Home/Supply Chain Management And Purchasing Principles/Page 2
  1. Asked: January 7, 2023In:

    Explain five circumstances under which an organization may adopt counter-trade as a sourcing method for its materials requirement. (10 marks)July 2020

    Best Answer
    Jemshah Enlightened

    Counter-trade refers to a type of trade in which goods or services are exchanged directly, rather than using traditional currency. There are several circumstances under which an organization may adopt counter-trade as a sourcing method for its material requirements: Limited access to foreign currencRead more

    Counter-trade refers to a type of trade in which goods or services are exchanged directly, rather than using traditional currency. There are several circumstances under which an organization may adopt counter-trade as a sourcing method for its material requirements:

    1. Limited access to foreign currency: An organization may adopt counter-trade if it has limited access to foreign currency, either due to economic sanctions or other restrictions. Counter-trade allows the organization to obtain needed materials without having to exchange currency.
    2. Difficulty in finding buyers for certain products: An organization may adopt counter-trade if it has difficulty finding buyers for certain products, either due to a lack of demand or competition. Counter-trade allows the organization to exchange these products for materials it needs, rather than selling them for a low price or not being able to sell them at all.
    3. To build relationships with strategic partners: An organization may adopt counter-trade as a way to build relationships with strategic partners, such as key suppliers or customers. Counter-trade can create mutual dependence and strengthen the relationship between the two parties.
    4. To diversify sources of supply: An organization may adopt counter-trade as a way to diversify its sources of supply, particularly if it is reliant on a single supplier or region for its materials. Counter-trade can allow the organization to obtain materials from other sources, reducing its dependence on any one supplier or region.
    5. To enter new markets: An organization may adopt counter-trade as a way to enter new markets, particularly if it faces barriers to entry due to economic or political factors. Counter-trade can allow the organization to access these markets by exchanging its products or services for materials it needs.
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  2. Asked: January 7, 2023In:

    Outline five elements that constitute total cost of ownerships as used in evaluating the bids for capital supplies (10 marks)July 2020

    Best Answer
    Jemshah Enlightened

    Initial purchase price: This is the price of the capital supply at the time of purchase. Installation and setup costs: These are the costs associated with installing and setting up the capital supply, including labor, materials, and any specialized equipment needed. Maintenance and repair costs: TheRead more

    1. Initial purchase price: This is the price of the capital supply at the time of purchase.
    2. Installation and setup costs: These are the costs associated with installing and setting up the capital supply, including labor, materials, and any specialized equipment needed.
    3. Maintenance and repair costs: These are the costs associated with maintaining and repairing the capital supply over its lifespan, including labor, materials, and any specialized equipment needed.
    4. Operating costs: These are the ongoing costs associated with using the capital supply, such as energy and consumables.
    5. Disposal or decommissioning costs: These are the costs associated with disposing of or decommissioning the capital supply at the end of its lifespan, including labor, materials, and any specialized equipment needed.
    6. Financing costs: These are the costs associated with financing the purchase of the capital supply, such as interest on loans or leases.
    7. Opportunity costs: These are the potential costs associated with not purchasing the capital supply, such as lost revenue or productivity.
    8. Risk and uncertainty: These are the potential costs associated with risks and uncertainties, such as changes in market conditions or technological obsolescence.
    9. Non-financial costs: These are the intangible costs associated with the capital supply, such as the impact on the environment or the organization’s reputation.
    10. Legal and regulatory costs: These are the costs associated with complying with legal and regulatory requirements related to the capital supply, such as environmental regulations or safety standards.
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  4. Asked: January 7, 2023In:

    Outline five mistakes that a supply chain manager may make while developing specifications for goods and services. (20 marks)July 2020

    Best Answer
    Jemshah Enlightened

    Failing to clearly define the requirements: The supply chain manager may not clearly define the requirements for the goods or services, leading to misunderstandings or miscommunications with suppliers. Not considering the end-user's needs: The supply chain manager may focus too much on the organizatRead more

    1. Failing to clearly define the requirements: The supply chain manager may not clearly define the requirements for the goods or services, leading to misunderstandings or miscommunications with suppliers.
    2. Not considering the end-user’s needs: The supply chain manager may focus too much on the organization’s needs and not enough on the end-user’s needs, leading to products or services that do not meet the customers’ needs or expectations.
    3. Overestimating or underestimating the quantity needed: The supply chain manager may overestimate or underestimate the quantity needed, leading to either shortages or excess inventory.
    4. Not considering the total cost of ownership: The supply chain manager may not consider the total cost of ownership (including maintenance, repair, and disposal costs) when developing specifications, leading to higher costs in the long run.
    5. Neglecting environmental and sustainability concerns: The supply chain manager may neglect environmental and sustainability concerns, such as the impact of the goods or services on the environment or the use of environmentally-friendly materials.
    6. Not considering the supplier’s capabilities: The supply chain manager may not consider the supplier’s capabilities and resources when developing specifications, leading to unrealistic or infeasible expectations.
    7. Failing to consider the impact on other parts of the supply chain: The supply chain manager may not consider the impact of the specifications on other parts of the supply chain, such as transportation or warehousing, leading to inefficiencies or bottlenecks.
    8. Not negotiating with suppliers: The supply chain manager may not negotiate with suppliers to get the best terms and prices, leading to higher costs or less favorable terms.
    9. Not monitoring and reviewing the specifications: The supply chain manager may not monitor and review the specifications to ensure that they are still relevant and effective, leading to outdated or ineffective specifications.
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  5. Asked: January 7, 2023In:

    A certain organization has adopted a horizontal approach in organizing its purchasing function. Explain five disadvantages of adopting such an approach. (10 marks).July 2020

    Best Answer
    Jemshah Enlightened

    Lack of specialization: A horizontal approach often involves a more generalist approach to purchasing, where staff are expected to handle a wide range of products and suppliers. This can result in a lack of specialization and expertise in specific areas, which can impact the efficiency and effectiveRead more

    1. Lack of specialization: A horizontal approach often involves a more generalist approach to purchasing, where staff are expected to handle a wide range of products and suppliers. This can result in a lack of specialization and expertise in specific areas, which can impact the efficiency and effectiveness of the purchasing function.
    2. Limited decision-making authority: In a horizontal organization, purchasing staff may have limited decision-making authority, as they may need to consult with other departments or managers before making decisions. This can slow down the purchasing process and make it more cumbersome.
    3. Reduced bargaining power: A horizontal approach to purchasing may involve working with a larger number of smaller suppliers, rather than a smaller number of larger suppliers. This can reduce the organization’s bargaining power and limit its ability to negotiate favorable terms and prices.
    4. Difficulty in managing relationships: A horizontal approach to purchasing can make it more difficult to manage relationships with suppliers, as there may be more suppliers to deal with and less specialization in specific product areas. This can lead to a lack of continuity and cohesion in the purchasing process.
    5. Complex communication and coordination: A horizontal approach to purchasing can lead to a more complex communication and coordination process, as there may be more staff involved and a need to consult with other departments or managers. This can increase the risk of misunderstandings and delays.
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