: 209 code1250 : 011-6-460954 or

011-6-478965

Yardstick International College

Assignment for Submission
Course Title: Basics of Procurement Management 2016A
Course Code: LSCM-123
Credit hours: 3
Full Name: TEMESGEN MOLLA WUBETU Department LOGISTICS & SUPPLY
Center: ADDIS ABABA Id. No. LO-SU/1/13B
Year 3 Term MAKE-UP ASSIGNMENT
Dear learner! This is an assignment which you are expected to work on your own. It accounts 40% of
your course work. You need to go through all the blocks of the course before you try to work on the
assignment questions.

You have the right to consult your nearby friends or any expert on the course to finish this assignment.
But you should be aware of the fact that copying the work of other people could be treated as academic
plagiarism and your grade out of 40% can be changed into nil according to the regulation of the college if
you are found in committing this prohibited act.

This assignment paper should be completed and sent to the Tutorial and Assessment Unit of YIC through
the above postal address or through your nearby study center until Tikimt, 24, 2016 E.C. If you submit
your assignment after the deadline, your mark out of 40% will be nil and your total mark will be
evaluated out of 60%. Make sure that the assignment questions are returned with your answer.

For office use only

Total mark (30%) _________________
Evaluator’s Name: _______________________________ Sign. _______________

November, 2023
Addis Ababa
Ethiopia
Basics of Procurement Management LSCM-123

Part I. Multiple Choices: Choose the correct answer from the given alternatives and write the

letter of your choice on the space provided. (2 points each)

1. What are the three main Component of choosing & suppliers? ANS.A
A. Value, quality and reliability

B. Quality, Quantity factors and value

C. Value, quality and popularity

D. Image, value and reliability

2. Reducing the numbers of standard item firm uses in its the product design and carries
in the inventory is called _______________ ANS. A
A. Simplification D. All

B. Standardization E. None

C. Generalization

3. The five Right of objective of purchases ANS. A

A. Quality, Quantity, price, Time and place
B. Cost, Service, Space, Time and Contract
C. Place, Time, Price, Ethics and contract
D. Product ,place, customer ,Price and Time
4. What are three main source purchase data are:- ANS. B
A. Standardized recipes inventory sheet and sales history
B. Standardized receipt , inventory sheet and suppliers List
C. Accountability consistency and integration
D. A and B E. None
5. All major inputs to the MRP system include ANS. D
A. Master production Schedule and bill of material
B. bill of material and inventory Record
C. inventory Record and master production Schedule
D. Master production Schedule ,Inventory Records and bill of Material
Part II. Short Answer: Give short answer for the following questions on the spaces provided.
(6 points each)
1. What is the difference between forward buying and speculative buying?
Forward buying is the purchase of any raw materials, supplies, components, or other items in
advance of current requirements. Speculative buying is the purchasing of an item in anticipation
of making a profit through its resale.

Yardstick International College 2

Basics of Procurement Management LSCM-123
Forward buying and speculative buying are two different approaches to purchasing goods or
assets, and their key differences lie in the intentions and circumstances behind the purchases:
1. Forward Buying: Forward buying refers to purchasing inventory or goods in advance of
the usual buying cycle or in larger quantities than immediately required. The purpose of
forward buying is to take advantage of favorable conditions such as discounted prices,
bulk purchase discounts, or expected price increases in the future. This strategy is
common in industries where prices fluctuate, such as agricultural commodities, where
buying ahead can help protect against future price increases. Forward buying is typically
based on reasonable forecasts and known demand patterns.
2. Speculative Buying: Speculative buying involves the purchase of assets, such as stocks,
currencies, or commodities, with the expectation of making a profit from short-term price
fluctuations. Unlike forward buying, speculative buying is driven by expectations of price
movements rather than immediate needs or inventory management.
In summary, forward buying is a planned approach to purchasing goods ahead of time to
benefit from favorable conditions or anticipate future demand, while speculative buying
involves purchasing assets with the intention of profiting from short-term price movements.

2. Desired the difference between Bill of Material and master Schedule?

The most important difference between MRP and MPS is this: An MPS operates through only
one layer of the BOM (bill of materials), so it doesn't account for all of the BOMs required to
produce a product. MRP does. So, most companies use the two together to run more efficiently.
The key difference between a Bill of Materials (BOM) and a Master Schedule lies in their
respective functions within the realm of manufacturing or production planning:
1. Bill of Materials (BOM):
- A Bill of Materials is a comprehensive list of all the raw materials, components, sub-assemblies, and
parts required to manufacture a product.
- It serves as a detailed inventory of what is needed for production, including quantities and
specifications of each item.
- BOMs are crucial for procurement, inventory management, production planning, and cost estimation
processes.
- It provides a structured breakdown of the product's composition, guiding the manufacturing process
from raw materials to finished goods.
2. Master Schedule:

Yardstick International College 3

Basics of Procurement Management LSCM-123
- The Master Schedule is a timeline or plan that outlines when specific products will be produced or
delivered over a certain period.
- It coordinates production activities by specifying what will be produced, in what quantity, and when.
- Master Scheduling involves balancing customer demands, production capacity, and inventory levels to
meet delivery commitments efficiently.
- It typically covers a shorter timeframe compared to long-term strategic plans, focusing on detailed
scheduling of production activities.
In summary, while a Bill of Materials details the components and materials required for production, a
Master Schedule outlines the timing and quantities of production activities to meet demand and optimize
resources.
3. List some benefit of Standardization?
There are several benefits of standardization in various domains, including:
1. Enhancing efficiency: Standardization helps establish uniform procedures, protocols, and
specifications. This streamlines operations, reduces redundancy, and improves overall
efficiency.
2. Promoting interoperability: By adhering to standards, different systems and products can
work seamlessly together. This enables compatibility, data exchange, and collaboration
across different platforms or organizations.
3. Ensuring quality and consistency: Standards provide clear guidelines for manufacturing,
processes, and services. They help maintain consistency in the quality of products or
services, ensuring that customers receive reliable and trustworthy outcomes.
4. Facilitating global trade: Standardization promotes international trade and removes
barriers between different countries or regions. By adopting common standards,
companies can expand their markets, access new customers, and enhance global
competitiveness.
5. Encouraging innovation: Standards define a baseline that drives innovation. They
influence the development of new technologies, products, and services, ensuring that they
meet specific requirements and are compatible with existing systems.
6. Enhancing safety and security: Standards often prioritize safety and security
considerations. They help establish protocols and guidelines to protect individuals,
environments, and organizations from potential risks or hazards.
7. Reducing costs: Standardization minimizes the need for customization and variation,
which can be costly. By following established standards, organizations can take
advantage of economies of scale, streamline processes, and reduce expenses.
8. Improving communication and understanding: Standards establish common baselines for
communication, terminology, and documentation. This facilitates clear and effective
communication between different stakeholders, leading to better understanding and
collaboration.

4. List at Least four objective of Inventory?

Four objectives of inventory management include:
1. Ensuring Adequate Stock Levels: The primary objective of inventory management is to
maintain sufficient levels of inventory to meet customer demands and minimize

Yardstick International College 4

Basics of Procurement Management LSCM-123
stockouts. By accurately predicting demand and keeping adequate stock on hand,
businesses can fulfill orders in a timely manner and avoid lost sales opportunities.
2. Minimizing Holding Costs: Holding costs refer to the expenses associated with storing
and managing inventory, including warehousing, insurance, obsolescence, and
depreciation. The objective here is to find the optimal balance between stock levels and
holding costs, minimizing excess inventory and associated costs while ensuring sufficient
inventory availability.
3. Minimizing Ordering Costs: Ordering costs are the expenses incurred when placing and
processing orders for inventory replenishment. The goal is to minimize these costs by
optimizing order quantities, frequency, and methods. Techniques such as economic order
quantity (EOQ) and just-in-time (JIT) inventory systems are commonly used to achieve
this objective.
4. Maximizing Customer Service Levels: Inventory management aims to provide a high
level of customer service by ensuring that products are available when and where
customers need them. This includes maintaining a wide product assortment, timely order
fulfillment, and accurate delivery. Meeting customer expectations and providing a
positive experience can enhance customer loyalty and satisfaction.

5. Discuss the 5Rs of Purchasing?

These are often called the “Five Rights” of procurement and supply.

 Inputs of the right “Quality”.

 Delivered in the right “Quantity”.

 To the right “Place”.

 At the right “Time”.

 For the right “Price”

The five rights are a traditional formula expressing the basic objectives of procurement, and the general
criteria by which procurement performance is measured. Even if they are not called ‘five rights’, they are
often covered in procurement literature as "key performance variables" or "procurement factors";
essentially, we are all talking about the same thing.

We will give a brief overview of the five rights (or five Rs) of procurement, and the importance of
achieving them here as follows:

1. The “Right Quality”:

Obtaining goods which are of satisfactory quality and fit for their purpose (suited to internal and
external customer’s needs), by:

 Accurate specification of requirements and quality standards.

 Supplier-and buyer-side quality management.

2. The “Right Quantity”:

Yardstick International College 5

Basics of Procurement Management LSCM-123
Obtaining goods in sufficient quantity to meet demand and maintain service levels while minimising
excess stock holding (which incurs costs and risks), by:

 Demand forecasting.

 Inventory management.

 Stock replenishment systems.

3. The “Right Place”:

Having goods delivered to the appropriate delivery point, packaged and transported in such a way as to
secure their safe arrival in good condition, by:

 Distribution planning.

 Transport planning.

 Packaging.

4. The “Right Time”:

Securing delivery of goods at the right time to meet demand, but not so early as to incur unnecessary
inventory costs, by:

 Demand management.

 Supplier management.

Yardstick International College 6