the subordinate situation. On the other hand, the use of nonmediated power by the buying organization can increase true commitment.

Suggested Cases Case 10: The K-Car Airbag Assembly Case 14: Michigan City Tractor (MCT), Inc.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Instructor Manual Chapter 12: Total Quality Management (TQM) and Purchasing Learning Objectives and Resources 12.1: Explain the relationship between total quality management (TQM) and supply chain management. 

Search proquest.com for the following articles and videos: o Sales Connection, The First Impressions o Taking the Lead, Above and Beyond: Managing for Productivity o Role of Supply Chain Management in Context of Total Quality Management in Flexible Systems: A State-of-the Art Literature Review o Supply Chain and Total Quality Management framework design for Business Performance-Case study Evidence o Integrating Total Quality Management and Supply Chain Management Similarities and Benefits

12.2: Identify TQM implementation challenges. 

Search proquest.com for the following articles and videos: o Implementation of Total Quality Management in Indian Industries: Challenges and Issues o Reinventing Organizations to Meet the Challenges of a Highly Competitive Global Environment o A Guide for Integrating Total Quality Management and Physical Asset Management in the Food Industry

12.3: Describe how the supplier satisfies the buying firm’s performance expectations. 

Search proquest.com for the following articles and videos: o Managing information processing needs in global supply chains: a prerequisite to sustainable supply chain management o The Financial Supply Chain Management: A New Solution for Supply Chain Resilience

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

o The complementary perspective of system of systems in collaboration, integration, and logistics: A value chain–based paradigm of supply chain management o Visibility in supply chains means firms will compete supply chain to supply chain 12.4: Demonstrate how to use statistical process control for detecting quality variation. 

Search proquest.com for the following articles and videos: o Quality Control: It’s Money in the Bank o Performance of statistical process control methods for regional surgical site infection surveillance: A 10-year multicenter pilot study o Costs and Inspection time nosedive as quality takes off

12.5: Discuss the various quality awards earned by suppliers. 

Search proquest.com for the following articles and videos: o Classic Johnny Carson o Taking the lead-keeping in touch: interpersonal and organizational communication o Daimler trucks North America recognizes Hirschmann solutions with Master of Quality Supplier Award o Web course works receives Brandon Hall Award for Quality Improvement Education Program o Culture change wins the Baldrige

12.6: Explain the importance of continuous improvement. 

Search proquest.com for the following articles and videos: o New approaches to an old problem: Reporting system o Relationship between continuous improvement practices and project management approach o Inside continuous improvement-a literature review o Key lessons to maintain continuous improvement: A case study of four companies

12.7: Explain how cost is influenced by design quality. 

Search proquest.com for the following articles and videos: o Remakes and returns: Quality issues are costing you more than you think

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

o The linkage via measurement of cost and quality

Discussion Questions 1. Why should the purchasing department be concerned with a firm’s overall quality assurance program?

The firms usually work closely with key suppliers for each item and few others for backup suppliers.

2. What are the quality requirements for suppliers?

The suppliers’ quality assurance systems must be consistent with the in-house quality requirements of the customer. Thus, the stated targets and expectations of the customer must meet the minimum level of performance.

Buying organizations must specify in detail, the agreed upon quality targets. At a minimum, the following four issues should be addressed in any purchasing contract: Parts per million (PPM) target agreement; field failure and reliability requirements; warranty agreement; urgency to solve problems; preventative quality (strategic components) Strategic components are the most critical parts in a project or platform and require more extensive quality assurance requirements.

Strategic components typically meet at least one of the following criteria: Supplier participation in the design of the component part; a high level of systems integration required for a complex component part; an expensive component part; long lead time for the component part; component parts that require extensive testing; parts with critical characteristics; component parts with complex legal implications In addition to meeting the above criteria, they should be required to undergo rigorous parts quality assurance (PQA) process. The general steps of a PQA process are as follows: Review the technical specifications; validate the reliability of the design characteristics; develop and document a quality assurance plan; identify the need for a tooling plan; perform pre-process audit; perform a legal and governmental audit; perform a packaging analysis plan; project the effect of a process mode failure; Develop a statistical process control plan; perform a production test run; perform a process audit; develop a part-handling plan 3. What is six sigma? What are the differences between statistical process control and six sigma?

Six sigma is a process that improves business efficiency and effectiveness by refocusing the efforts on productivity, reducing cost, and improved quality. It is concerned with consistency of output along with a goal of eliminate errors. Six sigma uses measurement--the use of financial targets. The measurement is focused on reducing variations. In contrast, Statistical Process Control are components of the six sigma system. It is a methodology of measuring and quality data capture during real-time manufacturing processes. It is based on the sample mean (X-bar) and the sample range chart (R) chart (W. C. Benton).

4. What is ISO 9000 and why is it important to a purchasing professional?

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

They are used to certify a variety of organizations and business concerns. Certification to an ISO 9000 standard does not guarantee any quality of end products and services, rather is certifies that formalized business processes are being applied. Most companies require their suppliers to provide certification that proves they have complied with all ISO 9001 requirements. Once a firm is certified, it will be listed in a directory so that all of its potential customers can know which firms have been certified and to what level. Large buying organizations are demanding that their suppliers should become certified through a third-party organization, such as ISO 9000 certification. Once completed, the evaluation can be either compared to the buying firm’s stated goals or benchmarked to the performance evaluations of the supplier’s competitors.

5. What is the difference between the Malcolm Baldrige Award and the ISO certification? Which one is the most important certification if the organization is sourcing globally?

Certification to an ISO 9000 standard does not guarantee any quality of end products and services, rather is certifies that formalized business processes are being applied. Most companies require their suppliers to provide certification that proves they have complied with all ISO 9001 requirements. Once a firm is certified, it will be listed in a directory so that all of its potential customers can know which firms have been certified and to what level.

Large buying organizations are demanding that their suppliers should become certified through a third-party organization, such as ISO 9000 certification. Once completed, the evaluation can be either compared to the buying firm’s stated goals or benchmarked to the performance evaluations of the supplier’s competitors. In contrast the development and implementation of MBA is different compared to ISO 9000 except the design quality, speed and prevention. The key factors of both awards systems, that is, customer focus, continuous improvement, competitive comparisons and benchmarking, fact-based management, people participation and partnership, strategic quality planning and its integration with overall corporate business plans, and public responsibility are not addressed in ISO 9001.

6. Go to the Malcolm Baldrige website at www.quality.nist.gov and write a two-page report on one of the most recent award winners.

Winners of the Malcolm Baldrige award include: the Pewaukee School District (PSD) was a winner in the Baldrige Performance Excellence Program. By aligning school policies with the district’s strategic plan and objectives, PSD was able to direct everyone’s commitment to their five key areas of strategic planning: (1) Teaching and Learning, (2) Technology, (3) Communication and Community Engagement, (4) Workforce Engagement and Development, and (5) Facilities and Operations, and ultimately receive a Baldrige National Quality Award. The coordination and common focus of PSD school policies and the PSD strategic planning process demonstrate the importance of aligning business strategies and policies. Through their strategic planning process, management hierarchy strategy, and pure dedication to quality, the Pewaukee school district was, and still is, able to achieve their goals and deliver excellent service to its students. There are many more listed in the Website or a student to do research.

7. What are the key requirements for TQM? Customer-focused; employee involvement; process-centered; integrated system; strategic and systematic approach; continual improvement; fact-based decision making; and Communications.

8. Who needs to be involved in setting TQM standards for suppliers?

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Quality should not be determined or defined by the producing company. Quality is determined by the customer!

9. An aircraft manufacturer is producing landing gear struts that conform to the military specification. However, the manufacturer is experiencing significant quality-related costs.

Speculate on the source of the increased quality-related costs.

In the aircraft industry, SAFETY is number ONE priority . . . however, this a heavy cost for any industry!

10. Explain the Japanese approach to TQM. Are there differences between the Japanese and the American approaches to TQM? The Japanese approach to thinking about quality is based on Dr. Deming’s statistical approach.

Total quality management, or TQM, is an approach to management that originated in Japanese industry in the 1950s and become more popular in western nations from the early 1980s. The term "total quality management," lost favor in the United States in the late 1990s, to be commonly substituted by "quality management." TQM is a set of management practices designed to improve quality performance at every level of an organization in order to meet or exceed customer requirements. It places strong focus on process measurement and controls as means of continuous improvement. TQM has a customer-first orientation, where customer satisfaction is the highest priority. TQM recognizes that a perfectly produced product has little value if it is not what the customer wants.

11. Discuss how TQM affects productivity.

Total quality management is just a dream if not implemented correctly. Therefore, the successful implementation stage integrates and adopts all the processes, tools, philosophy, team work, and other model for successful results to achieve objectives in a company. It starts with vision, goals and strategies, and mission shared in business. The mission depends upon the critical success factors that are to be identified and linked with key performance indicators to indicate whether the CSFs are being achieved once CSFs and KPIs are identified the organizations core processes are understood the process analysis, self-assessment and benchmarking are used to make improvements in opportunities and develop people to support for the continuous improvement when continuous improvement or redesign are done the performance measurement are used to evaluate the results.

12. What are the advantages of using the Taguchi method?

The method emphasizes a mean performance characteristic value close to the target value rather than a value within certain specification limits. It uses the following: straightforward and easy to apply to many engineering and manufacturing situations; used to narrow down quickly the scope of a research project or identifying problems in a manufacturing process from existing data; allows to have multiple analysis of different parameters without a high amount of experimentation; identifies key parameters that have the most effect on the performance characteristic value so that further experimentation on these parameters can be performed and the parameters that have little effect can be ignored 13. How does the Taguchi philosophy affect the purchasing department?

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

A purchasing manager should be knowledgeable of the Taguchi Method, also called the Robust design method. This statistical method improves the quality of manufactured goods and are applied to the field of biotechnology, engineering, marketing, and advertising. It ensures customer satisfaction by analyzing and looking into the noise factors created from a company’s product usage and other environmental stuff related to the production factor, even reducing the production costs whilst improving the quality and developing innovative designs. The Robust design method aims to reducing the waste during the manufacturing and operating process.

Wastes: Overproduction, Waiting, Transporting, Defects, Unnecessary Inventory. The recurring thing in the Robust design is improving engineering productivity. By using this method, many companies around the world that are in diverse industries, such as electronics and automobiles, saved millions of dollars in costs.

14. What are the costs associated with implementing a world-class quality assurance program?

There are several costs that go along with the implementation of an internationally recognized quality assurance program and/or certification. From the mid-1950s there was a growing need to standardize production quality and efficiency in western economies as business started to grow after World War 2 (history.com). This need only grew as the strong industrialize countries kept growing and globalization began to creep in, the need was only increasing. The earliest and still one of the most world recognized is the ISO certification; which has over 25 certification levels that apply to almost all manufacturing industries. The costs depend on several variables; certification level a company would like to achieve, amount of employees the company has, the amount of quality upgrades the company already has implemented, and amount of work that has to go in in order to achieve the state goal, and so on.

15. What is a loss function?

This is a statistical term. Taguchi emphasized the need to reduce variability. We often require each quality characteristic to have a target or nominal value and then attempt to reduce variability around this target. Taguchi models the departures which may happen from this target value with a loss function. The loss represents the cost incurred when the consumer uses a product whose quality characteristics differ from the nominal. Taguchi uses a loss function, L(y), of the form

L( y )  k ( y  T ) 2

16. What is AQL? The ―AQL tables‖ are statistical tools at the disposal of buyers (for product inspections). They help determine two key elements: (1) How many samples should be picked and inspected, among a batch of product or parts? (2) Where is the limit between acceptability and refusal, when it comes to defective products?

17. What is an OC curve? How is it used?

Acceptance sampling eliminates or rectifies poor lots and improve overall quality of product. It helps in reducing inspection costs and risk. In inspection of sample greater care will be taken so

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

that results may be more accurate. A rejected lot is frequently a signal to the manufacturer that the process should be improved. It provides a no of alternative plans in which a single sample is taken, two or indefinite no of samples may be taken from a single lot. An OC curve measures (1) The probability of accepting incoming lots (In short ) (2)The operating characteristic (OC) curve depicts the discriminatory power of an acceptance sampling plan. The OC plots the probabilities of accepting a lot versus the fraction defective. When the OC is plotted, the sampling risks are obvious. It is used in discrimination of sampling plan between good and bad lots.

Suggested Cases Case 11: The Kemper Engine Plant Case 14: Michigan City Tractor (MCT), Inc. Case 22: Worldwide Auto Manufacturers, Inc.

Instructor Manual Chapter 13: Price Determination Learning Objectives and Resources 13.1: State the factors that impact the purchasing decision. 

Search proquest.com for the following articles and videos: o A Delphi factor of the impact of ethical considerations on online consumer o Economist’s Assumptions in their Economic Models

13.2: State the differences in price/cost setting strategies based on economics and psychology. 

Search proquest.com for the following articles and videos: o Valeo SCALA laser scanner teardown analysis, cost analysis, and estimated price analysis, 2019 o Science; New findings on general science described by investigators at Emory University (a Bayesian approach to hedonic price analysis) o Banking industry price analysis: Read Infiniti’s latest success story to know how a retail banking client identified pricing opportunities o Comment and Analysis: Analysis, price signals fewer students want places on economic courses

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o Research and market offers report: The art and science of technical analysis: Market structure, price action and trading strategies 13.3: Describe the common discounts a supplier may offer a buyer. 

Search proquest.com for the following articles and videos: o Who pays the price of brokerage? Transferring constraint through price setting in the staffing sector o Car buyers refuse to bite the excise carrot (despite the 8–10% discounts being offered to buyers o Developers sweeting deals to woo home buyers: One project enticing buyers with car deals, another with discounts o Group buying with bundle discounts: computing efficient, stable, and fair solutions o Learning prices for repeated auctions with strategic buyers o Luxury flat buyers push for deep discounts (Covid-19 impact: companies), buyers get more time, payment options too

13.4: Explain the relationship between cost and price when determining pricing. 

Search proquest.com for the following articles and videos: o Analysis of the relationship between cost, price, and profit in lignite extraction o Doing more with less: a symbiotic relationship between cost management and innovation o Analysis of relationship between cost management and sales price management: a study of the practices adopted by preserved food canning o Exploring the relationship between costs and quality: does the joint evaluation of costs and quality alter the ranking of Danish hospital departments o The relationship between transaction costs and savings in offshoring information technology by large United States companies

13.5: Discuss how learning curve analysis relates to materials purchase price. 

Search proquest.com for the following articles and videos: o Learning curves and learning spillovers within multinational enterprises: an empirical study o Behind the learning curve: an investigation of managing learning activities for quality and productivity improvement

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

o Integrating accounting and multiplicative calculus: an effective estimation of learning curve o The learning curve for labor hours for pricing o Aggregate planning with curve learning productivity 13.6: Explain how to implement various pricing methods. 

Search proquest.com for the following articles and videos: o WIPO publishes patent for ZTE for ―Pricing authentication system and pricing authentication method‖ o Pricing of exchange traded gold funds: Capital Asset Pricing Method o Business and law--Pricing products and services o Business--Plan of Action o Business--On the dotted line

13.7: State the difference between gross margin and markup. 

Search proquest.com for the following articles and videos: o Critical path announces 2005 quarter results: continued improvement in gross margins revenues and gross margins o JC Penney says Q2 gross margins ― to improve‖ Q/Q and FY14 gross margins ―to improve significantly‖ o Rollover o Canadian solar reports third quarter 2009 results and issues 2010 guidance: Q309 highlights o Sonosite reports record revenues and gross margins; U.S. direct sales grow 73% sequentially and 278% versus prior year o The Only Way is Up: Over optimism and the demise of the American five-and-dime store, 1914–1941

13.8: Explain how the price/cost analysis process can be used to effectively negotiation and protect against a competitive bidding trap.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Teaching Strategies a. Research Log. Documenting and commenting on their thought process, tools, search methods, and judgment criteria throughout all stages of their work. b. Reflection Paper. Learner can do online internet search on topics relating to purchasing and supply management. c. Casework Project. The learner will follow Instructor-written casework project guidelines. d. Discussions. Learners participate in discussions forum and critique at least two classmate’s response.

Suggested Exercises or Projects a. An in-depth analysis casework project in Purchasing and Supply Management. It will analyze the Purchasing and Supply Management process in a local company or organization. The casework project will be a team effort in collaboration with classmates.

The casework project will be done in phases (Report 1–5).

Additional Teaching Questions 1. What is a price/cost analysis? The written determination of fair and reasonable price requires that the price is acceptable to both the agency and the supplier considering all circumstances, which may include the degree of competition, market conditions, quality, location, inflation, value, technology, and unique requirements of the procuring agency.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

2. How would you do a price/cost analysis? I would approach a cost analysis thinking it could be used to evaluate the reasonableness of individual cost elements when certified cost or pricing data are required. Price analysis should be used to verify that the overall price offered is fair and reasonable.

3. Will old-fashioned marketing environment be effective in modern trend demand conditions?

4. Why is the pricing decision among the most important considerations in marketing?

5. What are the different philosophies that underpin the different approaches to price determination?

Discussion Questions 1. What are the components of pricing? What are the psychological aspects of pricing?

There are a number of fundamental elements to develop a pricing strategy. The areas to consider are costs, competitive pricing, and pricing goals.

The components of pricing are: Scope of work--it refers to the scope of the components. There include many questions like: how much does the component actually do? How much time does it take to develop such a component? For example, estimate how much it would take you to build it again after you know what it entails and the potential pitfalls; market--it refers to the market on which the product will be launched. It includes how common is a component like this one?

Niche components have higher value but lower popularity. One should also consider the competition--how many similar components are available on the platform; solution--it refers to the process of how complete a solution is the component? How well does it accomplish its

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

objectives? How flexible is it for use in different scenarios; quality of code--how maintainable is the code? Does it adhere to coding standards and is well commented? Can it be easily extended/integrated? This can be another selling point in your component profile, so make sure to point it out.

2. How is pricing included in the negotiation process?

Pricing is a major role when it comes to the negotiation process of the contract. Both parties need to agree on the price of the service that is going to be provided. As it states inside of the book in Chapter 8, the business professional must analyze the prospective buyer’s solicitation and develop a work breakdown structure. The price/cost analysis is based on the negotiation process because it’s important to know what the future is going to hold and or bring for the company that is going to agree with this contract. There are a few questions that need to be answered as the book provided for us. What resources will be needed to do the work? When will they be needed?

Along with doing the analysis you have to find out if the contract term and cost will benefit the company and or hurt the company long term.

3. Explain why price/cost analysis is frequently slighted by purchasing managers.

Some form of price or cost analysis should be performed in connection with every procurement action, regardless of whether the organization is a vendor or a subrecipient. The form and degree of analysis, however, are dependent on the particular subcontract or purchase, and the pricing situation. Determination of price reasonableness through price or cost analysis is required even though the procurement is source directed by the contracting officer of the sponsoring agency.

In some purchases, price analysis alone will be sufficient; in others, price analysis will be used to corroborate the conclusions arrived at through cost analysis. The form and degree of analysis

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

are dependent on facts surrounding a particular subcontracting or purchasing situation. The scope of price analysis performed and the particular techniques used will depend on whether or not cost analysis is done, as well as on such factors as type of product or service, dollar value, purchase method, and extent of competition. The words ―vendor‖ and ―subcontractor‖ used herein are interchangeable. Price analysis is the process of deciding if the asking price for a product or service is fair and reasonable (difficult), without examining the specific cost and profit calculations the vendor used in arriving at the price. It is basically a process of comparing the price with known indicators of reasonableness. When adequate price competition does not exist, some other form of analysis is required. Some reasons that could affect adequate price competition are: specifications are not definitive, tolerances are restrictive, or production capacity limits those eligible to bid.

4. What is the difference between cost and value?

Why is this important for the negotiation process? Most people would agree that there is a difference between cost and value and that, of the two, value is much more difficult to define.

The value of a child’s battery-operated radio in a modern home equipped with satellite TV and sophisticated Wi-Fi could be very small. When a snowstorm cuts the electricity supply and the small battery-operated radio is the only means of hearing news, its value is drastically increased.

In negotiation the buyer and seller have different points of view, therefore, they must be able to achieve a win-win which is difficult.

5. What is meant by competitive bidding?

A competitive bid is a process used in the procurement of goods and services. It is a process that entails submitting a sealed envelope detailing the price and terms of an offer. The recipient of the offer selects the competitive bidder that has delivered the lowest price or best terms.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Competitive bidding is considerably less common than negotiated bidding, the other main method by which issuing companies contract with underwriters. It is more common with municipal bonds issued by utility companies.

Companies undertaking a competitive bid process usually command valuation premiums over their peers. They typically operate in an industry where they have developed a significant competitive advantage and operate as a price leader.

6. What are the elements of price/cost analysis?

Price or cost analysis is performed in connection with every procurement action, regardless of whether the organization is a vendor or a sub recipient. The form and degree of analysis are dependent on the particular subcontract or purchase and the pricing situation. Determination of price through price or cost analysis is required even though the procurement is source directed by the contracting officer of the sponsoring agency. The form and degree of analysis are: Dependent on facts surrounding a particular subcontracting or purchasing situation; the scope of price analysis performed and the particular techniques used will depend on whether or not cost analysis is done, as well as on such factors as type of product or service, dollar value, purchase method, and extent of competition.

Price analysis is the process of deciding if the asking price for a product or service is fair and reasonable, without examining the specific cost and profit calculations of the vendor used in arriving at the price. It is basically a process of comparing the price with known indicators of reasonableness. When adequate price competition does not exist, some other form of analysis is required.

7. What is a learning curve?

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Why should a buying firm be concerned about the effect of the learning curve? Learning curve is a line displaying the relationship between unit production time and the cumulative number of units produced. Learning (or experience) curve theory has a wide range of application in the business world. Learning curves can be applied to individuals or organizations. Learning curve theory is based on three assumptions: (1) The amount of time required to complete a given task or unit of a product will be less each time the task is undertaken. (2) The unit time will decrease at a decreasing rate. (3) The reduction in time will follow predictable pattern. A buying firm should always include this variable in any calculation.

8. How is price/cost analysis related to the negotiation process?

The price analysis related to the negotiation is effective when applied to products that can be contrasted to other, ―similar‖ procurements. Essentially, the goal of this general analysis is to assess whether a price is reasonable, and this depends on the type of market where the supplier operates. Performing a price analysis typically involves a few additional key components, which include historical and market price. While cost analysis related to negotiation, during purchasing, there will be instances where a specific cost breakdown of a process or product is mandatory.

Cost analysis is a more complex strategy than price analyses, because it involves applying direct and indirect costs into formulas for what is essentially a comprehensive breakdown of the product. A cost analysis is also useful when a price quote cannot be accessed from the manufacturer directly and the procurement is not easily comparable to others or is considered ―unique. ―Additionally, when producing an item internally, this method may be applied.

9. What is meant by the learning curve phenomenon?

Learning curves are based on the premise that people and organizations become better at their tasks as the tasks are repeated. Learning curve effects are greatest in operations that have

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

considerable ―touch‖ labor, that is, when people in the production process frequently touch the product. Learning tends to be less in semi-automated processes, and it may be nonexistent in fully automated processes. There may be some ―learning‖ in certain sporadic processes, in the sense of a gain in efficiency, but few would argue that the methods discussed in this paper are suitable for modeling it.

10. What are the assumptions that drive learning curve theory?

The learning curve theory is based on three assumptions: (1) the amount of time required to complete a given task or unit of a product will be less each time the task is undertaken, (2) the unit time will decrease at a decreasing rate, and (3) the reduction in time will follow a predictable pattern.

Suggested Cases Case 3: Carter Systems Canada, Inc. Case 4: Case Construction, Company Case 11: The Kemper Engine Plant

Instructor Manual

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Chapter 14: Bargaining and Negotiations Learning Objectives and Resources 14.1: Compare distributive and integrative bargaining. 

Search proquest.com for the following articles and videos: o Trust and resilience in integrative negotiations: A quantitative study o Negotiation: Entrepreneurs’ value co-creation

14.2: Explain the psychological bargaining framework. 

Article: Sequential Bargaining in the Field: Evidence from Millions of Online Bargaining Interactions

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Search proquest.com for the following articles and videos: o Is only she a good bargainer? The effects of gender, bargaining behavior and product expertise on bargaining outcomes o Negotiation

14.3: Discuss the economic bargaining framework. 

Search proquest.com for the following articles and videos: o Bargaining power as an economic force o Bargaining and effectiveness of economic development incentives: an evaluation of the Texas Chapter 313 program o Framework for Democracy-Balancing Act o Making Ends Meet

14.4: Illustrate the effects of both economic and psychological aspects on the outcome of bargaining situations. 

Search proquest.com for the following articles and videos: o Bargaining costs and rational behavior: A simple model: Bargaining games costless bargaining games o Nash bargaining theory (now published in the economics of bargaining

14.5: Demonstrate how to plan for a formal negotiation.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

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Search proquest.com for the following articles and videos: o Negotiation science; recent finding from the Harvard University provides new insights into negotiation science o Local teens learn social skills, art of negotiation: Teens learn social skills, art of negotiation o Key part of negotiating is running into the deadline o Business and the law--the business discount o Eight days in Tehran

14.6: Describe a richer conceptual model for buyer–seller interactions. 

Search proquest.com for the following articles and videos: o Sales Connection, The making connections o Business--Full service o Sales connection--The right choice o Business and the law--The Business discount o Sales connection, the Step-by-Step

Teaching Strategies a. Research Log. Documenting and commenting on their thought process, tools, search methods, and judgment criteria throughout all stages of their work. b. Reflection Paper. Learner can do Online Internet search on topics relating to supply management. c. Casework Project. The learner will follow casework project guidelines. d. Discussions. Learners participate in discussions forum and critique at least two classmate’s response.

Suggested Exercises or Projects: a. An in-depth analysis casework project in Purchasing and Supply Management. It will analyze the Purchasing and Supply Management process in a local company or organization. The casework project will be a team effort in collaboration with classmates.

The casework project will be done in phases (Report 1–5).

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Additional Teaching Questions Students should be asking the following questions: 1. What is a bargain? The definition of a bargain is an understanding between two people on the cost of goods or services. If someone agrees to sell a product at 10% off as long as the other person orders at least 12, that is an example of a bargain. . . . A purchase made at a sale is an example of a bargain.

2. What is the psychology involved? Bargaining is the back and forth process of negotiation in order to make an agreement between two parties. . . . In psychology, bargaining is used in the Kübler-Ross model which is also known as the five stages of grief (denial, anger, bargaining, depression, and acceptance).

3. What are the skills used in negotiation? These skills include (1) effective verbal communication (see our pages: verbal communication and effective speaking), (2) listening, (3) reducing misunderstandings is a key part of effective negotiation, (4) rapport building, (5) problem solving, (6) decision making, (7) assertiveness, and (8) dealing with difficult situations.

Discussion Questions 1. Explain how learning curve is used.

The analytical tool which is used to estimate the cost and of doing the repetitive task faster and in less price. It is applied in the situation where we have to calculate the rate of improvement of the person to reduce the price of the product by his learning and repetitive process. It helps in estimating the approx. time and cost for performing a task. Learning curve analysis is used in negotiation.

2. When and how is negotiation used, and what can be negotiated?

We use the rough estimates while applying the learning curves because it depends on various factors. Every person is different in itself. So the skills and capabilities of everyone are different.

It is difficult to identify in starting. Secondly, the other environment factors related to light, air, seating and standing arrangement etc. also effect on the learning and performing capacity of the individual.

3. How do you prepare for negotiation?

Hold a meeting within the organization, this will ensure that every company member or primary stakeholders are involved and they are participating hence having a collaborative negotiation process. Discuss what is needed, what is best for both external and internal stakeholders, for example, if the intention of negotiation process is gain, a competitive advantage of the company then the process should follow that direction implementing strategies on how to achieve success.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Ensure the process is compromising and it can be accommodative to all parties involved at it, because at the end of the day, this is the intention of negotiation to settle disputes and make peace.

4. What is meant by distributive bargaining?

Distributive bargaining is a type of bargaining that applies when one party stands to gain, then the other party must give up. Distributive bargaining can also be called zero-sum or win-lose.

What is meant by integrative bargaining? Integrative bargaining two parties with areas of mutual concern and complementary interests.

5. What is meant by psychological bargaining?

This is associated with the Kübler-Ross model. A person usually tries to avoid a bad situation by trying to bargain with the end result. The bargaining factors include body posture, body language, anchoring, and gain/loss framing. What are the psychological bargaining factors? The psychological factors include general bargaining disposition, payoff systems, social relationship with opponent, social relationship with significant other, and other situational factors.

6. Discuss the various payoff systems.

The actual payoff system that bargainers face in an interaction must certainly be major determinant of bargaining behavior. Several different factors related the payoff system have been studied. These include profit, the cost of time, the cost of failure, added benefits, quantitative or qualitative variations, and penalties. A good example is the Nash Prisoner Dilemma.

7. Discuss the characteristics of economic bargaining.

A determination of the desirable outcome of a negotiating process. It uses a method of fair division whereby the circumstances of one cannot be made better by worsening the circumstances of another. Quantities are determined in a fashion to maximize joint profits.

Suggested Cases Case 1: AMD Construction Company: Negotiating the Old-Fashioned Way Case 3: Carter Systems Canada, Inc. Case 21: Tom & Jerry (T&J) Construction, Inc.

Instructor Manual

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Chapter 15: Purchasing Transportation Services Learning Objectives and Resources 15.1: Explain the trade-off between cost, reliability, and speed in determining which mode of transportation to purchase. 

Search proquest.com for the following articles and videos: o Taking stock: Purchasing and Inventory Control o Yes, there is a toilet paper shortage. No, you do not need to stock up o The Oil Kingdom o Truck scheduling at cross-docking terminals: a follow-up-state-of-the art review

15.2: Compare purchasing examples in differing market segments.

15.3: State the relationship of NAFTA to imports and exports between the United States and Canada and Mexico. 

Search proquest.com for the following articles and videos: o Presidente Fox (Mexico’s President) o NAFTA o The Pros and Cons of NAFTA o NAFTA and the Campesinos: The impact of NAFTA on small scale agricultural producers in Mexico and the prospects for change

Teaching Strategies

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Relatively, the content of this chapter is more conceptual than the other chapters’ content. This chapter revolves around how information sharing, supply chain practices, and environmental dynamism interact to generate performance enhancements. Thus, it is essential that the concepts of information and its sharing are clearly explained. Without clear understanding, the interaction is difficult to fully comprehend. In addition: a. Research Log. Documenting and commenting on their thought process, tools, search methods, and judgment criteria throughout all stages of their work. b. Reflection Paper. Learner can do online internet search on topics relating to supply management. c. Casework Project. The learner will follow casework project guidelines. d. Discussions. Learners participate in discussions forum and critique at least two classmate’s response.

Suggested Exercises or Projects: a. An in-depth analysis casework project in Purchasing and Supply Management. It will analyze the Purchasing and Supply Management process in a local company or organization. The casework project will be a team effort in collaboration with classmates.

The casework project will be done in phases (Report 1–5).

Discussion Questions 1. What is transportation’s role in purchasing?

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

In purchasing transportations role is to provide the service between supplier and the firm within a given time frame in order to keep the supply chain process moving efficiently along with the accounts payable process. With deregulation it encourages increased competition better overall product costs, and better transportation services for firms.

2. List the alternative transportation modes. Give examples of each mode. 

Road transport: This type of transport is suitable for companies which want fast delivery.

For example, if we want to transport goods from Mississauga to Maritimes, road transport is the best choice, because it is cost-effective as it allows loading and unloading to be significantly low compared to other methods.

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Rail transport: This means of transport is the dependable mode as this mode is not affected by the harsh weather conditions. Transport will run in the snow, fog, and other conditions that would otherwise delay shipment. They also have large carrying capacities that provide employment opportunities to both skilled and unskilled workers. The military uses this a lot . . . also used for chemicals, automobiles, and so on.

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Marine transportation: They are famously slow and fit for those companies which want to ship bulky products that are not in a rush. They are cheaper than road transport and are not affected by harsh weather conditions. Shipping of oil is a good example.

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Air transport: This means of transport is extremely useful, and it is convenient and fast. It is the fastest option for freight and is best suited for perishable goods.

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Intermodal transportation: Every above means of transport has its pros and corns. So combining the pros of different modes is intermodal transportation. Door to door domestic intermodal transportation is a widely used alternative method to ship truckload by combining two modes of transport. Good intermodal saves up to 10–15% off truckload lanes. Nowadays, this method is the preferred method to deliver the product on time without increasing the lead time.

3. What transportation mode is most appropriate for shipping furniture from North Carolina to Texas?

What is the most appropriate mode for shipping pharmaceuticals from Columbus, OH, to Los Angeles? Road transport is a very important link in logistics activities. It extends the delivery services for air and maritime transport from airports and seaports. Also road transport is a classic method of freight carriage and remains a versatile option today. Road transport means transportation of goods and personnel from one place to the other on roads. Road is a route between two destinations, which has been either paved or worked on to enable transportation by way of carriages. For pharmaceuticals, airfreight was their preferred mode of transit for climate sensitive medicines. In survey research, which gathered insights from 150 pharma logistics professionals, saw 30% of respondents selected refrigerated trucks and 13% depict ocean freight as their mode of choice. In the report respondents advance to detail key strategies for tackling time on the tarmac excursions and key solutions to avoid breaks in the cold chain when moving medicines.

4. What are the important carrier selection criteria? What factors should be considered?

Shipping weight per cubic foot: liability for insurance; perishability; liability for damage to other commodities being transported; liability for spontaneous combustion or explosion; susceptibility

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

to theft; value per pound in comparison to other articles; ease or difficulty in loading/unloading; excessive weight/length, and so on.

5. What factors are considered when rating freight? How are rate negotiations conducted?

The main factors include mode of transportation, weight, size, distance, points of pickup and delivery, and the actual goods being shipped. Rate negotiation should include the idea of the more freight you transport, the cheaper it is. Also, the purchaser needs to understand the complicated carrier rules tariffs as they apply to pricing.

6. Why is the negotiation process critical to purchasing transportation services?

The negotiation process is very critical to purchasing transportation services, because it involves more a fixed cost to reach out to final procurement pricing. So the fixed costs can be negotiated to the least possible stage; the final price involves least of the variable costs, so it is very important to minimize the transportation services price; various services like logistics, which involves very much intangible elements, like high competitions, organization of process of transportation; lead time of inventories can be reduced to lowest level which makes the transportation prices more negotiable; due to current innovations and development, the learning curve of transportation costs has been going down which invites for more negotiation in transportation prices.

7. What is meant by the term third-party relationship?

There are numerous challenges that buyers face when attempting to transfer logistic activities to a third party. Therefore, the decisions must include all the parties that will be affected by the third part relationship. In developing a negotiation strategy, the shipper must identify the type of relationship desired with the third party. What’s more, is like any other buying situation, the shipper must establish a set of desires (costs) and demands (services) expected from the carrier.

The first step is to prequalify a set of carriers that will be offered the opportunity to be considered as a third-party provider.

8. What is meant by freight terms?

Costs--Who pays the freight costs for each leg of transit; risk--Who covers insurance and/or is responsible if the goods are damaged in transit; taxes and fees--For international shipments, who covers any customs duty or taxes; title--Who owns or has title to the goods? The title is not necessarily indicated by the shipping terms and can be noted separately on the commercial document.

9. What is a bill of lading?

The bill of lading is a required document to move a freight shipment. The bill of lading (BOL) works as a receipt of freight services, a contract between a freight carrier and shipper and a document of title. The bill of lading is a legally binding document providing the driver and the carrier all the details needed to process the freight shipment and invoice it correctly.

10. What does F.O.B. mean?

FOB stands for ―free on board‖ or ―freight on board‖ and is a designation that is used to indicate when liability and ownership of goods is transferred from a seller to a buyer. Free on board indicates whether the seller or the buyer is liable for goods that are damaged or destroyed during shipping. When used with an identified physical location, the designation determines which party

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

has responsibility for the payment of the freight charges and at what point title for the shipment passes from the seller to the buyer.

Suggested Cases Case 18: Philadelphia Aircraft Equipment, Inc.

Instructor Manual Chapter 16: Equipment Acquisition and Disposal Learning Objectives and Resources 16.1: Explain the process involved in purchasing capital equipment including cash analysis and methods of economic evaluation. 

Search proquest.com for the following articles and videos: o Acquiring capital equipment through shared risk agreements o Procuring capital equipment o A smart buyer’s guide to capital equipment purchasing/leasing o Capital equipment investment o Strategic asset management: alternatives for capital acquisitions

16.2: Name some strategies currently used to dispose of capital equipment. 

Search proquest.com for the following articles and videos: o Managing capital equipment from buying to disposal covered in American deals o Unicorn capital partners limited disposal of plant and equipment o E-waste management and sustainability: a case study in Brazil o Information technology hardware company pledges to make disposals

16.3: Discuss the advantages and disadvantages of purchasing new versus used equipment. 

Search proquest.com for the following articles and videos:

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

o For used equipment shopper’s it’s the best of times; U.S. columnist says the interest in used machinery contrasts a slump in new o Children’s medical equipment company to repay taxpayers for providing used equipment while billing for new equipment o Buyer beware: used equipment purchases can be profitable, if they are well informed o A guide to purchasing used chromatography equipment 16.4: Demonstrate how to analyze a lease-versus-purchase decision. 

Search proquest.com for the following articles and videos: o Viewpoints and communications: a proposed procedure for facilitating the analysis of lease–purchase decisions by consumers o Lease or purchase? A spreadsheet analysis o Lease versus purchase decisions: a survey of current practice o Go the extra mile

Teaching Strategies For this chapter, it is recommended that the emphasis should be on describing the Capital Equipment Acquisition Process framework and how various planning levels interact with each other. In addition, it should be clear how the financial management is used in this process. For example, cash flow analysis, economic evaluation, payback, and average rate of return, net present value, internal rate of return, profitability index, and so on. In addition:

a. Research Log. Documenting and commenting on their thought process, tools, search methods, and judgment criteria throughout all stages of their work. b. Reflection Paper. Learner can do Online Internet search on topics relating to supply management. c. Casework Project. The learner will follow casework project guidelines. d. Discussions. Learners participate in discussions forum and critique at least two classmate’s response.

Suggested Exercises or Projects

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

a. An in-depth analysis casework project in Purchasing and Supply Management. It will analyze the Purchasing and Supply Management process in a local company or organization. The casework project will be a team effort in collaboration with classmates.

The casework project will be done in phases (Report 1–5).

Discussion Questions

1. What role does purchasing play in capital equipment purchasing?

Purchasing and supply function does not necessarily play a dominant role in the purchasing of capital equipment--mainly provide support--give advice and promote supplier relationships: 

provision of information: provide info on availability of suppliers, new equipment, price of capital equipment, and so on

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evaluation and selection of suppliers: contribute by investigating potential suppliers including financial position, management abilities, technical abilities, reputation, after-sales services, and so on. AND make recommendations on local, national, international suppliers/reciprocity AND help compile supplier assessment

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negotiations with suppliers and contractual conditions: help prepare negotiating strategy and define the contractual conditions of the purchase

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coordination and administration of the purchase: act as central point where specific purchases are analyzed and considered, assume admin of the purchase, and execute the purchasing transaction

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

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specific purchases: purchasing can assume control of standard equipment with relatively low unit value

2. Discuss the various steps in the capital equipment acquisition process.

The acquisition process is a process comprised of several steps that will result in the best value for the customer. Simply put, best value is defined as ―matching the right solution to the customer’s requirements at an affordable price.‖ To achieve this, it is critical that the contracting team know the customer’s needs, establish criteria for proposed solutions, understand the marketplace and business environment, and develop an acquisition plan. Planning an acquisition is very much a team endeavor, often times involving and integrated product team composed of professionals from various career fields, who each hold a stake in the acquisition process. Their expertise is imperative to a successful procurement. Acquisition must first begin with market research which is conducted through various sources such as catalogs, trade shows, periodicals, internet sources, knowledgeable individuals in the industry, and so on. It is an ongoing process that lays the foundation for an acquisition as it is used to collect information about the marketplace in order to meet the customer’s needs for supplies or services.

The second step is to evaluate criteria based on how well each offerer’s approach meets the requirements for the request for proposal and aids in identifying the proposal’s strengths and weaknesses so that in the end, the selected proposal will be the one to offer the best value to the company. Evaluation criteria include a broad assessment of things such as cost, quality, technical approach, expertise, management capability, past performance, and so on. The third step is to determine the source selection organization (SSO). The source selection authority (SSA) must be at a level fully accountable for the results of the decision and knowledgeable enough to understand the factors necessary in determining the best value. The two organizational

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

approaches consist of the normal source selection and the major source selection. The approach used in the majority of contract awards is the normal source selection, which is comprised of the contracting officer who may make the award decision with the help of technical/management evaluation and price/cost analysis. Next, a solicitation is issued. The solicitation communicates government requirements to potential offerers. It should be consistent, clear and concise and provide an understanding of what is being bought, how it is being bought and how the selection will be made. It consists of work requirements; terms and conditions; evaluation factors and subfactors; the relative importance of factors and subfactors; instructions to offerers also addressing if discussion will be made upon award; and other exhibits and attachments. The solicitation should clearly state the basis on which a source is selected. It serves as the vessel to explain to offerers the ground rules the government will use in selecting the proposal of best value.

The fourth step is evaluating the proposals. The evaluation process examines each proposal against the factors and subfactors and the requirements stated in the solicitation. It assigns a rating along with supporting narrative, which is the core of the evaluation process. This process also assesses the offerer’s ability to perform. Other things to be evaluated include, price/cost, past performance unless it is determined inappropriate to do so, identifying any ambiguity in language or inadequacies, identifying strengths and weaknesses as well as risks.

The consensus means that each member must come to a meeting of the minds. After applying their expertise and knowledge of the solicitation, evaluating all the factors and risks involved, the outcome should be to select the proposal that gives the government the greatest advantage given its value.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

The fifth step is to award a contract with discussions or without discussions. Sometimes discussions with offerer’s after receipt of proposals is necessary to better understand the proposal. An award without discussions is likely to result in best value as things are clearly stated and no clarification is needed. This is the preferred approach.

The sixth step is the selection decision. This is where the SSA compares all competing proposals to each other. If using the lowest price technically acceptable process, the SSA compares proposals based on price alone considering they meet the requirements for factors and subfactors, then the proposal with the lowest cost/price is then selected The seventh step is to notify the successful and unsuccessful offerers, Congress and the general public must also be informed. A post award orientation brings together the key individuals who were involved in the pre award phase with those in the post award phase. If different personnel will be taking over the contract post award, this gathering provides the opportunity to transition the contractual duties and obligations.

In conclusion, the acquisition process is a tedious process where the pipeline of events requires the expertise of many people from many different career fields. It involves ongoing research to evaluate the market and to ensure all proposals are given fair judgment based on evaluation of criteria and customer needs. The end result should always reflect the best value for the Government.

3. Explain the concepts underlying (a) payback analysis, (b) average rate of return, (c) net present value, (d) internal rate of return, and (e) profitability indexes.

The Payback period can be seen as the most simple investment appraisal technique. The underlying tool mentions the time duration it takes for a given project to cover the initial project

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

cost by generating adequate cash flows. The method of accounting rate of return is used to assess the expected profit from an underlying investment. This method articulates the undue net accounting profit coming from the underlying investment in a form of a percentage.

Average accounting rate of return method is also known as the return on capital or the return on investment. The formula that is used to calculate average accounting rate of return is as follows: ARR= (Average annual profit after tax/Initial investment) × 100. The IRR method is based on discounting rate, bringing future cash flows (discounted) at par value with reference to the initial investment. Conversely, IRR is the ―discounting rate at which the company will neither make loss nor make a profit.‖ IRR is calculated using the trial and error method. The profitability index details the amount earned by company on per dollar of the investment. It’s calculated by finding present value of the expected future cash flows, which is further divided by initial cash outflow giving the project’s profitability index (PI). The benefits of using PI method is that it’s very straightforward to understand and calculate.

NPV is an aggregated sum of discounted cash outflow and inflow incurring in future as detailed by the project/investment. Usually, the discounting factor used in calculating of NPV is the weighted average cost of capital (WACC). To elaborate, WACC is a discounting factor used in calculation of NPV for discounting the future cash flows of a project. In its true essence, the tool of NPV calculates a sum of net cash flows after discounting them using the minimum required rate of return. After this the initial investment is deducted to find the ―net present value.‖ The decision making criteria under NPV method is that if the NPV is negative, we the project is not feasible, and if it’s positive then project is viable and feasible.

4. Discuss the reasons why a company may want to invest in new equipment instead of used equipment.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

It may not be cost-effective to procure new equipment. Depending on the purpose and expected use of the purchased equipment, it may be more cost-effective to buy used equipment.

5. What are the advantages and disadvantages of leasing as a financing option?

The advantage of finances versus leasing is that financing gives you the option of not having to pay interest on a loan while leasing does not. The disadvantage of financing versus leasing is that financing involves paying high down payments and high monthly payments while leasing requires the opposite.

6. What are the evaluation criteria for the lease-versus-buy decision?

There is a tax advantage of the leasing company has a high tax liability; thus buying equipment and leasing it to contractors is a profitable business. Since the equipment still must be used in the construction industry, the company leases the equipment it owns to contractors. On the other hand, many contractors have a higher after-tax cost for buying capital equipment than those faced by leasing company, allowing the leasing company to pass some of its savings on to contractors and still make a profit.

Suggested Cases

Case 12: McGruder Pavers, Inc. Case 17: Natural Construction, Inc. Case 19: Sage Imaging Center, Inc.

Instructor Manual

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Chapter 17: Health Care Purchasing and Supply Management Learning Objectives and Resources 17.1: Identify the complexities a manager may encounter when purchasing in the health care industry. 

Search proquest.com for the following articles and videos: o Needles o Under the influence o American business and Health Care Reform: Business and policy process business opinion on healthcare reform business ad managed competition business disagreements over health care o Healthcare reform: learning from international experience/evaluating the National Health Service/primary care: understanding health care and demands o Petroleum and health care: evaluating and managing health care vulnerability to petroleum supply shifts

17.2: Compare the health care supply chain with the traditional industrial supply chain. 

Search proquest.com for the following articles and videos: o Health care down as coronavirus disrupts global drug supply chain health care roundup o Latest innovative solutions for the health care industry to be showcased at RFID in health care: RFID Journal’s ninth event for hospitals o Keep celebrating supply chain professionals after National Care Supply Chain Week: WEST CMR offers incentives o The global healthcare supply chain management market size is expected to reach US$3 billion by 2025

17.3: Identify the various supply management methods in the health care field. 

Search proquest.com for the following articles and videos: o Integration of vaccine supply chains with other health commodity supply chains: a framework for decision making o Supply chain: partnership sourcing smooth supply chains dynamics o Can we defend the defense supply chain? Lessons learned from industry leaders in supply chain management o Supply chain practices and challenges: Case studies of four supply chain

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

o Demand side and supply side of healthcare supply chain 17.4: Explain how inventory control is accomplished in the health care field. 

Search proquest.com for the following articles and videos: o Inventory management using matrix analysis and inventory index in an oncology pharmacy of a tertiary teaching hospital o Inventory management with statistical process control: simulation and evaluation o A structured review of quantitative models of the pharmaceutical supply chain o An exploratory framework of the role of handling inventory and its management

17.5: Identify the current trends in health care purchasing.

17.6: Illustrate the capital equipment acquisition process. 

Search proquest.com for the following articles and videos: o Planning, growth, and the efficient use of capital

17.7: Show how various health care plans are evaluated. 

Search proquest.com for the following articles and videos: o State substance abuse and mental health managed care evaluation program o Economic incentives to promote innovation in healthcare deliver o Toward a national survey: evaluation of the CABHS and MHISP instruments o The employee health care value survey: round one

Teaching Strategies a. Research Log. Documenting and commenting on their thought process, tools, search methods, and judgment criteria throughout all stages of their work. b. Reflection Paper. Learner can do online internet search on topics relating to supply management. c. Casework Project. The learner will follow casework project guidelines. d. Discussions. Learners participate in discussions forum and critique at least two classmate’s response.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Suggested Exercises or Projects: a. An in-depth analysis casework project in Purchasing and Supply Management. It will analyze the Purchasing and Supply Management process in a local company or organization. The casework project will be a team effort in collaboration with classmates.

The casework project will be done in phases (Report 1–5).

Additional Teaching Questions 1. How is revenue generated in health care supply chain?

2. Why has the healthcare supply chain consistently lagged behind traditional industrial supply chain efficiencies?

3. Why have hospital systems been challenged to maintain profitability?

4. What are the main differences between hospital supply chain and industrial supply chains?

5. How would you as a professional supply chain manager improve the hospital supply chain?

Discussion Questions 1. Discuss the purchasing process for supplies and services in the healthcare field.

There are lots of competing suppliers. They cannot manipulate consumer demand through advertising or through control of special and hard-to-get knowledge about those goods and services. They are price takers: this means that they cannot stop consumers from getting and evaluating comparative price information for the same goods and services. There are so many of these suppliers that they cannot collude (conspire with each other) to keep prices artificially high.

2. Discuss the purchasing process for capital acquisition in the healthcare field.

Total cost of ownership (TCO) is a financial model used to ensure all associated costs are considered over the life of each asset. Ownership brings purchase costs but it also brings costs for installing, operating, upgrading, and maintaining these assets. Hospitals use TCO analysis to support their acquisition and planning decisions. TCO also ensures that procurement gets the best value for their money. Total cost of ownership analysis is a method to uncover, before the purchase, all of the front-end costs in addition to the hidden costs of ownership. Because every equipment purchase is different, what is included in the TCO calculation will vary. Hospitals and other healthcare organizations can save money by looking beyond initial purchase price points by focusing on the hidden costs of equipment performance and improved workforce productivity.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

3. How does supply management work in the health care industry?

Healthcare goods and services are often complex, hard to evaluate, and difficult to compare. We discussed part of this aspect of these goods and services above, when we considered issues of risk and uncertainty. Even services that seem relatively simple to understand may involve disagreements by physicians and hospitals about the relative quality of the good or service or disagreements about whether such comparison is even valid or possible.

4. Define group purchasing in the healthcare field.

Group purchasing organizations (GPOs) are intermediaries that help healthcare providers such as hospitals, nursing homes, and home health agencies realize savings and efficiencies by aggregating purchasing volume and using that leverage to negotiate discounts with manufacturers, distributors, and other vendors. Some GPO characteristics are GPOs negotiate contracts with vendors. Vendors pay GPOs administrative fees based on sales fees finance operations Surplus fees are distributed to owners or used to finance new ventures GPOs vary by size, scope of service, and ownership type. GPOs do not maintain inventories or engage in other aspects of supply chain management GPO-contracted purchases amounted to US$500B in 2008.

5. What are the various health care plans available to employers and employees?

Healthcare benefit choices are numerous, and employers will want to carefully examine the different aspects of insurance options available. Health insurance plan types include health maintenance organizations (HMOs), traditional fee-for-service indemnity insurance, preferred provider organizations (PPOs), and major medical policies. The popularity of health savings accounts (HSAs) is steadily growing as a health care benefit option. Dental and vision care insurance can also be provided as a separate health care benefit by employers.

6. What is the trend for purchasing health plans? (See Appendix A) Many health systems have embarked on integration efforts of their own to expand their networks, often across a broad geographic area. The goals are to compete with new entrants, achieve scale, succeed in APMs, and deliver value to payers, patients ,and participating providers. For instance, more than % of health system executives have expressed interest in acquiring outpatient, retail, or home health capabilities to expand their footprint and broaden their access points.

7. What percentage of the GNP is accounted for by the healthcare sector?

In the year 2018 it was 17.8%. It is projected to be by the year 2027 one fifth of the U.S. GNP.

Suggested Cases Case 13: Medical Laser Equipment, Inc. (C) Case 19: Sage Imaging Center, Inc.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

Case 20: Simpson Hospital Systems

Instructor Manual Chapter 18: Sourcing Professional Services Learning Objectives and Resources 18.1: Explain the service sector characteristics and strategies. 

Search proquest.com for the following articles and videos: o All in the family o President Obama o S&P 500 Communication Services Sector Outperforms: Here’s Why. o Knowledge intensive business services (KIBS) and their role in the knowledge-based economy. o Financial model of pricing decisions support in SMEs of the restaurant sector in Mexico.

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In the last 45 years, researchers and writers in the field of operations management have noted the differences and similarities between characteristics of operations in the service sector and in manufacturing. In pure service businesses, any transfer of a physical or concrete product is incidental to the service--for example, the written report of a management consultant. Pure service businesses include architects, universities banks, airlines, accounting firms, law firms, plumbing repair companies, motion picture theaters, and management consulting firms. One size strategy does not fit all for service businesses.

18.2: State the trends impacting the outsourcing of services domestically and globally. 

Search proquest.com for the following articles and videos: o Insourcing as a New Trend in Global Business o The Peculiarities and procedures of the transition to outsourcing by construction companies in Ukraine.

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The service sector has become the engine of growth for the American economy, fundamental to the health and prosperity of U.S. businesses, large, medium, or small.

Service companies engaged in every type of commercial activity--manufacturing, transportation, energy and utilities, retail and wholesale trade, finance and

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

government--rely on the edge that service firms offer to be integral to their business success.

18.3: State challenges that may arise in managing outsourced services in terms of complexity, coordination, power, and dependence. 

Search proquest.com for the following articles and videos: o Outsourcing efficiency o Reshoring in Manufacturing and Services o Andy Rooney’s Take on Outsourcing o Out of India (Outsourcing)

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The service sector accounts for about 80% of U.S. economic growth. Notwithstanding the prevalent role that the service sector now plays in nearly every industry, many firms struggle to realize the performance benefits they sought when deciding to outsource.

18.4: Identify the activities involved in procuring professional services. 

Search proquest.com for the following articles and videos: o Performance-based service acquisition o Accessing external expertise o The value of value co-creation: empirical evidence from B2B services.

Teaching Resources This chapter deals with the phenomenon of outsourcing which has been popularized over the last few decades. While the trend of outsourcing previously domestic business functions including manufacturing has been on the rise, the reality is not as bright as it is commonly known. The chapter focuses on describing the hidden costs of outsourcing and the difficulties in obtaining benefits from outsourcing a business function. Outsourcing by definition is the complete transfer of a business process that has been traditionally operated and managed internally to an independently owned external service provider. Thus, the outsourcing entity loses the ability to perform that business function permanently without serious reinvestment to gather the people, facilities, equipment, technology, and other assets needed to perform the function.

The expected strategic benefits of business process outsourcing for the outsourcer are cost minimization and the opportunity to refocus on one’s core competencies. However, the reality is that 20–25% of all outsourcing relationships fail within 2 years. A significant cause for failure is the hidden costs of outsourcing that initially go unnoticed because of the lack of strategic assessment and commitment on the part of the outsourcer. In regard to outsourcing, organizations should concentrate on developing a few core competencies and strategically outsource noncore activities. In order to approach outsourcing and obtain its benefits, the chapter recommends a process of outsourcing consisting of the following activities: strategic evaluation,

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

financial evaluation, vendor search and contracting, transition to the external sourcing model, and relationship management. The chapter also describes how control and coordination costs influence the manner in which the outsourcing service provider is managed by the outsourcing An emphasis should be on the fact that outsourcing indicates a total transfer which differentiates it from traditional buy situation. It may be effective to use examples to describe this situation and imagine what would need to be done to bring back an outsourced function in-house. In addition, special attention should be given to breaking preconceptions regarding outsourcing as living in the age of outsourcing may have created subconscious bias towards the economic effects of outsourcing. Emphasis should be put on the fact that the benefits are not a given but only the result of careful evaluation of the business case and only when several factors align in the right manner.

The purchasing of professional services is gaining exceptional attention. Thomas discussed growth strategies for service operations and how these strategies were different from those for manufacturing operations. The scope of work (SOW) is the area in an agreement where the work to be performed is described. The SOW should contain any milestones, reports, deliverables, and end products that are expected to be provided by the performing party. The SOW should also contain a time line for all deliverable.

The management of the project is the last line of defense. If the SOW is adequate, the right contractor is selected, and the ultimate price is reasonable, then a good management effort will secure the project. A poor management effort will undo all three preexecution achievements.

On the other hand, if the project is in trouble when the execution starts, a good project management effort can bail it out, and conversely, a poor effort will put the final nail in the coffin.

Additional Teaching Resources a. Research Log. Documenting and commenting on their thought process, tools, search methods, and judgment criteria throughout all stages of their work. b. Reflection Paper. Learner can do online internet search on topics relating to supply management. c. Casework Project. The learner will follow casework project guidelines. d. Discussions. Learners participate in discussions forum and critique at least two classmate’s response.

Suggested Exercises or Projects: a. An in-depth analysis casework project in Purchasing and Supply Management. It will analyze the Purchasing and Supply Management process in a local company or

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

organization. The casework project will be a team effort in collaboration with classmates.

The casework project will be done in phases (Report 1–5).

Discussion Questions 1. Why are organizations buying more professional services? Some companies prefer to buy professional services or outsource their major sectors to professionals for many reasons. Some of these reasons would include: Affordability: Outsourcing is very beneficial since an organization only buys the only specific services it requires for the time stated. This facilitates availability of top-notch skills at reasonable cost since an organization’s needs are pooled with other companies to create the resource pool they need (Subba, 2010).

Efficiency and effectiveness: professionals taken in by organization mostly remain focused on completing the duties assigned to them. This ensures employment of ethical practices, accuracy, and efficiency in the fields assigned to them.

Motivation: buying professional services helps to bring together competent and experienced people. This allows organizations to reflect and consider opportunities, setbacks, and circumstances from different perspectives that otherwise may have gone overlooked (Subba, 2010).

Time saving: Use of professionals to carry out certain duties enables an organization to accomplish its goals faster since it implies availability of better tools, customs and practices.

2. What are some of the key differences between buying services and buying OEM goods? The term original equipment manufacturer (OEM) refers to companies that make products for others to repackage and sell (Richman, 2011). The major differences between buying services and buying OEM products are generally based on quality received. OEM products, in most cases, come along with warranties. On the contrary, few or no services have warranty. Warranty ensures that the expected quality and standards are met.

Buying services is also noticeably different from buying OEM goods since services are never branded. OEM goods are usually branded in a way that from a far, one can easily associate a certain good with a certain manufacturer. This ensures allocation of the best suppliers who are renowned for their superior commodities.

One of the most apparent differences between buying services and buying OEM goods is that the latter involve tangible transactions unlike the previous. Some services lack observable impacts that can be used for ranking from other potential consumers. It also becomes hard to convince somebody how one received a certain service. On the contrary, goods can be readily available for prove. Such a difference makes a significant variation in situations where expenses are to be refunded.

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

3. How are governmental megaprojects procured? Governmental mega projects can be bought through various methods such as sealed bidding, contract negotiation, consolidated purchasing programs, among others. Sealed bidding implies to the situation where the government contracts competitively when its requirements are precise, accurate, and complete. The sealed bid process uses the invitation for bid technique to facilitate the purchase of the mega-projects.

Typically, an IFB includes a description of the project to be purchased, instructions for preparing a bid, the conditions for purchase, execution, delivery, payment agreement, contract clauses to be included, and the deadline for submitting bids (Conway-Jones, & American Bar Association, 2012). All the sealed bids are publicly perused at the purchasing office in accordance to the time stipulated in the invitation. All bids for the mega projects are evaluated and recorded transparently. The low bidder who is determined to be responsive to the government's requirements is awarded the contract by the agency.

In other instances, when the value of a government contract is above US$100,000 and when it requires a highly technical project, the government may issue a request for proposal (RFP) (Conway-Jones, & American Bar Association, 2012). In a RFP, the government petitions for its project of choice and requests for tenders from potential contractors with their set plan to accomplish that appeal and their preferred price. After submission, proposals submitted are subjected to negotiation.

4. How are megaprojects managed? What is meant by contract administration? Early planning and organization of ingredients required for success: Mega-projects implies a lot of financial backup, increased complexity, and hence increased risks and threats. A slight error can noticeably cause a lag in the implementation of the project. Adequate planning implies setting a course for the project, planning on equipments, manpower, schedule and cost estimates, project delivery strategies, among many more (Subba, 2010). Also: Stakeholder communication and project controls integration: A mega- project can be well managed through appropriate communication strategies. Crucial information regarding each phase of the project is required to help alleviate potential hindrances. Such information would include specific events and occurrences such as outages and safety statistics (Cambridge Educational (Firm), Films for the Humanities Sciences (Firm), & Films Media Group, 2009).

Continuous enhancement of project success prospect: This involves addressing potential risks detected. Additional information is needed to appropriately manage a scheme, like tracking the vital course across diverse projects. Quality checks on the planning outcomes also help to evaluate and manage mega-projects to ensure quality and successful completion of projects.

There should also be continued research undertaken to ensure that the choices made match up to the recent and newly set standards.

5. What are global sourcing trends? Give at least three real-world examples from the internet.

Global outsourcing is empowering business without boundaries in a border less world. As undertakings think global, their outsourcing models have changed to take action accordingly.

Outsourcing is no more only a fleeting snappy fix to accomplish cost lessening. Global outsourcing utilizes a mix of on location, seaward and offshore outsourcing answers for

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

accomplish key business targets for the outsourcing organization. Critical trends, as described beneath, will have an effect crosswise over different commercial ventures, yet to shifting levels.

Business goes Digital Computerized Revolution has given new parkways and is changing the way businesses and economies take a gander at innovation. Not at all like with past outlook changes, the Digital Revolution driven by Social Media, Mobility, and Analytics and Cloud (SMAC) has developed over a period and has now gained the devices to roll out critical improvement in the administrations scene. Shrewd firms will begin reexamining themselves as digital enterprises that adjust to requests from their inside and outer clients and convey administrations by utilizing the genuine force of digital services.

Globalization X The present progress of obtaining administrations from over the globe is alluded as Globalization X. For purchasers of outsourcing administrations new rising administration conveyance areas not just offer ideal cost, quality and better turnaround additionally give access to new markets too. This pattern is liable to drive the following rush of development for global enterprises that hope to develop their nearness in the favored administration conveyance areas.

Change in Business Process Management (BPM) The outsourcing business is developing from an assignment situated BPO administrations model to a stage driven and result connected BPM model. In numerous cases, mechanical mechanization will dispense with human mediation in these administrations. High-esteem investigation and learning driven administrations are developing twice as quick as conventional exchange–based BPM administrations. These new administrations will drive the future development of outsourcing. Huge information, online networking, venture portability, gadget merging, and new innovation will drive interest for specific administrations. The barely recognizable difference in the middle of center and noncenter procedures will decrease significantly further, bringing more up to date forms under the sourcing ambit.

View of Risk View of a nation or city among leaders impacts the choice in regards to an administration conveyance area. Legislatures of these nations make proactive move to decrease risk to businesses and potential speculators by making an empowering business environment bolstered by sufficient budgetary and administrative motivators and intercessions. It is normal that, going ahead, governments and speculation advancement bodies in these nations will make noteworthy interests in advertising and marking their nation to upgrade the apparent estimation of their areas.

The complexity of global cross-fringe business management introduces new difficulties as organizations invest more energy to stay nimble, gainful, and imaginative. Business forms should be adaptable and versatile to empower individuals to react quicker to changing business needs. Administrations outsourcing must be adjusted to business objectives, as opposed to be seen as only an instrument for upgrading operational efficiencies.

Global outsourcing takes a long haul all-encompassing perspective of the customer venture and adjusts its business objectives to the outsourced administration offerings, rather than strategic fleeting contracts that take a piecemeal venture by-undertaking or basic "out-tasking" way to deal

Benton, Purchasing and Supply Chain Management, 4e SAGE Publishing ©2021

with outsourcing. Transformational outsourcing results in enormous jumps and advancement by enhancing and streamlining complex business procedures to offer worth included advantage.

6. Discuss some of the complexities of global outsourcing? Give specific examples.

As a global manager, the level of things that must done to be a success is more than a person who is managing a small business or a company doing business in within their country. It can be very challenging for anyone to handle responsibility at an international level. It takes a special character, mindset, and work ethic to be a global manager. Also a global purchasing manager must understand and deal effectively with different cultures. The world is changing which means we have to change with it. At one time, all the countries were competing against one another in every type of market. It was important as a country to lead and dominate what every market they was really good at. Kind of like everything else we do as humans. We have competition hardwired into our DNA. 7. As a buying organization, what questions do you suggest asking each of the following potential service providers? You must be specific. The questions asked should include: 

Construction management. Will the price of lumber go up or down in the future?

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Underground construction. Will the price of oil go up or down in the future?

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Above ground construction. How accurate are your forecasts for planning in relationship with your action plans?

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Engineering design? Are the engineers in charge of this project competent?

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Health and safety. What are the OSHA regulations?

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Environment. What are the environmental guidelines in place in the company?

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Printing and promotions?

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Legal services. Do we have a competent lawyer?

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Facilities maintenance. Do we have a competent facilities management facilitator?

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Information technology. Are we safe using the current software?