Party Is Over: Let A Procurement Play A Strategic Role In Your Company (Again).

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Effects analysis refers to studying the consequences of those failures. Immediate consequences of a failure on operation, function or functionality, or status of some item. An identifier for item complexity. Complexity increases as levels are closer to one.

Defects in design, process, quality, or part application, which are the underlying cause of the failure or which initiate a process which leads to failure. Severity considers the worst potential consequence of a failure, determined by the degree of injury, property damage, or system damage that could ultimately occur. Since FMEA is effectively dependent on the members of the committee which examines product failures, it is limited by their experience of previous failures.

If a failure mode cannot be identified, then external help is needed from consultants who are aware of the many different types of product failure. FMEA is thus part of a larger system of quality control, where documentation is vital to implementation. Total Quality Management is the organization-wide management of quality. Management consists of planning, organizing, directing, control, and assurance. Total quality is called total because it consists of two qualities: One major aim is to reduce variation from every process so that greater consistency of effort is obtained. Kansei — Examining the way the user applies the product leads to improvement in the product itself.

A Quality Management System is typically defined as: Therefore Quality Management Systems focus on customer expectations and ongoing review and improvement. TQM requires that the company maintain this quality standard in all aspects of its business. This requires ensuring that things are done right the first time and that defects and waste are eliminated from operations.

In order to ensure that value for money is achieved it is essential that a sufficient number of competent, financially sound suppliers with adequate capacity to undertake the work be identified. Purchasers should bear in mind when considering the method of attracting suppliers that adequate publicity be given in order to satisfy the principle of transparency. No specific level has been set to determine at what level contracts should be advertised. Factors that contracting authorities should take into account include:. What is considered adequate publicity will depend on the specific nature of the contract and the commodity sought, and may be affected by factors such as the value of the contract or the complexity of the project.

Any advertisement should make it clear what the business need is so that suppliers can see what services are required. This refers to the process of evaluating and approving potential suppliers by factual and measurable assessment. The purpose of supplier evaluation is to ensure a portfolio of best in class suppliers is available for use. Supplier evaluation is also a process applied to current suppliers in order to measure and monitor their performance for the purposes of reducing costs, mitigating risk and driving continuous improvement.

Supplier evaluation is a continual process within purchasing departments and forms part of the pre-qualification step within the purchasing process, although in many organizations it includes the participation and input of other departments and stakeholders.. Based on the information obtained via the evaluation, a supplier is scored and either approved or not approved as one from whom to procure materials or services. In many organizations, there is an approved supplier list ASL to which a qualified supplier is then added. Once approved, a supplier may be reevaluated on a periodic, often annual, basis.

The ongoing process is defined as supplier performance management. This information enables the contracting organization to determine the overall capability and capacity of the prospective service provider It is crucial to the achievement of best value for money that only competent suppliers are selected. A request for proposal referred to as RFP is an invitation for suppliers, often through a bidding process, to submit a proposal on a specific commodity or service. RFPs often include specifications of the item, project or service for which a proposal is requested.

The more detailed the specifications, the better the chances that the proposal provided will be accurate. Generally RFPs are sent to an approved supplier or vendor list. Request for Quotation RFQ is used when discussions with bidders are not required mainly when the specifications of a product or service are already known and when price is the main or only factor in selecting the successful bidder. In this scenario, products, services or suppliers may be selected from the RFQ results to bring in to further research in order to write a more fully fleshed out RFP.

It is used to gather vendor information from multiple companies to generate a pool of prospects. This eases the RFP review process by preemptively short-listing candidates which meet the desired qualifications. The bidders return a proposal by a set date and time. Late proposals may or may not be considered, depending on the terms of the initial RFP. The proposals are used to evaluate the suitability as a supplier, vendor, or institutional partner.

From ITIL to Next-Gen Service Management

Discussions may be held on the proposals often to clarify technical capabilities or to note errors in a proposal. In some instances, all or only selected bidders may be invited to participate in subsequent bids, or may be asked to submit their best technical and financial proposal, commonly referred to as a Best and Final Offer BAFO. Selecting supplier is not an easy process. Many different formulas and techniques can be used. One effective method assigns suppliers to four basic categories based upon their level of performance in key areas, such as delivery, quality and responsiveness.

As well as increased use of suppliers, the future will also see them being involved earlier in the product development process. The activities of the product development process were carried out in series, and suppliers were only involved near the end of the process. A typical product would go through many activities — it might start life in the marketing function, and then go through conceptual design, engineering design and analysis, testing, detailed design, manufacturing engineering, process planning, tooling, production planning, purchasing, machining, assembly, testing, packaging, installation and maintenance.

In some cases, suppliers were only brought into the process to compete against each other on pricing. As a result the company finished up working with a large number of suppliers, and even with different suppliers on similar products. It was impossible to build up the stable, long-term quality-generating relationships that lead to client satisfaction. To respond to the need to get products to market faster, to reduce the cost of developing products and to make sure the product provides customer satisfaction, the product development process needs to be re-organized.

In team-oriented companies, people from different functions will work together on the upstream activities, effectively taking the major decisions about the entire product development process in the initial design phase. The team will need to know in detail at an early stage about the different parts of the product, and the way the parts fit together. The team will want to make the best possible use of suppliers with the aim of getting a customer-satisfying product to market as quickly as possible.

This will probably mean involving the supplier right at the beginning of the process, when the major modules of the product are being defined. The supplier will then be given the job of designing and manufacturing a complete sub-assembly. In the re-organized process, suppliers will be expected to respond quickly, to be responsible and to be reliable. They will be expected to have excellent skills, knowledge and experience concerning particular parts or activities. The company will want to have long-term relationships with a small group of highly competent, knowledgeable and trusted suppliers.

All brave sellers want a qualified buyer to pay very close to maximum value for their business. In addition to high range value, sellers consistently prefer to deal with a buyer whom they like and can trust with the future of their business and its employees. What attitude attracts and retains a qualified buyer through the closing?

All brave buyers hope to find a bargain, but expect to pay a fair price. In addition to a fair price, buyers always prefer to deal with a willing and cooperative seller, whom they like and can trust. What attitude encourages open dialog and bonding? Proactive and cooperative sellers set the tone for fair value negotiations.

IT Service Management roles and responsibilities

In the best transactions a special rapport builds, which results in an extra effort by the seller to help the buyer succeed. The most successful buyers actively communicate with the seller and follow-up with a fax or letter. Successful buyers have conversations with the seller about post-acquisition issues. Personal involvement is critical. The price paid is very important, but the winning buyers are those who establish rapport, a shared vision, and a personal bonding with the seller. Remember, intermediaries bring buyers, advice, and assist. Sellers must actively sell their business.

Successful closings, a high commitment for direct personal involvement is required between the seller and the buyer. Supplier management team is a discipline of working collaboratively with those suppliers that are vital to the success of your organization, to maximize the potential value of those relationships. Once the sourcing procurement team has engaged a supplier there is a real need to maintain a balance of control in the new relationship to ensure the benefits of that deal are delivered.

This can lead to not only the failure to deliver the projected on-boarding benefit but create frustrating and unsatisfactory relationships which in turn can impact service, cost and the ability to adapt to changing market influences. Cross category supplier measurement can take place, risk mitigation exercises both reactive and proactive can be undertaken and knowledge and innovation can be shared for mutual gain.

Equally an SMT function can create a community for the SMTs, or Account Managers, Supply Chain Consultants, Supplier Performance Managers in which they can centralize knowledge and deliver revenue generating opportunities for both parties through the exploration of additional, out of current contract business opportunities.

SE is a concept that refers to the participation of all the functional areas of the firm in the product design activity. A Cross-functional team is a group of people with different functional expertise working toward a common goal. It may include people from finance, marketing, operations, and human resources departments. Typically, it includes employees from all levels of an organization. Members may also come from outside an organization in particular, from suppliers, key customers, or consultants.

Cross-functional teams often function as self-directed teams responding to broad, but not specific directives. The client organization and the supplier enter into a contractual agreement that defines the transferred services. Under the agreement the supplier acquires the means of production in the form of a transfer of people, assets and other resources from the client. The client agrees to procure the services from the supplier for the term of the contract.

Stock control, otherwise known as inventory control, is used to show how much stock you have at any one time, and how you keep track of it. It applies to every item you use to produce a product or service, from raw materials to finished goods. It covers stock at every stage of the production process, from purchase and delivery to using and re-ordering the stock. Efficient stock control allows you to have the right amount of stock in the right place at the right time. It ensures that capital is not tied up unnecessarily, and protects production if problems arise with the supply chain.

Deciding how much stock to keep depends on the size and nature of your business, and the type of stock involved. If you are short of space you may be able to buy stock in bulk and then pay a fee to your supplier to store it, calling it off as and when needed. Keeping stocks of unfinished goods can be a useful way to protect production if there are problems down the line with other supplies. There are several methods for controlling stock, all designed to provide an efficient system for deciding what, when and how much to order.

This is known as the Re-order Level. At every review you place an order to return stocks to a predetermined level. Economic Order Quantity EOQ — a standard formula used to arrive at a balance between holding too much or too little stock. Batch control — managing the production of goods in batches. You need to make sure that you have the right number of components to cover your needs until the next batch. Stock is identified by date received and moves on through each stage of production in strict order. In planning, and controlling inventories forecasting is based on whether demand for items in inventories is independent or dependent.

Dependent items are usually subassemblies or components parts that will be used in the production of final or finished products. And example is demand for wheels for new cars. If each car is to have four wheels, then the total number of wheels require for a production run is simply a function of the number of cars that are to be produced in that run.

Independent demand items are the finished goods or other end items that are sold to someone. There is usually no way to determine precisely how many of these items will be demanded during any given time period because demand typically includes an element of randomness. Forecasting plays an important role in stocking decision, whereas stock requirements for dependent demand items are determined by reference to the production plan.

Inventories are used to satisfy demand requirements, so it is essential to have reliable estimates of the amount and timing of demand it is important to know how long it will take for orders to be delivered. Managers need to know the extent to which demand and lead time might vary; the greater the potential variability, the greater the need for additional stock to reduce the risk of shortage between deliveries. Thus there is crucial link between forecasting and inventory management.

Material Requirements planning is a computer-based information system designed to handle ordering and scheduling dependent demand inventories. A production plan for a specified number of finished products is translated into requirements for component parts and raw materials working backward from the due date, using lead times and other information to determined when and how much to order. Thus MRP is designed to answer the questions: How much is needed? And when it is needed?

PURCHASING AND SUPPLY CHAIN MANAGMENT 4 PP111

BOM contains a listing of all the assemblies, subassemblies, parts, and raw materials that are needed to produce one unit of a finished product. Thus each finished product has its own bill of materials. This is used to store information on the status of each item by time period. This includes gross requirements, scheduled receipts, and expected amount on hand. It also includes other details for each items, such as supplier, lead-time, and lot-size, changes due to stock receipts and cancelled order, withdrawals and similar events are also recorded in this file.

Computers and appropriate software program to handle computations and maintained records. Inaccuracy can lead to unpleasant surprises, ranging from missing parts, ordering two many of some items or too few of others and failure to stay on schedule. It represents an effort to expand the scope of production resources planning, and to involve other functional areas of the firm in the planning process especially marketing and finance.

In too many instances, production, marketing, and finance operate without complete knowledge or regards for what other areas of the firm are doing. For the firm need to focus on a common set of goals. This is the major purpose of MRP2, to integrate all functions. The rationale for having these functional areas work together is the increased likelihood of developing a plan that works and with which everyone can live by.

Again, because each of the functional areas is involved in formulating the plan, they will have reasonably knowledge of the plan and more reason to work towards achieving it. This is MRP2 comes into play, generally material requirements and schedules. Next, management must make more detailed capacity requirements planning to determine whether these more specific capacity requirements can be met. Distribution Requirement Planning is a system for inventory management and distribution planning.

It is especially useful in multi-echelon warehouse system. DRP is used to plan and coordinate transportation, warehousing location, workers, equipment, and financial flows. The Just in Time System is a manufacturing practice developed by the Japanese in order to minimize holdings of stock. Suppliers deliver materials needed for production at the exact moment they are required.

Goods are produced only as they are needed for the next phase of production. Stock is frequently delivered therefore there is a zero inventory situation. The firm only produces something when there is actual customer demand for it First sell it, then make it. The Just in Time system only work when there is high employee flexibility and commitment and a well coordinated production system to ensure quality and continuous improvements to minimize bottlenecks.

A system can communicate such demand by using a kanban card. The kanban card is an authorization to move or work on parts. In kanban system no part can be worked or move without one of the card. It worked like this. Each container is affixed with a card. When a process or work station needs to replenish its supply of parts, a worker goes to the area where these parts are stored and withdraws one container of parts.

Each container holds a predetermined quantity. The worker removes the kanban card from the container and posts it in a designated spot where it will be clearly visible. The worker moves the container to the work station. The posted kanban card is then picked up by a stock person who replenished the stock with another containerm and so on down the line. The number of kanban card need for a given production level can be calculated using this formular:.

Suppliers are replenished as soon as inventories reach predetermined level. Increased competition and rising business costs are forcing companies to rethink the way they coordinate and manage vendor and customer relationships. Lean centers on eliminating waste and speeding up business processes. In the supply chain context, it encompasses the procedures that precede and follow the actual, physical manufacturing process. Lean works particularly well in the supply chain, where redundancy and waste can hamper the overall productivity of all partners.

That waste can seriously hinder profitability. In fact, the Yankee Group says U. Companies that have transitioned lean from the manufacturing floor to the supply chain emphasize quality, preventative maintenance and continuous improvement. Eliminate poor demand visibility, long order cycles, high product costs, and low margins, improve responsiveness, reduce waste and variability, and improve flow and cycle times, and lower IT management costs. Are we outsourcing enough?

What functions can we move to China? Are we doing business with India yet? It is likely that a procurement manager somewhere is being asked these questions right now. Executives have noticed their peers increasingly relying on outsourcing. While outsourcing may seem new, it really is just a new focus on the classic make or buy procurement decision. You need to ensure that such decisions are made intelligently and not just based on the outsourcing trend. The decision to outsource a part or assembly is often based on lack of internal resources, refocus of core competencies, or cost reduction.

The focus of this article is on outsourcing with the objective of lower cost. If you are attempting to outsource a part or assembly that is produced in-house based on lower cost, you must perform a thorough analysis. In many cases, cost can only be reduced if the supplier is going to use a more efficient process or significantly less expensive labor. You must be careful in comparing costs. Unless you are going to eliminate some fixed costs, the only real cost reduction is the variable cost.

If the supplier cannot produce the part for a price lower than your variable cost, you are not saving your company money. If you are in the process of outsourcing a part or assembly in an effort to reduce cost, you should be searching for a supplier that can produce the part using a more efficient method than you or a much lower labor rate are currently using. Even after they add in their overhead and profit, it is possible that the supplier can produce the part for less cost than you can in house. How hard is the money you have invested working for you?

Say you sell N10, worth of a product at cost each year. Total revenue received from sales of the product is N12, If we bought the entire N10, worth of the product on January 1st, at the end of the year we would have made a N2, gross profit on an investment of N10, But do we have to buy the entire N10, worth of the product at one time?

What if we bought N5, worth of the product on January 1st. Then, just before running out of stock, we bought an additional N5, worth of the product with part of the revenues received from selling the first shipment. Could we make the same gross profit on an even smaller investment? What if we were to buy N2, dollars worth of material. Sell most of it.

Buy another N2, dollars worth of the product. Sell most of that shipment and then repeat the process two more times before the end of the year. The annual gross profit of N2, is now generated with an investment of about N2, Which investment option is better? Selling N10, worth of a product and making N2, gross profit with an investment of N10,, N5, or N2,? The best option is N2, Investing N2, rather than N10, frees up N7, that can be used for other purposes… such as stocking other products that have the potential of generating additional profits.

Capital goods include factories, machinery, tools, equipment, and various buildings which are used to produce other products for consumption. Capital goods also refer to any material used or consumed to manufacture other goods and services. Capital goods are important to businesses, because they use capital goods to help their business make functional goods for the buying public or to provide consumers with a valuable service.

The significant exception to this is depreciation allowance, which like intermediate goods, is treated as a business expense. The major factors that must be taken into consideration when you are deciding to lease or buy a piece of capital equipment. What are the major factors that must be taken into consideration when you are deciding to lease or buy a piece of capital equipment?

A minimal down payment consisting of a first and last payment is usually required in advance, and the monthly payments remain the same for the duration of the lease. Plus, electronic documents can be generated the same day as the approval so you can watch a machine demo, apply for credit, have documents signed and receive a purchase order all in the same day. The use of a piece of machinery to make a product is what makes a company income. Leasing provides an easy, affordable method of using equipment that allows a monthly payment without obtaining a bank loan or worrying about budget justification.

Leasing also keeps your other lines of credit open and total system financing, including delivery and installation, can be spread over the lease term. When acquiring new equipment, leasing provides advantages such as:. Your cash — Hold or spend it; leasing preserves capital for other uses whether they are known or those that are unforeseen.

Cost level — Instead of a large upfront dollar outlay when purchasing equipment, leasing minimizes it. Another way of asking that question is: Life cycle costs LCC are all costs from project inception to disposal of equipment. LCC applies to both equipment and projects. LCC costs are found by an analytical study of total costs experienced during the life of equipment or projects.

The object of LCC analysis is to choose the most cost-effective approach from a series of alternatives so the least long term cost of ownership is achieved. LCC analysis helps engineers justify equipment and process selection based on total costs rather than the initial purchase price of equipment or projects. LCC provides best results when both art and science are merged together with good judgment as is true with most engineering tools. LCC costs have two major elements: Acquisition and sustaining costs are not mutually exclusive.

Frequently the cost of sustaining equipment is 2 to 20 times the acquisition cost. One of the key areas of long-term decision-making that firms must tackle is that of investment — the need to commit funds by purchasing land, buildings, machinery and so on, in anticipation of being able to earn an income greater than the funds committed. In order to handle these decisions, firms have to make an assessment of the size of the outflows and inflows of funds, the lifespan of the investment, the degree of risk attached and the cost of obtaining funds.

Even the projects that are unlikely to generate profits should be subjected to investment appraisal. So investment appraisal may help to find the cheapest way to provide a new staff restaurant, even though such a project may be unlikely to earn profits for the company. One of the most important steps in the capital budgeting cycle is working out if the benefits of investing large capital sums outweigh the costs of these investments. The range of methods that business organizations use can be categorized one of two ways: This is literally the amount of time required for the cash inflows from a capital investment project to equal the cash outflows.

The usual way that firms deal with deciding between two or more competing projects is to accept the project that has the shortest payback period. Payback is often used as an initial screening method. So, if N4 million is invested with the aim of earning N, per year net cash earnings , the payback period is calculated thus:.

This all looks fairly easy! But what if the project has more uneven cash inflows? Then we need to work out the payback period on the cumulative cash flow over the duration of the project as a whole. Firstly, it is popular because of its simplicity. Research over the years has shown that UK firms favor it and perhaps this is understandable given how easy it is to calculate.

Secondly, in a business environment of rapid technological change, new plant and machinery may need to be replaced sooner than in the past, so a quick payback on investment is essential. Thirdly, the investment climate in the UK in particular, demands that investors are rewarded with fast returns.

Many profitable opportunities for long-term investment are overlooked because they involve a longer wait for revenues to flow. Who decides the length of optimal payback time? No one does — it is decided by pitting one investment opportunity against another. Cash flows are regarded as either pre-payback or post-payback , but the latter tend to be ignored.

The average rate of return expresses the profits arising from a project as a percentage of the initial capital cost. However the definition of profits and capital cost are different depending on which textbook you use. For instance, the profits may be taken to include depreciation, or they may not. One of the most common approaches is as follows:. A project to replace an item of machinery is being appraised. What is the ARR for this project? As with the Payback method, the chief advantage with ARR is its simplicity.

This makes it relatively easy to understand. There is also a link with some accounting measures that are commonly used. The ARR is expressed in percentage terms and this, again, may make it easier for managers to use. Secondly, the concept of profit can be very subjective, varying with specific accounting practice and the capitalization of project costs. As a result, the ARR calculation for identical projects would be likely to result in different outcomes from business to business. Thirdly, there is no definitive signal given by the ARR to help managers decide whether or not to invest. This lack of a guide for decision making means that investment decisions remain subjective.

NPV is a technique where cash inflows expected in future years are discounted back to their present value. This is calculated by using a discount rate equivalent to the interest that would have been received on the sums, had the inflows been saved, or the interest that has to be paid by the firm on funds borrowed. Assessing the value of NPV calculations is simple.

When more than one project is being appraised, the firm should choose the one that produces the highest NPV.

Imagine a scenario where the managers of a firm are considering whether to accept or reject an investment project, on the basis of their acquiring the funds necessary at a known rate of interest. Repetitive codes for frequent transfers to same Beneficiaries Fastest way for Beneficiary to receive good funds.

Easy to trace movement of funds from bank to bank Cost is usually more than other means of payment. Acceptance credits offer built-in financing opportunity Rights and risks of Buyer and Seller are balanced. Confirmation eliminates country risk and commercial risk More costly than other payment alternatives. Confirmation eliminates country risk and commercial risk Weak language can give Beneficiary unintended advantages. Defects liability clauses in construction contracts are clauses in which the parties choose to allocate risk.

In the case where due to a defect in the delivered product, a life, a body or property of another person including a third party not using or consuming the product directly, and a legal person as well as a natural person is injured, the person who manufactured, processed, imported or put his name, etc.

However, the manufacturer, etc. Therefore, incorporeal property such as services, information, software, electricity, etc. Moreover, agricultural, forestall, marine and mineral products which are not processed artificially are not the object of the Law. Any person who puts his name, etc. The right for damages provided in the Law shall be extinguished by prescription if the injured person or his legal representative does not exercise their rights within the following period: A period of three years from the time when the injured person or his legal representative becomes aware of the damage and the liable party for the damage short-term negative prescription A period of ten years from the time when the manufacturer, etc.

A lot of businesses are dedicated to improving their business through proper customer support. A good customer support system will bring in the best feed back that can be used to better the business services and products. Usually these procedures of getting customer feed back is taken in a negative sense by the employees as some businesses use this information to point out flaws in the employees relation ship with the customer or a lack of service meted out. This should not be the case. Positive or negative feed back should be used only to motivate the employee to understand their short comings.

This is what good customer support is all about — making the customer satisfied and employee happy. We provide Customer Support Services so what are you waiting for ask for a quote now. A commodity is some good for which there a demand is, but which is supplied without qualitative differentiation across a market. It is a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk. In other words, copper is copper. The price of copper is universal, and fluctuates daily based on global supply and demand. Stereos, on the other hand, have many levels of quality.

And, the better a stereo is [perceived to be], the more it will cost. One of the characteristics of a commodity good is that its price is determined as a function of its market as a whole. Well-established physical commodities have actively traded spot and derivative markets. Generally, these are basic resources and agricultural products such as iron ore, crude oil, coal, ethanol, salt, sugar, coffee beans, soybeans, aluminum, copper, rice, wheat, gold, silver and platinum.

A forward contract or simply a forward is an agreement between two parties to buy or sell an asset at a certain future time for a certain price agreed today. It costs nothing to enter a forward contract. The party agreeing to buy the underlying asset in the future assumes a long position, and the party agreeing to sell the asset in the future assumes a short position.

The price agreed upon is called the delivery price, which is equal to the forward price at the time the contract is entered into. There are many specific financial vehicles to accomplish this, including insurance policies, forward contracts, swaps, options, many types of over-the-counter and derivative products, and perhaps most popularly, futures contracts. Public futures markets were established in the s to allow transparent, standardized, and efficient hedging of agricultural commodity prices; they have since expanded to include futures contracts for hedging the values of energy, precious metals, foreign currency, and interest rate fluctuations.

Futures contract, in finance, refers to a standardized contract to buy or sell a specified commodity of standardized quality at a certain date in the future, at a market determined price the futures price. The contracts are traded on a futures exchange. In finance, an option is a contract between a buyer and a seller that gives the buyer the right—but not the obligation—to buy or to sell a particular asset the underlying asset at a later day at an agreed price. In return for granting the option, the seller collects a payment the premium from the buyer.

A call option gives the buyer the right to buy the underlying asset; a put option gives the buyer of the option the right to sell the underlying asset. If the buyer chooses to exercise this right, the seller is obliged to sell or buy the asset at the agreed price.

The buyer may choose not to exercise the right and let it expire. The underlying asset can be a piece of property, or shares of stock or some other security, such as, among others, a futures contract. Over-the-counter OTC trading is to trade financial instruments such as stocks, bonds, commodities or derivatives directly between two parties. It is contrasted with exchange trading, which occurs via facilities constructed for the purpose of trading i. The spot price or spot rate of a commodity, a security or a currency is the price that is quoted for immediate spot settlement payment and delivery.

Spot settlement is normally one or two business days from trade date. This is in contrast with the forward price established in a forward contract or futures contract, where contract terms price are set now, but delivery and payment will occur at a future date. For securities, the synonymous term cash price is more often used. Depending on the item being traded, spot prices can indicate market expectations of future price movements in different ways.

For a security or non-perishable commodity e. In theory, the difference in spot and forward prices should be equal to the finance charges, plus any earnings due to the holder of the security. In contrast, a perishable commodity does not allow this arbitrage — the cost of storage is effectively higher than the expected future price of the commodity. As a result, spot prices will reflect current supply and demand, not future price movements.

Spot prices can therefore be quite volatile and move independently from forward prices. According to the unbiased forward hypothesis, the difference between these prices will equal the expected price change of the commodity over the period. The July price will reflect tomato supply and demand in July. July tomatoes are effectively a different commodity from January tomatoes price. Denoting a price for goods that does not include any loading or transport…in loading, transporting, or shipping them to their destination. A loco price might be quoted in the form: N per tonne, loco PH factory.

A cost-plus contract, more accurately termed a Cost Reimbursement Contract, is a contract where a contractor is paid for all of its allowed expenses to a set limit plus additional payment to allow for a profit. Cost reimbursement contracts contrast with fixed-price contract, in which the contractor is paid a negotiated amount regardless of incurred expenses. There are four general types of cost reimbursement contracts, all of which pay every allowable, allocatable, and reasonable cost incurred by the contractor plus a fee or profit which differs by contract type.

In some contracts, the fee is determined subjectively by an awards fee board whereas in others the fee is based upon objective performance metrics. An aircraft development contract, for example, may pay award fees if the contractor achieves certain speed, range, or payload capacity goals. Because this contract type provides no incentive for the contractor to control costs it is rarely utilized. A cost reimbursement contract is appropriate when it is desirable to shift some risk of successful contract performance from the contractor to the buyer.

It is most commonly used when the item purchased cannot be explicitly defined, as in research and development, or in cases where there is not enough data to accurately estimate the final cost. A fixed-price contract is a contract where the amount of payment does not depend on the amount of resources or time expended, as opposed to a cost-plus contract which is intended to cover the costs and some amount of profit. Such a scheme is often used in military and government contractors to put the risk on the side of the vendor, and control costs.

However, historically when such contracts are used for innovative new projects with untested or undeveloped technologies, such as new military transports or stealth attack planes, it can and often results in a failure if costs greatly exceed the ability of the contractor to absorb unforeseen cost overruns. However, such contracts continue to be popular despite a history of failed or troubled projects, though they tend to work when costs are well known in advance. Some laws have been written which prefer fixed-price contracts; however, many maintain that such contracts are actually the most expensive, especially when the risks or costs are unknown.

A CPIF Cost-Plus-Incentive-Fee contract is a cost-reimbursement contract that provides for an initially negotiated fee to be adjusted later by a formula based on the relationship of total allowable costs to total target costs. Like a cost-plus contract, the price paid by the buyer to the seller changes in relation to costs, in order to reduce the risks assumed by the contractor seller. To achieve this incentive, in CPIF contracts, the seller is paid his target cost plus a initially negotiated fee plus a variable amount that is determined by subtracting the target cost from the actual costs, and multiplying the difference by the buyer ratio.

To protect the buyer, it is common to set a ceiling price. This is the maximal price the buyer will required to pay the seller, regardless of how high the costs are. The point of total assumption PTA is a point on the cost line of the Profit-cost curve determined by the contract elements associated with a fixed price plus incentive-Firm Target FPI contract above which the seller effectively bears all the costs of a cost overrun.

The seller bears all of the cost risk at PTA and beyond, due to a dollar for dollar decrease in profit beyond the costs at the PTA. Note, however, that between the cost at PTA and when the cost equals the ceiling price, the seller is still in a profitable position; only after costs exceed the ceiling price is the seller in a loss position. Any FPI contract specifies a target cost, a target profit, a target price, a ceiling price, and one or more share ratios.

If for a moment, PTA is given and you are trying to calculate the ceiling price for the buyer maximum amount that the buyer will have to spend ,the calculation will be. For cost reimbursable contract, the Point of Total Assumption does not exist, since the buyer agrees to cover all costs. The CPIF includes both a minimum fee and a maximum fee. The share line in combination with the Target Fee, Maximum Fee and Minimum Fee can be used to easily calculate the points at which the incentive arrangement affects fee.

Straight re-buy- re-purchase of an existing product, routine, simple re-orders. Modified re-buy- some minor changes to existing product, not as complex as new task. This is a term used to describe practice of sourcing from the global market for goods and services across geopolitical boundaries. A definition focused on this aspect of global sourcing is: Global sourcing often aims to exploit global efficiencies in the delivery of a product or service.

These efficiencies include low cost skilled labor, low cost raw material and other economic factors like tax breaks and low trade tariffs. Majority of companies today strive to harness the potential of global sourcing in reducing cost. Hence it is commonly found that global sourcing initiatives and programs form a integral part of the strategic sourcing plan and procurement strategy of many multinational companies.

Global sourcing is often associated with a centralized procurement strategy for a multinational, wherein a central buying organization seeks economies of scale through corporate-wide standardization and benchmarking. The global sourcing of goods and services has advantages and disadvantages that can go beyond low cost. Some advantages of global sourcing, beyond low cost, include: Costs — A global sourcing strategy is often used to benefit from lower labor costs abroad.

They include multi-modal freight charges, broker fees, bank fees, taxes called duties, insurance, etc. Laws — Global sourcing forces buyers and suppliers to choose one of three bodies of law to apply to their contract: Currency — The buyer and the seller must agree on a currency to use. Lead Time — Lead time for global purchases is usually significantly longer than for domestic ones. This is due to ocean travel being slower than air travel and customs clearance adding time not involved in domestic sourcing.

Optimizing the flow of incoming materials requires a value chain approach that evaluates the tradeoffs between truckload vs. High Transportation prices have forced companies to completely re-think their transportation habits, from the type of vehicles they used to how they go about their daily errands. Managers have developed a newfound awareness of transportation and logistics expenses. With so many variables and cost drivers, getting a handle on such costs requires a value chain perspective that includes an end-to-end look at transportation. They focuses on some of the opportunities for improvement and potential savings on the inbound side of the logistics equation.

This includes redefining milk runs, cross docking, scheduling deliveries and the intelligent use of technology. Mapping all of the transportation legs between the point of origin and your facility can make it easy to see where and when problems are likely to arise.. By definition the receiving function does not create value. The goal is therefore to minimize the time and touches required to move material from the dock to the assembly line or work cells.

Accomplishing this starts at the points of use in the plant, focusing specifically on high naira value and high frequency items. Looking at the actual rate of consumption, will reveal the optimum rate of incoming parts and subassemblies. Such analysis typically yields an ideal material flow that is characterized by smaller quantities and more frequent deliveries.

Such a tactic would logically translate into higher transportation costs unless incoming shipments can be consolidated. Another way to consolidate shipments into truckload quantities is to establish some form of transportation loop, known as a milk run. The truck becomes the consolidation device, picking up shipments from suppliers within a particular geographic area on a daily or weekly basis, and delivering them to the factory on a regular schedule. Getting such an approach to work requires an ability to minimize and manage variability.

Milk run truckloads will typically include a broad variety of products. Some pallets will be stackable and some will not. Managing variability in volume presents some special challenges as well. The size of the truck offers some opportunity for aligning the incoming flow with normal consumption patterns. Any overflow, during seasonal sales spikes for example, should be handled via alternative transportation modes. If shipment volumes for a SKU tend to have huge swings in volume-perhaps because a particular raw material is produced in large batches at irregular intervals-they should not be considered for milk run delivery.

With sufficient oversight day-to-day execution of the route can be cost effectively managed by a third-party logistics provider. However it is managed, the mix and volume of the incoming parts flow should be re-evaluated at least every quarter. Another strategy for consolidating shipments is cross docking.

ITIL/ITSM Roles and Responsibilities

A cross dock receives a variety of products and sorts and consolidates them for shipment without anything ever being put into long-term storage. These facilities, which may look similar to a normal warehouse with more staging areas and fewer storage racks, or feature miles of conveyor and highly automated sorting equipment, allow large quantities of product to be received from one channel and a mixed load to be built on the outbound side. The concept can be just as effective on much smaller scale. No matter the approach, effectively managing the inbound material flow offers a huge advantage when it comes to scheduling.

Most receiving docks are overwhelmed with deliveries at certain times of the day. The peak time might be first thing in the morning, late in the afternoon or happen at completely unpredictable intervals. The receiving area descends into chaos with material piling up in staging areas and lift trucks dashing to and fro. During other hours there may be little for people to do but sweep the floors. Scheduling and segmenting some portion of the inbound material flow will smooth the flow of goods through receiving.

More predictable deliveries allow managers to do a better job of allocating resources, including labor, floor space and material-handling equipment. Improved predictability also improves productivity and limits overtime requirements. More predictable work patterns also allow for the establishment of standardized work.

These are some of the basic tactics for streamlining the flow of incoming materials. Operations managers need to stay on top of such activity as global transportation rates rise. The process relates to the movement and storage of products from the end of the production line to the end user. Contract management or contract administration is the management of contracts made with customers, vendors, partners, or employees. Clear definitions of accountability and responsibility are essential for effective service management. To help with this task the RACI Responsible — Accountable — Consulted — Informed model or "authority matrix" is often used within organizations to define the roles and responsibilities in relation to processes and activities.

When using RACI, there is only one person accountable for an activity for a defined scope of applicability. Hence, there must be only one process owner for each process and one service owner for each service. For the sample roles outlined below, some of them are based on ITIL processes while others are based on common IT practices, and the names and combinations may vary depending on the organization. Key thing for every IT organization is to ensure that based on their structure, service offerings and processes, relevant roles are identified, documented and assigned and constantly reviewed.

The specific roles within ITIL service management all require specific skills, attributes and competences from the people involved to enable them to work effectively and efficiently. However, whatever the role, it is imperative that the person carrying out that role has the following attributes:. The primary aim of the service desk is to provide a single point of contact between the services being provided and the users. A typical service desk manages incidents and service requests, and also handles communication with the users. Service desk employees execute the first line incident management, access management and request fulfilment processes.

This role can wear several hats including account manager and service level manager. The activities handled include those under the business relationship management and service level management processes. This role is responsible for being the interface between the IT department and third party suppliers of assets and services, who are external to the organization.

This role may exist in a procurement or supply chain function and be seconded to IT. This role is responsible for overall coordination of the incident management process, in particular whenever there are major incidents. Once incidents are solved, the ball is passed to the problem manager to coordinate investigation into the root cause, identifying workarounds and following up for permanent resolution.

During service transition, this key role exists to coordinate the review and approval of planned changes to the IT infrastructure and services. This role is actively involved in the work of the service design as well as the service transition stages of the service lifecycle, and would manage the design coordination as well as transition planning and support processes.

When it comes to software development and systems configuration, the system developer role comes into play. This role performs the operational activities which ITIL defines should be carried out by the technical management and application management functions, being the second line support role. In IT, this role can also be called business continuity manager, if the main organization has not implemented a business continuity framework.

This role ensures that IT is prepared for any eventuality that could significantly impact running of business services including disasters. Continuous monitoring of IT infrastructure and services has become a daily job for IT departments who provide critical services. No IT organization will function effectively without a strategy that is aligned to the one of the corporate organization. This role, mostly found in a Finance Department or can be seconded to IT, is responsible for managing the accounting, budgeting and charging activities relating to IT services and infrastructure.

This strategic role is critical when it comes to understanding, anticipating and influencing customer demand for services. It usually works with roles handling capacity management to ensure that IT has capacity to meet this demand. This role would be responsible for managing the service portfolio which consists of the planned, live and retired services. The live services are usually documented in a service catalogue. Authoritative source of reference for the IT components, systems, and services that make up your business and IT environments.

FootPrints service desk delivers a user-friendly suite of on-premises tools to automate IT services quickly and easily. BMC Client Management automates management of your IT assets to help control costs, maintain compliance, and reduce financial risks.

BMC Digital Workplace formerly MyIT modernizes your business with formless requests, context-aware services and crowdsourced collaboration. BMC Discovery formerly ADDM automatically discovers data center inventory, configuration, and relationship data, and maps business applications to the IT infrastructure.

Main Menu Featured Products. Select the link below that best matches your interest. Download free ITIL reference books. IT Service Management roles and responsibilities. The differences between small and large IT organization can be seen in the table below: Example of a large IT department structure For a large department, specialization can take place as dedicated service and process roles can be assigned to individuals and teams where necessary. Roles in IT Service Management.

R - Responsible The person or people responsible for correct execution — for getting the job done A - Accountable The person who has ownership of quality and the end result. Only one person can be accountable for each task C - Consulted The people who are consulted and whose opinions are sought.

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