Ownership Cost

There are total of four (4) mandatory questions for this GBA. You must answer all four questions.
The following instruction applies to all four questions.
Consider a company you are currently working for or you are familiar with. However, the company must spend a substantial portion of their purchasing budget on the procurement for raw materials, parts or components for their products or services to generate sales revenue.
For example, Apple purchases chips from Samsung for its iPhones and McDonald purchases beef patties for its burgers. The reason Apple or McDonald buy chip or beef patties is to sell their products.
On the other hand, you’d better to avoid choosing an organisation in public sector or government. Such organisations typically purchase goods either for their own consumption or to provide public services. “Making money in the market” is not one of their main motivations.
In question 1(a), you are required to provide a brief description of the company you choose. You may answer all four questions based on the company you choose for Question 1. Or, if you find it would be too difficult to collect such thorough information of a company, you may choose a different company for each question. If you choose to select a different company for each question, you must provide a brief profile of the company at the beginning of the answer for the question. 5 marks will be awarded for the profile of the company only for Question 1(a). No additional marks will be given for subsequent profiles of the companies.
Question 1
(a) Describe the profile of the company you chose. In your description, you must include a brief introduction on its purchasing department. Explain the role of purchasing in the company. (5 marks)
(b) What are the purchasing polices and purchasing procedures of the company? Demonstrate your understanding by providing a summary of purchasing policies and procedures of the company. (10 marks)
(c) Show whether the purchasing policies and procedures of the company are effective. Suggest improvements on purchasing policies and procedures, if you have any. (10 marks)
Question 2
(a) Investigate whether the company you chose adopts the practice of conducting spend analysis and category management. Analyse how spend analysis and category management help (or can help) the company to improve their performance in purchasing. (10 marks)
(b) Appraise which raw materials, parts or components that the company purchases should be considered as critical commodity. You must justify your answer. Propose effective strategies to manage suppliers for critical commodities. (15 marks)
Question 3
(a) Awarding contract is only the beginning of the business relationship. The performance of suppliers should be measured throughout the contracted period.
Examine how suppliers’ performances are measured at the company you chose. Typically, the categories of supplier performance measure include delivery, quality and cost. Which category (or categories) is (or are) most important for the company you chose? You must justify your answer. (10 marks)
(b) Look at whether the company you chose adopts the practice of supplier development. What are the barriers to supplier development? Propose ways to overcome them. Due to the limited time, you may focus on Buyer Specific barriers. (10 marks)
(c) Discuss the factors that are critical to global sourcing success for the company you chose. (5 marks)
Question 4
(a) Total cost of ownership (TCO) refers to the present value of all costs associated with a product, service or capital equipment that are incurred over its expected life. Choosing a supplier purely based on the price alone may not lead to the optimal outcome in the long run.
Analyse whether the company you chose adopts Total Cost of Ownership when evaluating suppliers. Comment on which cost elements should be included for each cost category when applying Total Cost of Ownership. (15 marks)
(b) Relate how value analysis or process mapping can be used to support effective purchasing for the company you chose. (You do not need to provide analysis on both value analysis and process mapping. Analysis on one topic would suffice.) (10 marks)

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