3.7 Key Terms, References, and Accessibility Descriptions

Key Terms

[KPIs] - Key Performance Indicators  – quantifiable metrics used for measuring the company’s performance and success in many different areas and situations. KPIs help the organization to focus on the primary key points.

[RFP]- Request for Proposal – “An RFP accounts for price but focuses on meeting the project quality or schedule requirements. The process of developing a proposal in response to an RFP can be very expensive for the bidder, and the project team should not issue an RFP to a company that is not eligible to win the bid” (Accettura, Bergsma, Boszak, Callaway, Cote, N. Doepker, Harbidge, Her, Hlushko,  Holmes, Knight, MacDowell, Marshall, McDougall, Prima & Story, 2021) CC-BY-NC-SA-4.0

[RFQ] - Request for Quote – “An RFQ focuses on price. The type of materials or service is well defined and can be obtained from several sources. The bidder that can meet the project quality and schedule requirements usually wins the contract by quoting the lowest price” (Accettura, et. al, 2021) CC-BY-NC-SA-4.0

Sourcing – is a process of gaining goods or services from a particular place (Cambridge University Press, 2022).

Outsourcing – is the process or a situation when the company employs a third-party provider or organization to do some work instead of using its staff or resources (Cambridge University Press, 2022).

Chapter References

Accettura, A., Bergsma, K., Boszak, T., Callaway, J.L., Cote, N. Doepker, C. Harbidge, M., Her, S., Hlushko, T., Holmes, J., Knight, M., MacDowell,  P., Marshall, C., McDougall, L., Prima, A., & Story, T. (2021). Project management for instructional designers, First Canadian edition. Pressbooks. http://pm4id.ca

Cambridge University Press. (2022). Cambridge Dictionary. https://dictionary.cambridge.org/dictionary/english/outsourcing

FITT. (2021). FITTskills: Global Value Chain (7th Edition). Forum for International Trade Training (FITT). https://bookshelf.vitalsource.com/books/9781988782126

Forrester Research. (July 20, 2020). Technology outsourcing industry spending by business and government in Canada from 2016 to 2021 (in billion Canadian dollars) [Graph]. In Statista. https://www.statista.com/statistics/821790/canada-spending-tech-outsourcing-industry/

Heizer, J., Render, B., Munson, C., Griffin, P. (2020).”Operations Management: Sustainability and Supply Chain Management“. (3rd ed.). Pearson.

Mangan, J., Lalwani, C. (2016). Global Logistics and Supply Chain Management (3rd ed.). Wiley

Mariadoss., B., J. (n.d.). 10.3 Global Sourcing and Distribution. Pressbook. https://opentext.wsu.edu/mktg360/chapter/10-3/

Office of Government Procurement Ireland. (2018, January 11). Types of Procurement Process. [Video]. YouTube. https://www.youtube.com/watch?v=_490ZEaYdwA

Scully, J. I., & Fawcett, S. E. (1994). International procurement strategies: Challenges and opportunities for the small firm. Production and Inventory Management Journal, 35(2), 39. https://www.proquest.com/openview/50eec3b24d2fa945a6a58507cef2735a/1?pq-origsite=gscholar&cbl=36911

Skill Dynamics. (2012, September 14). Sourcing processes: Supplier Selection-Procurement Training-Purchasing skills.  [Video]. YouTube.https://www.youtube.com/watch?v=510AN2Tkuik

Taherdoost, H., & Brard, A. (2019). Analyzing the Process of Supplier Selection Criteria and Methods. Procedia Manufacturing, 32, 1024–1034. https://doi.org/10.1016/j.promfg.2019.02.317

Watt, A. (n.d.). Procurement management. Pressbook. https://ecampusontario.pressbooks.pub/projectmanagement/chapter/chapter-13-procurement-management-project-management/

Williams, L. (Ed.), & Lumen Learning (Ed.). (n.d.). Introduction to business. Lumen Learning. https://courses.lumenlearning.com/baycollege-introbusiness/chapter/reading-outsourcing/#return-footnote-4444-1

Image Descriptions

Fig 3.1: 1. Conduct an internal needs analysis (identify the firm’s needs and targets benchmark the current company’s performance). [Return to image].

2. Conduct an assessment of the suppliers’ market (research and find the most cost-effective supply with the lowest risk).

3. Collect supplier information (determine supplier selection criteria, compare and evaluate suppliers).

4. Develop a sourcing/outsourcing strategy (strategy can be through acquisition or partnerships or purchase directly from suppliers).

5. implement the sourcing strategy (express interest. A firm can start preparing RFP (request for proposal) with explicit materials or RFQ (request for quote) and send it out to suppliers with a deadline for their response. Use e-procurement technology).

6. Negotiate with suppliers and select the winning bid (Evaluate suppliers’ responses by applying evaluation criteria. Choose suppliers by using the selection criteria).

7. Implement a transaction plan or contractual supply chain improvements. (invite winner suppliers in implementing improvements. The buyer should use KPIs (Key performance indicators)).

Fig 3.4: One bar for every year from 2016-2021 showing spending in billion Canadian dollars. 2016 = 13, 2017 & 2018 = 14. 2019-2021 = 15. [Return to image].

Fig 3.6: Bar graph showing IT-outsourcing services market revenue in Canada from 2016-2021 by segment in million US dollars. Each bar is divided to show: IT-infrastructure outsourcing, IT-application outsourcing, IT-administration outsourcing, and professional payment services. Totals increase over time with IT-infrastructure outsourcing growing the most (6625.08 in 2016 to 7439.02 in 2021). [Return to image].

Alternative Text-Based Activities

Assessing What You Already Know Activity (Text-based)

Question 1:

Procurement is about specifying requirements, identifying sources, evaluating options, and acquiring resources that are fit for purpose, cost effective and sustainable.

• False (Incorrect)
• True (Correct)

Feedback: “Procurement is about specifying requirements, identifying sources, evaluating options, and acquiring resources that are fit for purpose, cost effective and sustainable” ( p. 144).

Question 2:

Does the procurement process help organizations gain and manage costs such as professional services, IT equipment, capital assets and so forth?

• Yes (Correct)
• No (Incorrect)

Feedback:  The procurement process helps companies obtain and manage costs such as freight forwarders, human resources, capital assets, fuel, IT equipment, sales, utilities, marketing, legal and professional services, raw materials, facility management.

Question 3:

Globalization has significantly deteriorated businesses by decreasing the availability of labour globally and production flexibility. True/ False

• True- (Incorrect)
• False (Correct)

Feedback: Globalization has significantly improved businesses by increasing the availability of labour globally and production flexibility. In addition, labour costs in many countries are cheap, which helps companies move their production process to third-party or external providers with whom the firm has a contract. As a result, the firm has gotten a lot of advantages, such as access to specialized resources and reduced fixed costs. For example, an airplane can be split into thousands of parts and produced in many geographic locations.

Question 4:

What are the three main steps of choosing a supplier? Check all that apply.

• Identifying (Correct)
• Preparing (Incorrect)
• Evaluating  (Correct)
• Negotiating (Correct)

Feedback: Selecting the right supplier consists of identifying, evaluating, and negotiating steps. Selection of suppliers is a process where the main objectives are reducing the risk of purchasing and costs, maximizing the value of the purchaser, as well as developing long-term relationships between supplier and buyer (Taherdoost & Brard, 2019). [Return to activity].

Check Your Understanding: Concept of Procurement and its Value in the Global Value Chain

Question 1:

Feedback: Great Job! (Correct)

Try Again! (Incorrect)

Question 2:

What is the role of procurement?

• Hiring workforce on behalf of the company (Incorrect)
• Marketing and selling on behalf of the company (Incorrect)
• Managing risk and value on behalf of the company (Correct)

Feedback: Managing risks and value on behalf of the company is the role of procurement ( p. 148).

Question 3:

Contract planning is where you plan out each individual contract for the project work. True/False

• True (Correct)
• False (Incorrect)

Feedback: Contract planning is where you plan out each individual contract for the project work. You work out how you’ll manage the contract, what metrics it will need to meet to be considered successful, how you’ll pick a seller, and how you’ll administer the contract once the work is happening (Watt, n.d.)

Question 4:

International procurement is the process which is increasingly essential for organizations globally. It helps organizations enhance their  (_______), (_________), (_______), and (_______)  by finding suppliers who meet the organization’s strategy.

• competitive position, meet customer expectations, improve profits, add value (Correct)
• network, find new stream of revenue, connect them directly (Incorrect)
• Opportunities, improve profit, create freedom, buying an existing business (incorrect)

Feedback:  The process of purchasing services or goods worldwide to bid on contracts is called international procurement. The process is increasingly essential for organizations globally. It helps organizations enhance their competitive position, meet customer expectations, improve profits, and add value by finding suppliers who meet the organization’s strategy. [Return to activity].

Check Your Understanding: Sourcing and Outsourcing of Goods, Manufacturing and Services

Question 1:

Many organizations use (_____) and (_____) strategies and become globally competitive.

• Outsourcing and sourcing (Correct)
• Sourcing and procurement (Incorrect)
• Many suppliers and inbound transportation (Incorrect)

Feedback: Modern businesses evolve simply from  domestic supply of products  to global sourcing and outsourcing goods, manufacturing, and services. It is clear that companies cannot manufacture and do all products and services for running a business and hold a competitive position in the market. That is why many organizations use sourcing and outsourcing strategies and become globally competitive.

Question 2:

Benefits of outsourcing. Check all that apply.

• Lower costs; (Correct)
• differentiate products; (Correct)
• production capacity; (Correct)
• meet customer demands; (Correct)
• efficient replenishment; (Correct)
• focus on the core competencies; (Correct)
• build innovative products or services; (Correct)
• effective and efficient service; (Correct)
• increase value by bringing capabilities and expertise; (Correct)
• reduce operational and production costs; (Correct)
• being adaptable for changing market conditions and preferences; (Correct)
• increase human resources;  (Correct)
• low cost of labour;  (Correct)
• Value-added component of logistic activities (Incorrect)

Feedback:

Question 3:

Benefits of sole-sourcing. Check all that apply.

• Price discounts based on higher volume (Correct)
• Rewards for loyalty during tough times (Correct)
• Exclusivity brings differentiation (Correct)
• Greater influence with a supplier (Correct)
• More flexibility in times of disruption (Incorrect)
• Negotiating lower rates by pitting one supplier against another (Incorrect)

Feedback: Sole-Sourcing Advantages

• Price discounts based on higher volume
• Rewards for loyalty during tough times
• Exclusivity brings differentiation
• Greater influence with a supplier

Sole-Sourcing Disadvantages

• Higher risk of disruption
• Supplier has more negotiating power on price (Mariadoss, n.d.). CC-BY-NC-SA-4.0

Question 4:

Today, more firms, like PowerSki, want to specialize in the processes that they perform best—and outsource the rest.

• True (Correct)
• False (Incorrect)

Feedback: Understandably, outsourcing is becoming an increasingly popular option among manufacturers. For one thing, few companies have either the expertise or the inclination to produce everything needed to make a product. Today, more firms, like PowerSki, want to specialize in the processes that they perform best—and outsource the rest. Like PowerSki, they also want to take advantage of outsourcing by linking up with suppliers located in regions with lower labour costs (Williams & Lumen Learning (Ed.), n.d.). CC-BY-NC-SA-4.0

[Return to activity].

Check Your Understanding: Show how suppliers are selected and the role of different components in supplier relationship models

Question 1:

Suppliers are the central part of the company’s success.

• True (Correct)
• False (Incorrect)

Feedback: Suppliers are the central part of the company’s success. To select suppliers for the firm, the organization needs to know various strategies. According to the chosen strategy, the company needs to choose the right supplier.

Question 2:

A firm has to select the appropriate strategy for its supply chain. According to the book “Operations Management: Sustainability and Supply Chain Management” (2020), (_______) methods exist nowadays (Heizer, Render, Munson, & Griffin, 2020, p. 428).

• 5 (Incorrect)
• 7 (Incorrect)
• 8 (Incorrect)
• 6 (Correct)
• 9 (Incorrect)

Feedback: A firm has to select the appropriate strategy for its supply chain. According to the book “Operations Management: Sustainability and Supply Chain Management” (2020), six methods exist nowadays (Heizer, Render, Munson, & Griffin, 2020, p. 428).

Question 3:

Arrange the logistic cycle activities in correct order:
Collaborate with many suppliers -1
negotiating with a few suppliers- 2
buy the supplier -3
joint venture -4
a coalition strategy called a keiretsu -5
use suppliers when needed and called virtual companies -6

Question 4:

Drag and Drop the steps in correct category

Feedback: It is important for companies to select suppliers for the firm. That is why the organization needs to know various strategies. According to the chosen strategy, the company needs to choose the right supplier. A firm has to select the appropriate strategy for its supply chain. According to the book “Operations Management: Sustainability and Supply Chain Management” (2020), six methods exist nowadays (Heizer, Render, Munson, & Griffin, 2020, p. 428). [Return to activity].

Check Your Understanding: Explain How Supplier Relationships Adds Value in The Global Value Chain

Question 1:

Supplier relationship’ value created by (_____), (____) and getting quality products for the same price.

• reducing costs, improving efficiency (Correct)
• reducing order processing, deterioration in productivity (Incorrect)
• Improving management resources, reduce logistics-related costs (Incorrect)

Feedback:  Supplier relationship management is increasingly essential for companies. Supplier relationship’ value created by reducing costs, improving efficiency, and getting quality products for the same price. These benefits impact the financial results of any organization.

Question 2:

Advantages are beneficial if the relationship with suppliers is long-term developed.

• False (Incorrect)
• True (Correct)

Feedback: Advantages are beneficial if the relationship with suppliers is long-term developed. To create advantages for the organization, companies and suppliers have to invest money, time, patience, resources, and willingness to communicate to find the best solution for all parties. All stakeholders involved in the process include employees, suppliers, and buyers. Increasing the complexity of changing product lines, service delivery, value, and customer satisfaction all points to becoming a function of the global value chain.

Question 3:

Ongoing valuable relationships can increase the popularity of (_______)

• quality products (Correct)
• transportation (Incorrect)
• services (Incorrect)
• activities (Incorrect)

Feedback: Ongoing valuable relationships can increase the popularity of quality products and the organization’s efficiency and effectiveness, determined by a business model, supply chain, customers, and suppliers.

Question 4:

If the company delivers quality products without defects, customer satisfaction indicators will (____).

• Increase (Correct)
• Decrease (Incorrect)

Feedback: If the company delivers quality products without defects, customer satisfaction indicators will increase because customers will continue to enjoy doing business. More vital brand awareness comes from excellent customer satisfaction factors. In addition, the production or manufacturing industry depends on suppliers. If the raw material is delivered late, the company will face risks and losses. Losses such as stopping production or rejecting finished products.

[Return to activity].