Chapter 1 and 2 Q&A
Chapter 1 – Introduction to Purchasing and Supply Chain Management
1. Why are more top managers recognizing the importance of purchasing/supply
management?
Top managers are increasingly recognizing the importance of purchasing and supply
management due to the rising presence of world-class competitors both domestically and
internationally. This competitive landscape has compelled organizations to optimize
internal processes. Furthermore, shifts toward outsourcing and offshoring have
transformed cost structures and efficiency strategies, while the emerging trends of re-
shoring and nearshoring are reshaping economic considerations in supply chain
management.
5. What are some of the factors that might influence how important purchasing is to
the success of an organization?
Several factors significantly influence the importance of purchasing in an organization’s
success. Effective purchasing can drive substantial value and cost savings, foster
innovative supplier relationships, and enhance overall product and service quality,
thereby improving the organization's reputation. Moreover, it plays a crucial role in
reducing time to market, managing supplier risk, generating broader economic impact,
and ultimately contributing to a firm's competitive advantage.
6. With the expected increase in AI, robotics, and automation, what knowledge and
skills do you feel are required for a purchasing professional?
As AI, robotics, and automation become integral to operations, purchasing professionals
must possess a strong educational background supplemented with relevant certifications.
They need to demonstrate strategic thinking, leadership, and the capability to manage
cross-functional teams effectively. A process-oriented mindset, coupled with strong soft
skills, is essential. Proficiency in data analytics, total cost and market analysis, and fact-
based decision-making will be key to navigating the evolving landscape of procurement.
8. What impacts will technology have on supply base innovation and risk
management, and will technology allow supply managers to spend more time on
these two areas?
Technology is expected to positively impact supply base innovation and risk management
by improving quality, accelerating time to market, and enhancing supply chain visibility.
As routine processes become automated, supply managers will be able to devote more
time to strategic tasks such as innovation and risk management, thereby strengthening the
resilience and responsiveness of the supply chain.
Chapter 2 – The Purchasing Process
1. How can an effective purchasing department affect organizational performance?
An effective purchasing department can significantly enhance organizational
performance through multiple channels. These include ensuring supply assurance,
efficiently managing the procure-to-pay process, and overseeing supplier performance.
By aligning goals with internal stakeholders and developing integrated supply strategies,
the purchasing team supports broader business objectives. Activities such as spend
analysis, demand management, specification development, supplier evaluation, contract
management, cost control, and relationship management all contribute to a robust supply
management strategy.
5. Describe how purchasing becomes aware of purchase requirements.
Purchasing becomes aware of purchase requirements through various inputs and
processes. These include annual or biannual planning cycles, involvement in new product
development, and direct meetings with internal customers. Additional sources include
demand forecasts, customer orders, purchase requisitions, routine reordering systems, and
stock checks. Together, these mechanisms ensure that the purchasing function stays
informed and responsive to organizational needs.
7. Why do some firms no longer rely on competitive bidding when awarding
purchase contracts?
Firms may forego competitive bidding when one or more of the standard criteria—such
as high volume, clear specifications, or a competitive marketplace—are not met. In such
cases, negotiation is preferred, especially when supplier collaboration is required for
innovation, risk-sharing, or long development timelines. Negotiation also becomes
necessary when buyers need to agree on various performance factors, or when suppliers
cannot easily estimate costs and risks due to complexity or uncertainty.
10. Why is it important to measure and monitor supplier performance improvement
over time?
Monitoring supplier performance over time is essential to gaining insight into current
supply market conditions and ensuring that suppliers remain competitive. It helps
improve existing suppliers, cultivate new supplier capabilities, and strengthen supplier
relationships. Continuous measurement supports ongoing improvement efforts and
provides a basis for informed future purchasing decisions, thereby enhancing supply
chain stability and performance.
13. Discuss how the purchase of capital equipment differs from the purchase of
routine supplies.
Purchasing capital equipment differs significantly from routine supply purchases. Capital
equipment, such as computers, furniture, or custom-designed machinery, involves large
investments and is intended for long-term use, usually exceeding one year. These
purchases are infrequent and highly sensitive to broader economic trends. On the other
hand, routine supplies—such as raw materials, semifinished and finished products, MRO
items, and support services—are acquired regularly to sustain day-to-day operations and
production.
14. Develop a list of topics that nonpurchasing personnel should be allowed to talk
about with their counterparts at suppliers. Develop a list of topics that only
purchasing should be allowed to talk about with suppliers.
Nonpurchasing personnel may discuss topics with suppliers that relate to technical and
product-specific issues such as product performance, technology comparisons,
specifications, quality standards, R&D, and product design. In contrast, purchasing
personnel should handle discussions related to commercial and contractual matters
including price, delivery schedules, payment terms, relationship development, supplier
performance evaluation, documentation, contract terms, communication protocols, and
dispute resolution.
