Supply Chain Management Graduate Program

SCM 5004 Purchasing &

Supplier
Management

Final Exam Individual Assessment Fall 2022

Submitted To:

Submitted By:

Date of Submission: December 13th, 2022

 Table of Contents

Title Page No.

1. Part 1

Question 1 1
Question 2 3
Question 3 5

2. Part 2

Question 1 7
Question 2 10
Question 3 11

3. Part 3

Question 1 12
Question 2 14

4. Part 4

Question 1 16
Question 2 18
PART 1 (30 marks Total) Purchasing Styles, there are 2 very distinct purchasing styles today. One

is Public Sector Government based known as the Broader Public Purchasing System and the other

Private-Corporate Shareholder based Purchasing system.

Question 1 (12 marks) You were exposed to the Ontario Government Broader Public Purchasing

process. Outline the “challenges” with your rationale associated with the Government Purchasing

Process (BPS)?

The Ontario Government Broader Public Purchasing Process aids in acquiring the required benefits/perks

for Canadian Citizens. This not only applies to public works but also deals with various other forms such

as services, infrastructure, construction, etc. The Public Purchasing process is a crucial part of government

and those who work in the field always confront difficulties. Every step that the government is involved

with always has to make sure that the public is notified, and they are in constant update about the same. It

becomes difficult as they have to provide the public with all the pertinent data and the entire decision-

making process. Also at the same time, many regulations must be followed before coming to a decision.

There is a particular set of rules that must be followed. Again, without any say, Government is the only

entity responsible for any actions made, whether they will have a positive or negative impact. Due to all

this, it also becomes a hectic task to find and qualify suppliers to govern and adhere to the regulations

while maintaining a smooth supply chain performance. With this, Government must compile a list of a

variety of suppliers who not only meet the objectives financially but also possess a high level of

competence with a good name in the market.

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As is well known the media is a very crucial part of today’s world. Any procurement process is carried out

using taxpayers' funds and if the government used those funds, they should be extremely cautious to see

whether it is being used at the right place and at the right time. If things go southwards, the media may

inflate the significance of this situation.

Last but not the least, market factors significantly impact public procurement professionals to increase

competition. They face additional challenges, such as communication, currency exchange rates, payment,

customs regulations, lead-time, transportation, foreign government regulations, trade agreements, and

transportation, in addition to compliance with their governments' procurement laws and policies and

international trade requirements as previously mentioned.

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Question 2 (12 marks) You were exposed to private sector organizations such as Amazon and Air

Canada. Outline the advantages and disadvantages of the Purchasing system and flexible rules that

would exist in those organizations.

I’d say that one of the biggest private sector organizations in the world is made up of Amazon and Air

Canada. Tremendous sales and bulky investments are the sources of revenue for both Amazon and Air

Canada. They not only facilitate a faster procurement procedure but also use multiple suppliers at the same

time in order to locate the best deal or offer.

Advantages:

The most important advantage of the private sector organization's system is that the entire process is

centralized, and a purchasing manager oversees and manages this department. So, to eliminate duplication,

overlapping, and inconsistent procurement, all purchases under centralized purchasing are made by the

purchasing department. Additionally, unlike public sector they have full authority to utilize their resources

as they see fit for the benefit of the business. They are also in the business of long-term relationships

wherein they can achieve incomes and profits under their own management. Another important advantage

is that the private purchasing system is quicker than the public purchasing system. They have greater

system freedom and are not required to justify their decisions to anyone. So, hence they make decisions

that will benefit the business. As already mentioned, they are free to accept any offer they deem to be most

advantageous financially and to do so without having to justify their selection to its outcomes. In other

words, they don’t have as many restrictions as the public procurement system does.

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Disadvantages:

With little to no care or attention paid to social responsibility, the private procurement process has a core

focus on only generating income. In the end, less environmentally friendly procurement strategies are the

result. The primary disadvantage of the purchasing system is that it becomes necessary to keep control

over commodities and facilities in order to guarantee that people live in high-quality environments.

Additionally, private sector facilities and services are frequently over budget. Even if they have many

advantages, there are also disadvantages and unfavorable outcomes that need to be addressed in order to

avoid future problems that could harm the business and stakeholders. The private procurement procedure

is the most challenging to have faith in since it has a significant chance of failure. Additionally, there is

tremendous competition in the private sector for money, growth, demand, and other factors, which raises

the risk when selecting the best supplier. Additionally, it is possible that the purchasing department will

have insufficient experience for the position, which will make working with suppliers quite problematic.

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Question 3 (6 marks) If you had a choice and two (2) Purchasing job offers at the same time, one

Private Purchasing and one Government Purchasing which one would you choose? Outline thoughts

and rationale as to your personal alignment and explain why?

If I had a choice between two offers, I would first consider where I might see myself developing

professionally — privately or publicly. We are all aware that each department has advantages and

disadvantages, but as far as my personality and working style are concerned, I always like to be affiliated

with a company that operates in a fast-paced setting and where I can occasionally witness my

improvement. The procurement industry will become considerably more established in the future because

to ongoing innovation, technical developments, and constant improvement in the private sector. In

addition, I am the kind of person that is constantly driven by financial gain. So, it's difficult for me to

choose something over money. My top priority is the return on investment. Furthermore, if I put my all

into my work in the private sector, it will greatly profit from my diligence, which will allow me to change

my designation at higher levels. With this, I'll be able to improve and perfect my knowledge and abilities,

which will help me stand out from the crowd and become an effective

Now, this is not to say that I dislike the public sector completely. In the future, if the private sector goes

well and I am in a good position, I might turn my attention to public organizations that have a reputation

for supporting the social and economic causes of the nation. With my small efforts and strides in this

direction, I will ultimately provide a service to the community and create a positive impact with my little

efforts.

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Part 2. (30 marks Total) When putting out an RFP and evaluating supplier responses a supplier

rating matrix is used to tabulate scores. A base criterion is identified and used to ensure the

company’s core competencies are at minimum maintained or enhanced.

Scenario: You are the Purchasing Manager at an insulated beverage flask producing company.

Your Company just completed your 25-years anniversary and are in the top 3 recognized Insulated

flask producers across Canada.

Due to your company success and retail growth (plus on-line ecommerce growth) you are unable to

keep up with now 24/7 delivery needs and have decided to outsource your deliveries. By outsourcing

deliveries this will allow more time for your company staff team to focus on their leading products

and their development.

You have narrowed to 3 vendors who have submitted their quotes and services and are ready for

further evaluation:

One is “UPS Canada” (3,000 plus vehicles in the fleet and operating across Canada since 1975).

Second is a private business called “SpeedX Broker Services” in business 2 years with access to

multiple delivery vehicles and has software to match vehicles to needs on an added per fee basis.

Third is a family-owned business “Bower Online Delivery Service”, 6 months in business and ready

to invest in vehicles and if they have a signed contract from you which they would use to support

requirements for adding additional capital with and from Bank negotiations.

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Question 1 (12 marks) Create an RFP evaluation rating matrix, identify at least 6 key evaluation

criteria you will require and provide a % value rating for each of your criteria. (based on total

100% evaluation criteria)

Sr No. Evaluation Criteria Percentage 

1 Cost 25

2 Service/Goodwill 15

3 Infrastructure/Overall Capability 15

4 Quality 10

5 Technology 10

6 Experience 10

7 Finances 10

8 Reviews 5

Total 100

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As per my understanding, above are the 8 evaluation criteria which I feel are utmost important and they

are explained below:

i. Cost (25%): Cost would be the most important consideration in assessing the RFP for this project which

is accounting for merely 25%. As you can also see that factor is given the most weight. Here, we'll get a

sense of what the decisive element will be in terms of the cost competency supplied by all three vendors,

which will assist us to reach a decision.

ii. Service (15%): The second most important aspect of this project is service which accounts for 15%

because it will allow us to learn more about how well they can meet client demands, how well they

compete in the market, and how well-liked they are and are what’s their goodwill in the market.

iii. Infrastructure/Overall Capability (15%): Infrastructure increases a vendor's overall capacity, which

makes them more distinctive in the market. We must assess if the suppliers have enough trucks,

warehouses, and distribution centers to handle all of the demands, both present, and future.

iv. Quality (10%): It depends not only on how successfully they can satisfy the customer's needs but also

on whether they can reach the customer's satisfaction level and do so in a way that makes them pleased.

v. Technology (10%): These days, new technology powers every procedure. Therefore, we must be

certain to check which technologies the vendors can manage, and if they do, we may move forward and

collaborate with them.

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vi. Experience (10%): We must check the experience of the vendor in past projects and how well they

were able to execute them or not and then decide to move ahead.

vii. Finances (10%): This is one of the most crucial aspects in determining the vendor's credibility and

financial standing. This is done to guarantee that any potential dangers in the future are eliminated. This

will also enable us to determine whether they can carry out the operations effectively and how they

manage their expenses.

viii. Reviews (5%): It aids us in contacting their previous clients and partners to inquire about their level

of service, dedication to the collaboration, and instances in which they were able to finish the project on

schedule, etc.

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Question 2 (12 marks) Using your 6 criteria rate the above 3 vendors (your totals) which will

support your ultimate decision (show your calculations all based on your 6 rating criteria).

Sr Evaluation Criteria Weighing UPS SpeedX Bower Online

No. Percentage Canada Broker Delivery Service

Services

1 Cost 25 18 20 22

2 Service/Goodwill 15 13 12 10

3 Infrastructure/Overall 15 14 12 8

Capability

4 Quality 10 8 7 6

5 Technology 10 9 8 6

6 Experience 10 9 8 5

7 Finances 10 10 8 7

8 Reviews 5 3 4 1

Total 100 84 79 65

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Question 3 (6 marks) Who would you select? Add a brief rationale as to Why?

After assessing all the 3 companies, the result of the analysis showed that UPS Canada stands out with a

score of 84 out of 100, despite the fact that their costs were significantly higher than those of the other 2

companies. UPS Canada shines out as the best when the other evaluation criteria are taken into account.

This is a result of their brand recognition and market presence. The organization will benefit from its

effective fleet infrastructure, network distribution, top-notch technology, quality, etc. This increases the

likelihood that they will deliver everything required on schedule. . They possess the capacity to maintain

their revenue and profits and have a strategy for dealing with them. Since of their expertise and

experience, they also scored high marks for flexibility because they are prepared for any problems, have

backup plans in place, and can act fast to address them when they do. Along with this, UPS Canada is the

greatest option to choose because of consumer testimonials and industry evaluations.

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Part 3. (20 marks Total) The Profit Leverage Effect is a key value add that Purchasing people can

provide to their company. (As mentioned in class when going for interviews in Purchasing,

knowledge of this concept will be a key differentiator for you to outline the merits with examples as

to the Profit Leverage benefits).

Scenario: You are in purchasing at an after-market auto parts supply company. Your role is to

source-purchase parts which will be sold both in retail and online (e-commerce). One of your

products is a mobile phone holder that fits into a car cup holder, purchase price is $4.00 each and

the company sells for $8.00 each. Sales are ramping up as you are this unique product supplier in

the marketplace. Sales are currently running at 3,000 a month. The future forecast is for each

month to grow by plus 500 a month (3,500 new monthly total) for the next 12 months at least.

You have decided to confirm with your supplier (s) as to their ability to meet new demand increases.

(plus 500 units a month, starting in 3 months (day 1 month 4) for at least a year’s supply).

Question 1 (12 Marks) Outline Purchasing steps you would take in terms of adding value to the

Profit Leverage Effect on behalf of your company. Add who would you reach out to.

My first action will be to meet with my present supplier, strengthen our connection. I will then create a

strong bond, then write down my expectations of increasing the no. of mobile phone holders from 3000 to

3500 and pitch him a lower cost. Naturally, there is a probability that the supplier may want more money

as the product quantity increases from 3000 to 3500. However, because I strengthened my bond with

them, I can use it as a leverage and tell him that the current supplier will only be involved in future

projects for my current company. Additionally, we are working to increase sales as we are now the only

supplier of our particular product on the market. By working with us in the long run, the supplier will not

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only gain a favorable position in the market but will also be certain that all future contracts will be

awarded to them.

Apart from this, by joining up with a business that is now in the lead in terms of mobile phone owners, the

provider will get goodwill in the market. Since they are now affiliated with us, there is a probability that

the supplier may begin receiving projects from other businesses as well, which would eventually aid in

their financial and international expansion. This will make me as a Purchasing Manager negotiate

procurement costs and reduce it so that the ROI and profits are in huge numbers. With this, I'll also get in

touch with the sales and marketing teams to create a strategy for widespread product promotion and to

ensure that its sales rise.

After that, I'll also get in touch with the production manager since if sales start to rise, we don't want to fall

behind in production. As a result, I'll need to keep them aware of any abrupt changes to the process and

depend on them to be adaptable. Last but not least, in order to make the process run more smoothly, I will

also get in touch with the finance management team and let them know that timely budget allocations and

payments are necessary for a productive and efficient process. Therefore, as a purchasing manager, all of

these criteria will eventually assist me in adding value by maximizing profits and raising sales.

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Question 2 (8 marks) Outline your assumptions and show your mathematics calculations with your

financial projections.

Here, I believe that it would make much more sense if we paid less for the goods we are purchasing from

the vendor. We are making a profit of $4 by purchasing the item from the seller for $4 and selling it to the

customer for $8. Given that there are already 3000 products, the profit would be 4$*3000 = 12000$ each

month. As I understand it, we are currently ramping up sales in the market, we are the only unique mobile

phone holder seller at the moment, and we have a plan to grow every year with the aim of increasing sales

and revenue. All of these factors will add up and can then be used as leverage to negotiate a favourable

contract with the supplier. As we are raising the quantity from 3000 to 3500, I will ask him to provide it to

us for $3 instead of the initial pricing where we are buying at $4. This will therefore result in a $5 profit

for each goods sold. For 3000$ products sold like we were doing before = 5$*3000 = 15000$ - [ Here, we

can see a rise of 3000$ per month, which is from 12000$ profit to 15000$.]

Now we are yet to calculate the increase in the no. of sales (additional 500 units), As the quantity will also

increase while ramping up sales, the new cost will be = 5$*3500 = $17,500. Thus, a sharp increase from

$15000 to $17500 is visible. Overall, we started with $12,000 and ended up with a $17,500 profit. An

increase of $5500 every month. And if we compare this increase to the previous one, the previous one is

equal to $12,000

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Old Value - $12000 Monthly | $144K Yearly (3000 Products)

New Value = $17,500 Monthly | $210K Yearly (3500 Products). – a 45% rise

This leads me to the conclusion that by using the Profit Leveraging effect, my calculations, and my

assumptions, we will be able to achieve a more higher revenue, approximately a 45% rise, making it the

most desirable one, by purchasing 500 units more each month for the following 12 months with a slight

decrease of $1 value after every product.

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Part 4 (20 marks Total) Supplier Relationship Management is a key role for Purchasing, as the Air

Canada experience highlighted for us the Purchasing financial savings and benefits will be lost

within 18 months unless the supplier relationship is fully managed. To this end in this Module we

learned the importance of KPI’s (Key Performance Indicators) and how they are to be mutually

agreed with measures provided monthly to your attention from the supplier.

Scenario: Assume that your company (Canada Hardware parts) has just set up a contract with

“Trust Courier” for pick up and deliveries at your company and the volumes are in the range of 30-

40 daily (in and out basis) Monday to Friday 09:00-5:00 pm, Special rush shipments after hours and

weekends are available (part of the contract) with prior approval (name, date and time) & full

supporting documentation required. As agreed in the contract within 3 hours of after hours’ notice

to “Trust Courier” the delivery will have taken place.

Question 1 (12 marks) Outline 6 (KPI’s) Key Performance Indicators you would expect on a

monthly basis?

i. Order Pick-up and Delivery - The order pick-up and delivery must be completed on time as the main

goal. Because 30 to 40 couriers need to be picked up at one area and dropped off at another, we must keep

track of the efficient courier's progress. This will enable us to keep an eye on both the success of the

business and the degree of consumer happiness. Time is very important, and if deadlines are met, the

process will move forward smoothly and without any hiccups.

ii. Cost-effectiveness: We must ascertain their fees and determine whether everything is provided for the

stated fees and the promised services.

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iii. Shipment Trackability or related info: This is a crucial element in determining how transparent they

are with respect to their orders or commitments. Customers can follow or track the development of their

orders with the use of trackability, which will ultimately secure their satisfaction and calm their anxieties.

This will not only enable us a company to increase the number of orders for the aforementioned product

but also the likelihood of customers becoming devoted/lifelong purchasers.

iv. Average late delivery time: No firm is perfect, therefore there is always a potential that anything

could go wrong for one reason or another. Therefore, taking this into account, we must have a basic

concept of how much time it takes to deliver a package late. If there is a delay in the customer's orders,

this will give us an exact idea and allow us to commit to them what would be the next steps/actions taken

to overcome them

v. Safety: Safety of the package is equally important as it is to be delivered on time. If any damage occurs

to the products, we can have a tendency to investigate it and take the next required actions. As a result, this

will eventually assist our business build a solid reputation in the marketplace.

vi. Documentation and other legal parts: We should have everything mentioned clearly and agreed upon

by both parties because the document states that there is an agreement in place that defines that there

would be fast deliveries/special rush shipments after business hours and on weekends. If they fail to do so,

the necessary action can be taken. Therefore, the purpose of this is not to immediately violate contracts but

rather to instill a sense of urgency and seriousness that should be there while doing business with our

organization.

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Question 2 (8 marks) Outline any other feedback you would welcome from “Trust Courier” on a

Monthly basis? (feel free to develop examples).

Given that this is our first contract with them, I'm interested in hearing whether working with them was

positive or negative from their perspective. Let's use the person who used to come to pick up the package

as an example. Was the package ready from our end when they arrived? Were they given the correct

papers from our end? In addition to the partnership team, were they receiving the payments/documentation

from the necessary departments on time?

If by chance they encountered any difficulties while collaborating with us - a feedback mechanism is

something that will allow us to see where things are lacking from our end and what should be the possible

outcomes to overcome, it. This will not only lead us as a company to perform better and better every

single day but also enable us to improve for more upcoming projects in the future whether it may be with

the Trust Courier or any XYZ company. In addition to this, I would also like to learn more about their

offerings and whether they have any new services that may benefit both our businesses in the near future.

Last but not the least, I would also expect feedback in the sense of the customers which will help us

understand how well they are able to execute the task assigned to them. So that it will lead us to assign

more and more tasks for the coming stages.

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