Sourcing Procurement & Purchasing Question Sheet

 

What are the techniques to source?

1. Attending industry-specific tradeshows and exhibitions is a valuable way to gather information about new products, meet new suppliers, and learn about the latest industry trends.
2. It is essential to build a strong network within your industry through attending industry events, joining trade associations, or connecting with professionals through LinkedIn. When you have a good reputation, word-of-mouth recommendations can lead to valuable suppliers.
3. Online marketplaces, such as Alibaba, is an efficient way to find suppliers and products. Traders can browse product catalogs, compare prices, and connect directly with manufactures and factories.

 

 

What are the key criteria to determine the valuation of a sourcing?

Pricing

• Cost Competitiveness: Base cost of products, shipping, tariffs, and additional fees.
• Payment Terms: Flexible payment terms, such as credit and deferred payment.

 

Location

• Proximity to Market: Location relative to target market.

 

Shipping costs, delivery times, and logistical complexity.

• Access to Resources: Located near essential raw materials or transportation hubs, offering more consistent and cost-effective sourcing.

 

Certifications & Quality Assurance

• Compliance with Standards: Necessary certifications that meet industry standards.
• Quality Control Processes: Regular inspections and testing to reduce risk of defects or recalls.

 

Size & Capacity

• Production capacity
• Scalability

 

Busyness

• Supplier Workload: A busy supplier will have longer lead times, lower flexibility, higher risk of delays.
• Priority: Consider how much priority your order will receive compared to their other clients.

 

Minimum Order Quantity (MOQ)

• Order Flexibility: Required MOQ can impact cash flow and inventory management.
  Low MOQs à greater flexibility and ability to test new products quickly.
• Cost Efficiency: Higher MOQs require a more significant upfront investment.

 

Service

• Customer Support: Quality of customer service, responsiveness, problem resolution, willingness to accommodate special requests, critical for smooth partnership.
• After-Sales Support: Warranty, repairs, replacement policies.

 

Reputation & Reliability

• Track Record: Supplier’s history of delivering on time, maintaining quality, and handling issues can be indicative of future performance.
• Customer Reviews & Testimonials: Feedback from other clients provides insight into supplier’s reliability and professionalism.

 

Innovation & Technology

• Adoption of New Technologies: Latest technology leads to better quality, faster production, higher cost-effectiveness, or more innovative products.
• R&D Capabilities: Ability to innovate and improve products continuously can be a significant advantage in competitive markets.

 

Sustainability & Ethical Practices

• Environmental Impact: Evaluating supplier’s commitment to sustainable practices, such waste reduction or eco-friendly materials, is increasingly important.
• Ethical Standards: Adhering to ethical labor practices and fair trade principals, vital for brand reputation.

 

 

 

What is “supplier policy” in purchasing?

• A supplier policy is an internal set of guidelines and standards that a company establishes to govern its relationships with suppliers. The policy outlines the company’s expectations, requirements, and its procedures for engaging with suppliers. The objective is to ensure that the procurement process aligns with the organizations values, goals, and legal obligations.

 

 

Why is it important to have a good balance among suppliers?

A balanced supplier base is crucial in ensuring the stability, efficiency, and resilience of a the supply chain.

• Risk mitigation from supply disruptions and market fluctuation.
• Leverage in negotiations: Suppliers are likelier to offer better terms or concessions when they the company has alternative options.
• Quality assurance: Different suppliers specialize in various aspects of the product, allowing the company to source the highest quality materials.
  Company can also maintain consistency in quality by ensuring that if one supplier’s quality decreases, the company can rely on others keep the level of quality and avoid production delays.
• Capacity management to ensure scalability and avoid overreliance that may lead to capacity constraints, especially during peak periods.
• Supplier chain resilience: Geographical diversification protects against regional disruptions such as political instability, trade restrictions, or natural disasters. There is greater flexibility in that allows more agile responses to changes in market conditions, customer preferences, or regulatory environments.

 

 

What are the key questions to ask a supplier at an exhibition/trade show to gauge their value? Give at least 5.

• What is your yearly turnover?
• What is your production capacity? How much capacity do you have available during peak times and low seasons?
• How many employees do you have?
• Which countries do you normally export to?
• What are your core competencies?

 

• What quality control measures do you have in place to ensure consistency? Certifications?
• What are your typical lead times from order to delivery?
• What are your minimum order quantities, and is it possible to negotiate MOQs for smaller or trial orders?
• How long have you been in business, and who are some of your key clients?
• What is your on-time delivery rate, and how do you handle delays or issues?

 

 

In a RFQ, what are two crucial elements that a buyer must ask a supplier?

1. What is the total cost of the product, including all components, materials, labor, shipping, and any applicable tax and duties?
2. What are the expected lead times?

 

What are incoterms?

• Incoterms, short for International Commercial Terms, are a set of stardardized trade terms used in international and domestic contracts for the sale of goods. It specifies which party is responsible for the specific actions during the shipping process (packaging, loading, transportation, insurance, customs clearance, and delivery), defines risk transfer, and determines who bears the costs related to transportation.

 

 

Explain sourcing in your own words.

• Sourcing is the process of finding suitable suppliers that fit your company’s needs and requirements. It is managing the supply chain base to ensure that your company can source for products of specific quality, negotiate terms, have flexibility, and maintain resilience of the chain.

 

 

What are the various terms of payment? Explain the difference between the two.

• There is T/T (telegraphic transfer) and L/C (letter of credit).
• A T/T is quick way to directly transfer money to and from international banks. A T/T payment can be made in parts: as a deposit and at the time of loading. For example, a contract might determine, on Incoterms FOB, 30% deposit and 70% after issuing the Bill of Lading (after loading the goods onto the ship).
• A L/C is a letter from bank that guarantees that the buyer’s payment will be received on time and for the correct amount. It provides security for both buyer and seller. The issuing bank assumes full financial responsibility of the buyer. However, an L/C takes more time and effort, not to mention, it imposes a financial burden on businesses. Banks charge various service fees, including issuance, amendment, and confirmation fees.