2 MARK QUESTIONS
Purchasing
A35. List any four responsibilities that are fully
delegated to Purchasing function. P 492
1.
Obtaining prices
2.
Selecting vendors
3.
Awarding purchase orders
4.
Follow up on deliveries
5.
Vendor relations
A36. What is Vendor
Rating? P 501
A37. What is Value
analysis? P 504
Value
analysis is also known as value engineering. It aims at modifying the
specifications of materials, parts or products to reduce their cost without
affecting its original function.
B 14. What are the three
types of make or buy decisions. P 500
The three types of make or buy
decisions are
1.
Making or buying something that was not purchased before.
2.
Making something that is being
purchased now,
3.
Buying something that is being made
in the factory.
B15. What is critical
incident system of vendor rating? P 503
Critical incident method of vendor
rating is based on the records of significant events and occurrences between
buyer and vendor, both positive and negative. This method is relatively easy to
implement for small organizations.
Stores
A 38. What is the
importance of stores? P 510
Efficient
store yields
1.
Ready
availability of major materials for efficient service to users.
2.
Efficient
space utilisation and flexibility of arrangement.
3.
A
reduced need for material handling equipment.
4.
Minimisation
of material deterioration and pilferage.
5.
Ease of
physical counting
A39. What is stock
verification? P513
Stock
verification is periodic, checking of actual inventory with book balances.
These checks can be done annually, continuously or at low point.
A40. List any four
groups into which stores items are grouped for the purpose of
codification. P 515
Common
groups of stores items for the purpose of codification are
Raw materials, goods in process, Finished goods,
consumable stores, spare parts, packing materials etc.
B16. What is ancillary
development? P 499
Ancillary
is a unit which supplies 50% or more of its output to one manufacturer.
Ancillarisation is subcontracting a part of the manufacturing process to an
outside unit which is normally a small scale unit. The larger unit benefits
from the lower overheads of ancillary unit.
B17. What are the three
types of ‘Make or Buy decisions’ ? P 500
Make or buy decision is deciding whether a part should be purchased or
manufactured inhouse. The three types of make or buy decisions are –
1.
Making or buying something which it
never procured before.
2.
Making something which it is buying
now
3.
Buying something which it is making
now
B18. List any two
methods of stock verification. P513
Methods
of stock verification are - periodic verification, continuous verification and
low point verification
B19. What is stores
manual? P513
Stores
manualis a written document of policies and procedures to be followed in stores
management.
B 20. Explain continuous
inventory verification. P514
The
total stores items are divided into 52 groups and each week physical stock
verification of one group is conducted. The advantage is the stores operation
need not be suspended for verification.
C8. Define stores
efficiency index. P513
Stores
efficiency index = number of requisitions delivered on time / total number of
requisitions
C9. What is low point
inventory verification? P513
In
low point inventory method, verification is done when stocks are minimum,
irrespective of period. The advantage is time taken for verification is minimum
because of small quantities involved.
8 MARK QUESTIONS
Purchasing
A 14. What is the
importance of Purchasing? P 491 Box 21.1
The importance of purchasing are as
follows
1.
Purchasing function provides
materials to the factory without which production can not be undertaken.
2.
Raw material cost varies from 30 – 60
% in most units, thus purchase department has the largest budget.
3.
One percent saving in raw material
cost can result in much higher increase in profitability.
4.
With the advent of buying materials
instead of making them in house, the importance of role of purchase is
increasing.
5.
Timely procurement of materials is
needed for production to run smoothly.
6.
Purchase department is a store house
of information, as stream of salesmen call on them and provide information about competitors, and changes in
technology etc.
B 11. List any eight
responsibilities that Purchasing function shares with other functions. P492
The responsibilities that the
purchase function shares with other departments are
1.
Obtaining technical information and
advice
2.
Receiving sales representatives and
gather information
3.
Establishing specifications
4.
Scheduling orders and deliveries.
5.
Inspecting incoming goods
6.
Expediting
7.
Accounting
8.
Market research
9.
Forward buying and hedging policies
10.
Service contracts and agreements
11.
Sale of scrap, and unusable items
A 15. Describe in brief
the concept of Ancillary Development?
P498-9
Sub contracting is a process in
which part of the production function is outsourced, normally to small scale
units. A unit which sells more than 50% of its output to one large company is
called an ancillary to that company. As part of entrepreneurial development,
Government of India has been advising
all big manufacturing units to develop ancillaries. Ancillarisation ensures
regular, timely and cheaper supply of goods to companies. It also helps solve
unemployment problem among educated youth.
A 16.
Based on the following data which vendor would you
select.
|
( Page 506)
|
||
Supplier
|
A
|
B
|
C
|
Quantity supplied
|
90
|
80
|
75
|
Quantity accepted
|
75
|
72
|
68
|
Price of each item ( Rs )
|
10
|
10.2
|
10.5
|
Delivery promised ( in days )
|
15
|
15
|
15
|
Actual Delivery made ( in days )
|
15
|
16
|
18
|
Weightage for quality = 60%, price = 20%, delivery =
20%
|
|||
Ans.
|
|||
A
|
B
|
C
|
|
Percentage accepted
|
75/90*100
|
72/80*100
|
68/75*100
|
83.33
|
90.00
|
90.67
|
|
Quality rating ( weightage = 60% )
|
83.33*.6
|
90*.6
|
90.67*.6
|
50
|
54
|
54.4
|
|
Price Ratio = min price/ net price *100
|
10/10*100
|
10/10.2*100
|
10/10.5*100
|
100
|
98.04
|
95.24
|
|
Price Rating = price ratio * weightage
|
100* .2
|
98.04*.2
|
95.24 * .2
|
20.00
|
19.61
|
19.05
|
|
Delivery promise kept
|
15/15*100
|
15/16*100
|
15/18*100
|
100
|
93.75
|
83.33
|
|
Delivery rating
|
100*.2
|
93.75*.2
|
83.33*.2
|
20
|
18.75
|
16.7
|
|
Overall rating
|
90.00
|
92.36
|
90.12
|
Based on the overall rating , I would select B as
supplier
|
|||
B 12. Describe any two
vendor rating techniques . P 502-3
1.
The weighted Point method : This is a
quantitative method. under this plan, the performance factors to be evaluated
are listed and given weightage based on their relative importance. Eg. Quality
40, delivery 20. Price 30, service 25 etc. Then actual vendor performance is
measured on each factor and expressed in quantifiable terms. Each factor rating
is multiplied by the actual performance figures. The sum total of these
represent the supplier’s overall rating. Such overall rating of different
suppliers is compared to take appropriate decisions.
2.
The checklist system: This is a
qualitative method. A simple check list on various parameters is prepared like
reliability, technical capabilities, after sale service, availability, buying
convenience, sales assistance etc. Each has some sub check lists in the form of
questions. All decisions will be based on the qualitative information culled
from the above information.
A 17. List the steps
involved in Purchase Cycle. P 494
1.
Recognition of the need.
2.
Description of the need.
3.
A suitable source is selected for the
purpose.Often a source has to be developed.
4.
Price and availability are determined
5.
Purchase order is prepared and sent
to supplier.
6.
Acceptance of purchase order is
obtained from supplier.
7.
Follow up is done to ensure timely
delivery of materials.
8.
Checking the invoice and approving it
for making payment.
Stores
A18. What are the
functions of the ‘Stores’? P 510
The functions of stores are as
follows
1.
To receive raw materials and account
for them
2.
To provide adequate and proper
storage to various items
3.
To meet the demands of consuming
departments by proper issue and account
for them.
4.
To minimize obsolescence, surplus,
and scrap through proper codification preservation and handling.
5.
To highlight stock accumulation discrepancies
and abnormal consumption and effect control measures.
6.
To ensure good housekeeping,so that
materials handling, stocking, receipt and issue can be done adequately.
7.
To periodically verify stocks and assist purchase by providing
timely information.
A 19. Describe the three
methods of stock verification. P513-14
Stock verification is the process of
checking actual stocks in the stores and matching them with balances in the books.
There are three methods of stock verification namely
1.
Periodic verification or annual
verification : Inventory is taken once in a year. Generally at the end of
financial year. This necessitates stoppage of issues to production departments
during the verification period. The workload on stores staff will be more to
complete in time.
2.
Perpetual verification : In this
method, the total items are divided into 52 groups, and stocks of each group
are verified in a given week. Thus by the completion of one year all stocks
would be verified. The advantage is that the workload will be uniform, and
there is little disruption to production activities.
3.
Low point verification : The stock is verified whenever stock is low.
This minimizes the time required for verification. But the disadvantage is that
the verification is irregular.
B 13. What are the
common groups for classification and codification of store items ? P515
Stores are generally classified on
the basis of their nature of usage. The common groups for
codification and classification of stores items are
1.
Raw materials
2.
Consumable stores
3.
Finished goods
4.
Tools and fixtures
5.
Spare parts
6.
Packing materials
7.
Work in process
8.
Capital goods.
9.
Electrical goods
15 MARK QUESTIONS
Purchasing
A6. What are the
functions of Purchase Department? P 492
It may be emphasised that some of the functions are
the sole responsibility of the purchasing department,some are shared with other
departments,and the remaining are the responsibilities in which the purchasing
department has considerable interest.
1.Responsibilities often fully delegated to the
purchasing function:
(a)
Obtaining prices.
(b)
Selecting vendors.
(c)
Awarding purchase orders.
(d)
Following up on delivery promises.
(e)
Adjusting and setting complaints.
(f)
Selecting and training of purchasing
personnel.
(g)
Vendor relations.
2.Responsibilities often shared with functions other
than purchasing functions:
(a)
obtaining technical information and
advice.
(b)
Receiving sales presentations and
arranging for sales opportunities with interested personnel.
(c)
Establishing specifications.
(d)
Scheduling orders and deliveries.
(e)
Inspecting.
(f)
Specifying delivery method and
routing.
(g)
Expediting.
(h)
Accounting.
(i)
Purchasing and market research.
(j)
Inventory and warehousing policy
and/or control.
(k)
Forward buying and hedging policies
and procedures.
(l)
Construction contracting.
(m)
Service contracts and agreements.
(n)
Sale of scrap,salvage and surplus.
(o)
Purchasing for employees.
(p)
Contracting for machines and
equipment .
(q)
Development of specifications.
(r)
General considerations of quantities
or timing on planning deliveries.
(s)
Transportation and traffic.
(t)
Determination of whether to make or
buy.
(u)
Customs
(v)
Other Functions
3.Responsibilities often divorced from purchasing but
of particular intrest to purchasing.
a .Receiving and warehousing.
b.Payment of invoices.
c.Other Functions.
The above listing is exemplary,But not
exhaustive.Purchasing responsibilities in any company should be well defined so
encourage effectiveness in operations.
B3. Give a typical check
list for evaluating vendors P 503
Buyer’s
check list for evaluating Customer.
a.
Reliability
1.
Is
supplier a reputable stable and financially strong company?
2.
2. Are
the supplier’s abiity and integrity proved by past performance?
3.
3. Is
supplier giving me savings along with product improvements?
b.
Technical
capabilities
1.
Will
supplier provide engineering assistance?
2.
Will
supplier’s analytical engineering kills help improve the efficiency of my basic
processes?
3.
Will
supplier provide design assistance?
4.
Does
contribute to general advancement through basic research?
c.
After
sale service
1.
Does
supplier have service shop organisation available when and where i may need it?
2.
Is
emergency service available?
3.
Will
renewable parts be available when i want them?
d.
Availability
1.
Will
suplier ensure on time delivery?
2.
Are
stocks available locally on short notice?
3.
Is
supplier’s location an advantage to me?
4.
Does
supplier plan shipments to minimise my inventory?
5.
Can the
supplier be depended upon to provide a steady flow of products or materials?
e.
Buying
convenience
1.
Does
supplier offer full line of related products?
2.
Does
supplier package his products conveniently for my use?
3.
Does
supplier have a local sales contact? Is he qualified to help me? Does he have
expertise to solve my problems.
4.
Can the
supplier cut my costs like incoming inspection, rejects, complaints etc.
f.
Sales
assistance
1.
Does
supplier help develop mutual market? Will he recommend my products?
2.
Will the
appearance of suppliers product enhance the appearance of my product?
Stores
A7. Give the factors to
consider while deciding stores layout P
511
Stores Layout is a fundamental factor in determining
the efficient performance of the department.The following factors deserve
serious consideration,while planning for the stores layout”
1.Provision for easy receipt,storage and disbursement
of materials,nearness to point of use:
2.Minimum handling and transportation of
materials,good accessibility for handling equipment and personnel.
3.Adequate Capacity provision for flexibility for
future expansion.
4.Efficient utilisation of floor space and height.
5.Clear identification of materials,Quick location of
items and ease of physical counting.
6.Protecting against waste,deterioration,damage and
pilferage.
7. Design the buildings physical appearance to create
good will and to invite business.
8.Arrange storage for fast and easy customer order
processing.
9.Use compatible storage or display equipment to
create good interior appearances.
10.Install good lighting to prevent theft,parts damage
and error in stocking.
11.Plan storage for easy shelf-life rotation to permit
first in first out control.
12.Segregate rebuilt,Re-manufactured,used and new
merchandise.
13.Include safety as a part of the facility plan and
maintain a periodic housekeeping and rearrangement plan.
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