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Supply chain
# EXTENSIVE REVISION NOTES – PURCHASING & SUPPLY CHAIN MANAGEMENT (MCQ ORIENTED)
⚠️ This document is a **VERY DETAILED, IN-DEPTH REVISION**, designed for **serious exam preparation** (40 MCQs or more).
It explains **ALL key terms, concepts, processes, steps, logic, and links between topics**, exactly how examiners expect.
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## 1. CORE DEFINITIONS (ABSOLUTELY FUNDAMENTAL)
### Supply Chain
A **supply chain** is the entire network of organizations, people, activities, information, and resources involved in moving a product or service from **raw material suppliers to final customers**.
It includes:
* Suppliers and suppliers of suppliers
* Manufacturers
* Warehouses
* Distributors and retailers
* Final customers
➡ A supply chain is **end-to-end**.
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### Supply Chain Management (SCM)
Supply Chain Management is the **strategic coordination and integration** of all supply chain activities in order to:
* Reduce total costs
* Improve service level
* Increase speed and flexibility
* Improve customer satisfaction
➡ SCM focuses on **global optimization**, not local optimization.
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### Procurement
Procurement is the **global and strategic process** of acquiring goods and services.
It includes:
* Identifying needs
* Analyzing markets
* Selecting suppliers
* Negotiating contracts
* Managing supplier relationships
➡ Procurement = strategy + process + relationships.
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### Purchasing
Purchasing is a **part of procurement**.
It focuses on the **transactional and operational** side:
* Ordering
* Receiving
* Invoicing
* Payment
➡ Purchasing = execution.
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### Sourcing
Sourcing is the activity of:
* Searching for suppliers
* Evaluating suppliers
* Selecting the most suitable ones
➡ Sourcing answers: *“From whom should we buy?”*
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## 2. ACTIVITIES IN PURCHASING (QUESTION 1 – FULL DETAIL)
Purchasing activities are structured and sequential:
1. **Understanding internal needs**
* Who needs the product or service?
* For what purpose?
* Required quantity and timing
2. **Analyzing current purchases**
* What do we already buy?
* From which suppliers?
* At what cost?
3. **Market and supplier analysis**
* Supplier availability
* Market competitiveness
* Risk level
4. **Supplier selection**
* Evaluation using criteria and methods
5. **Request for quotation/proposal (RFQ/RFP)**
* Formal request sent to suppliers
6. **Negotiation**
* Price
* Delivery terms
* Payment terms
* Contract clauses
7. **Contracting**
* Legal agreement
8. **Order placement & follow-up**
* Ensure delivery on time
9. **Supplier performance evaluation**
* Quality
* Cost
* Delivery
* Service
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## 3. ACTIVITIES IN SUPPLY CHAIN MANAGEMENT (QUESTION 2 – EXPANDED)
Supply Chain Management includes **strategic, tactical, and operational activities**:
### Strategic level
* Network design
* Make or Buy decisions
* Supplier strategy
### Tactical level
* Demand planning
* Inventory policy
* Capacity planning
### Operational level
* Purchasing
* Manufacturing
* Warehousing
* Transportation
* Order fulfillment
➡ SCM integrates **purchasing + production + logistics + IT**.
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## 4. THE SCOR MODEL (QUESTION 3 – FULL EXPLANATION)
The **SCOR Model** is a reference framework that describes how supply chains work.
### SCOR processes:
### 1. PLAN
Purpose: balance demand and supply.
Includes:
* Demand forecasting
* Sales & Operations Planning (S&OP)
* Capacity planning
* Budgeting
### 2. SOURCE
Purpose: obtain materials and services.
Includes:
* Supplier selection
* Contract management
* Purchase orders
* Supplier monitoring
### 3. MAKE
Purpose: transform inputs into finished goods.
Includes:
* Production planning
* Manufacturing
* Quality control
* Maintenance
### 4. DELIVER
Purpose: move products to customers.
Includes:
* Warehousing
* Inventory management
* Transportation
* Order picking
### 5. RETURN
Purpose: manage reverse flows.
Includes:
* Returns
* Repairs
* Recycling
* Disposal
### 6. ENABLE
Purpose: support all other processes.
Includes:
* IT systems
* KPIs
* Risk management
* HR & training
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## 5. PURCHASING PROCESS STEPS (QUESTION 4 – VERY IMPORTANT)
1. **Need identification**
* Define what is really needed
2. **Need specification**
* Translate needs into technical or functional terms
3. **Supplier sourcing**
* Identify potential suppliers
4. **Supplier selection**
* Evaluate and rank suppliers
5. **Consultation**
* RFQ / RFP / Tendering
6. **Negotiation**
* Price, lead time, quality, risks
7. **Contracting**
* Formal agreement
8. **Ordering**
* Purchase order issuance
9. **Performance evaluation**
* Continuous monitoring
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## 6. SUPPLIER SELECTION CRITERIA (QUESTION 5 – DETAILED)
Supplier selection uses **multi-criteria evaluation**:
### Economic criteria
* Price
* Cost structure
* Total cost
### Technical criteria
* Product quality
* Technology
* Capacity
### Logistical criteria
* Lead time
* Reliability
* Flexibility
### Financial criteria
* Financial health
* Credit risk
### Strategic criteria
* Innovation
* Long-term partnership
### CSR criteria
* Environmental practices
* Social responsibility
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## 7. TOTAL COST OF OWNERSHIP – TCO (QUESTION 6 – FULL)
TCO measures **all costs incurred during the life cycle** of a product or service.
### Pre-acquisition costs
* Market research
* Supplier evaluation
### Acquisition costs
* Purchase price
* Transport
* Customs
### Post-acquisition costs
* Maintenance
* Energy
* Training
* End-of-life
➡ TCO ≠ Price.
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## 8. MAKE OR BUY DECISION (QUESTION 7 – DEEP ANALYSIS)
Make or Buy determines whether an activity should be:
* Performed internally (Make)
* Outsourced (Buy)
### Key decision factors
* Cost comparison
* Core competencies
* Quality requirements
* Risk exposure
* Strategic control
* Capacity constraints
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## 9. SUPPLY CHAIN FLOWS (QUESTION 8 – VERY IMPORTANT)
### 1. Physical flows
Movement of goods from suppliers to customers.
### 2. Information flows
Orders, forecasts, inventory data.
### 3. Financial flows
Payments, invoices, credits.
All flows must be **synchronized**.
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## 10. THE KRALJIC MATRIX (QUESTION 9 – FULL)
The Kraljic Matrix classifies purchases based on:
* Supply risk
* Profit impact
### Categories
**Non-critical items**
* Low risk, low impact
* Simplify process
**Leverage items**
* Low risk, high impact
* Negotiate price
**Bottleneck items**
* High risk, low impact
* Secure supply
**Strategic items**
* High risk, high impact
* Partnership
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## 11. WAREHOUSING SAFETY (QUESTION 10 – DETAILED)
Warehouse safety aims to:
* Prevent accidents
* Protect workers
* Ensure operational continuity
### Safety measures
* Risk assessments
* Training programs
* PPE usage
* Equipment maintenance
* Clear procedures
Safety is part of **ENABLE** in SCOR.
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## 12. COMMON MCQ CONFUSIONS
* Procurement vs Purchasing
* Price vs TCO
* Logistics vs Supply Chain
* SCOR Deliver vs Source
* Make or Buy vs Outsourcing
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## FINAL STUDY STRATEGY
1. Understand concepts first
2. Memorize definitions
3. Practice MCQs
4. Focus on differences
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