Question
1. Cost Reductions: Metric: Percentage of Cost Savings Calculation : (Total Cost Savings / Total Procurement Spend) times 100 is the calculation. How: To calculate
1. Cost Reductions:
- Metric:Percentage of Cost Savings
- Calculation :(Total Cost Savings / Total Procurement Spend) times 100 is the calculation.
- How:To calculate the cost savings obtained, compare the price of goods or services acquired with and without the department's assistance.
2. Performance of Supplier:
- Metric:Performance Score for Suppliers
- Calculation :A combined score derived from factors like lead times, quality, responsiveness, and on-time delivery.
- How:Consistently evaluate and rank providers using surveys and performance metrics.
3. Keeping an Inventory:
- Metric:Inventory Turnover
- Calculation :Average Inventory Value / Cost of Goods Sold (COGS)
- How:Monitor the effectiveness of inventory management, striving for a higher rate of turnover to lower carrying expenses.
4. Time of Procurement Cycle:
- Metric:Procurement Cycle Time (in days) is the metric.
- Calculation:The amount of time needed between the start of a purchase request and the delivery of the ordered goods.
- How:Track and evaluate how long it takes to finish the procurement process in order to pinpoint areas that need improvement and bottlenecks.
5. Managing Risks:
- Metric :Risk Exposure Score Metric
- Calculation:A qualitative evaluation based on variables such as supply chain, economic, or geopolitical risks.
- How:Determine the degree of risk exposure by allocating scores based on the evaluation and monitoring of possible risks related to materials, suppliers, and world events.
A purchasing/supply management department should also make sure that its key performance indicators (KPIs) are in line with the larger goals and objectives of the company. By routinely monitoring and evaluating these indicators, the department may enhance productivity, cut expenses, and enhance the organization's success as a whole.
4.Apply the Control Process to each of these 5 items identified in question 3 by:
A.)Establishing a standard for it.
B.)Explaining how you would measure the performance to the standard.
C.)Explaining how you would analyze deviations or variances
D.)Explaining what corrective action you would take to correct them.
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