Ask Rich
 Rich
Weissman is our resident purchasing expert, and is ready to answer any and
all of your purchasing-related questions. Rich is a Certified Purchasing
Manager with 25 years of hands-on purchasing experience.
Here are 5 recent Ask Rich questions and answers! View the entire Ask Rich Archive or Search the Ask Rich Archive for more answers!8/15/2008 Question: Rich: Trying to show Purchasings value in our Engineering operation which historically handled construction jobs with poor scopes of work and allowing awardees to essentially design build and inevitable cost overrun projects.
Is there a resource to develop roles and responsibilities and justify the reasons for them?
Meeting significant resistance when we try to interject any questions to clarify issues.
Thank You.Justification is an issue with all purchasing and supply management positions. having managed an indirect spend area in the past I found that developing a relationship with the construction /facilities folks helps the best. They often feel they know it all and it takes a while to break down some of the barriers. I did find this ISM seminar outline for purchasing construction and it provides a nice level of detail for all of the elements of construction purchasing. Maybe when they see it they will realize that they are over their head on the business issues and "allow" you to help. That, and senior management support, is what you need to get going. My advice is to start small and build the trust and expertise.
http://www.ism.ws/education/OnsiteSeminarDetail.cfm?ItemNumber=18247
6/26/2008 Question: For years we have purchased material to come in-house and used Massachusetts Tax exempt form ST-12 We have started using several different suppliers to drop ship their material directly to our customers. Once on the customer site our tech support then adds the software we created to the drop shipped material. The question: Is there a generic Tax Exempt for to cover all the U.S. States?
The vendors are telling us we can no longer use the Mass tax exempt form for items dropped shipped to another state. How do we get around this issue and not pay tax for the dropped shipped items?
Thanks,
Brian
There are generic forms that cover some states but not all states. Here is where a speedy solution may not be the best thing to do. All states have different laws and regulations relating to taxation. It behooves your finance folks to work with each specific state on a case by case basis. A bit of more work up front will no doubt solve problems down the road when it is audit time. This can be tricky. My advice is to push it to finance as it is really their issue. If it helps, most states have decent web sites with all of the required forms.
12/5/2007 Question: I have language with a major contract that allows for a management fee of 8% for non-bulk purchases and 2% for bulk purchases procured by the contractor on behalf of the T. The language specifically states "bulk materials including, not limited to, locomotive fuel, ballast, ties and rail". Example of dispute is windows for 270 coaches for which one PO was issued for nearly 6500 windows.In my eye this is a bulk procurement.
My argument was represented as thus "Though the term bulk(bulk materials, bulk storage,bulk inventory)in purchasing, inventory management, and distribution may often refer to raw materials such as coal, iron ore, grains, etc.that are stored or transported in large quantities, this term applies to other classifications based on specific industry, business or facility"
I would appreciate any feedback on this.While the windows may be a LARGE purchase, I don’t feel it is a BULK purchase. Certainly, each industry has its own definitions and in the railroad industry I can see where bulk would be relative to rail infrastructure. But to me the windows would be dependent and quite specific to the model of coach and not be considered a bulk purchase. Sorry.
9/6/2007 Question: I am looking for a class or direction on "ROOT CAUSE ANAYLSIS". How to start and anaylsis, what I should be looking for or asking for. Guide lines. MarshaI’d recommend contacting the American Society for Quality (ASQ). You can fine them at www.ask.org. There are a lot of seminars, web-based programs and publications available. The ASQ also has local chapters where those programs may be offered. Local colleges may also offer programs but I’d start with the ASQ. Their programming is typically quite strong.
7/30/2007 Question: Should the Standard Cost be changed, Monthly, Quarterly, Annually? Costs are changing that rapidly on some products.Standard costs are an important aspect of determining necessary financial strategies like margin analysis and cost of goods sold. I do not think they are an accurate measure of purchasing performance. Over the years I’ve ridden the standard cost roller coaster, benefiting from a high standard cost when my purchase quantities rise and purchase price costs drop and being penalized from a low standard cost when quantities drop and prices rise. I had nothing to do with either scenario but would get hammered one day and praised the next.
I think a better measure of purchasing performance is establishing a purchase price index of some sort. Much like a standard cost, the index point of 1.0 is established at a particular point in time and all subsequent purchases (forever) are measured against that standard. Assume that you are buying a capacitor for $10.00 when the ratio is established. If the price stays the same the ratio stays at 1.0. If the price goes up by $1.00, or 10%, then the ratio is 1.10. If the price goes down by 10%, than the ratio is .9.
This purchase price index will allow for trend analysis and is a good tool for your finance folks as well. It is interesting to see the pricing trends by product line, commodities, and other pertinent sorts. All without getting caught up in standard costs which companies often change to meet financial goals not as a true measure of purchasing performance.
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