QUESTION 1

(a) The nature of relationships between an organisation and its supplier has changed from Transactional' to ‘Mutual Explain the above mentioned statement.

(b) Purchasing and supply is now recognised to be strategic for an organisation. Name 5 external factors that are behind this shift in importance and recognition

QUESTION 2

When decision makers in an organisation come to the phase of ‘Strategic choice' of their strategic procurement plan, they may have to decide between ‘Centralisation' and ‘Decentralisation' of their procurement activities.  Give 3 advantages of ‘Centralisation' and 3 advantages of Decentralisation

QUESTION 3

Mr. Johnson is the Procurement Director of ‘Modern Toys Ltd', a toys manufacturer. The company actually buys the electrical motors needed for its toy car assembly at Rs 800 each. Mr Johnson has gathered data to enable him to decide whether it is worth manufacturing their own motors

Fixed costs will be Rs 3 M per year and the variable costs per motor will be Rs 350. The annual maximum capacity of Modern Toys is 10000 toys cars per year Using graph paper-

(a) At what percent of capacity does it pay the company to manufacture its own motors?

(b) What opportunity loss does the company make if it manufactures 9000 cars per year and still buys the motors?

(d) A new supplier has been identified selling its motors with same specifications at Rs 600 each. What decision should the company make and why?