Chapter 01
Materials and purchasing
45 terms
Practice by level
Terms
01Raw materialNguyên liệu thô
Definition
An unprocessed input used to make a finished product.
Examples
- The plant buys 1 tonne of wheat flour for 9 million dong, enough for about 16 thousand packs of 75 gram instant noodles.
- A beverage plant uses 12 tonnes of sugar per month, which is 22 percent of total material cost.
Easy to get wrong
People often count packaging as raw material. Packaging is a separate input with its own bill of materials line.
02Packaging materialBao bì
Definition
Material that holds, protects and identifies the product on its way to the shopper.
Examples
- A carton holding 24 bottles costs 6 thousand dong, which is 250 dong per bottle.
- A 500 ml PET bottle costs 1200 dong, or 18 percent of the cost of goods for a bottle retailing at 6500 dong.
Easy to get wrong
Primary packaging touches the product, secondary packaging is the outer case. Merging the two breaks the bill of materials.
03Purchase orderĐơn đặt hàng
Definition
A document the buyer sends the seller stating the item, quantity, price and delivery date.
Examples
- Order 4821 covers 500 cases at 320 thousand dong per case, a total of 160 million dong.
- The buyer issued 3 orders in one month worth 1.2 billion dong in total, payable 30 days after delivery.
Easy to get wrong
A purchase order is not a framework contract. The contract sets yearly terms, the order commits one specific buy.
04Lead timeThời gian chờ hàng
Definition
The time from placing an order to having the goods in the warehouse and ready to use.
Examples
- An imported flavour has a 45 day lead time: 30 days of sea freight plus 15 days of customs clearance and lab testing.
- A local carton supplier delivers in 7 days, so the warehouse holds 10 days of stock instead of the 60 days it holds for imports.
Easy to get wrong
People count only the shipping leg. Lead time also covers order processing, supplier production and goods receipt.
05Minimum order quantitySố lượng đặt hàng tối thiểu
Definition
The smallest quantity a supplier accepts for one order.
Examples
- An aluminium foil supplier sets a 2 tonne minimum while monthly demand is only 800 kg, so one order covers 2.5 months.
- Ordering 4000 bottles against a 5000 bottle minimum triggers an 8 percent surcharge on the order value.
Easy to get wrong
A low minimum does not mean low cost. Many small orders raise freight and order handling cost.
06SupplierNhà cung cấp
Definition
A company that sells materials, packaging or services to the plant under agreed terms.
Examples
- The plant buys flour from 3 suppliers. The largest ships 60 percent of the 1500 tonne yearly need, or 900 tonnes.
- A carton supplier hit 95 percent on time across 120 orders in a year, leaving 6 late orders.
Easy to get wrong
The biggest supplier is not automatically the best one. High volume with late deliveries still stops the line.
07Bill of materialsĐịnh mức nguyên vật liệu
Definition
A list of every material and packaging item needed for one unit of finished product, with the quantity used.
Examples
- The bill for one 75 gram noodle pack is 65 grams of flour, 8 grams of frying oil and 2 grams of seasoning.
- A 24 bottle case needs 24 PET bottles, 24 caps, 24 labels and 1 carton, a packaging cost of 36 thousand dong.
Easy to get wrong
The bill must carry a loss allowance. Theoretical quantities alone leave the buying plan short every time.
08Request for quotationYêu cầu báo giá
Definition
A document sent to several suppliers asking for price and terms on the same requirement.
Examples
- Purchasing sent a request for quotation to 5 suppliers and received 4 quotes within 10 days.
- Four quotes for 500 cartons ranged from 5800 to 6600 dong per carton, a spread of 14 percent.
Easy to get wrong
The lowest price is not always the best quote. Compare only on the same spec, delivery point and lead time.
09Competitive tenderĐấu thầu mua hàng
Definition
A process that invites several suppliers to compete on one common set of criteria to pick a winner.
Examples
- A one year carton tender covering 3 billion dong of prior spend drew 6 bidders, scored 70 percent on price and 30 percent on capability.
- After the tender the carton price fell from 6600 to 6100 dong per case, a drop of 7.6 percent.
Easy to get wrong
A tender does not save money by itself. A vague specification makes the quotes impossible to compare.
10Framework contractHợp đồng khung
Definition
A long term agreement fixing price, quality and general terms, while each quantity comes on its own order.
Examples
- A 12 month framework fixes sugar at 18 thousand dong per kg for an expected volume of 144 tonnes.
- Over 12 months the buyer issued 24 purchase orders against a single framework contract.
Easy to get wrong
Expected volume in a framework is not a purchase commitment. Only a commitment clause creates that obligation.
11Payment termsĐiều khoản thanh toán
Definition
The agreement on when and how the supplier gets paid after delivery.
Examples
- Terms of 30 days from receipt apply to an order worth 160 million dong.
- The supplier offers a 2 percent discount for payment within 10 days, worth 3.2 million dong on a 160 million dong order.
Easy to get wrong
Longer payment terms are not free. The supplier usually prices its own cost of capital back into the unit price.
12IncotermsĐiều kiện giao hàng quốc tế
Definition
A standard set of rules stating which side carries cost, risk and paperwork on each leg of a shipment.
Examples
- Buying a flavour on FOB terms, the buyer pays 1800 dollars of sea freight for one 20 foot container.
- The same lot quotes at 24 thousand dollars CIF and 22 thousand dollars FOB, a gap of 2 thousand dollars made of 1800 freight and 200 insurance.
Easy to get wrong
A lower FOB price does not mean a cheaper deal. The gap is freight and insurance that the buyer now pays directly.
13Total cost of ownershipTổng chi phí sở hữu
Definition
The full cost of a buying choice: purchase price plus freight, storage, losses and handling cost.
Examples
- Supplier A sells cartons at 5800 dong but 8 percent are scrapped, which works out to about 6304 dong per usable carton.
- Local material costs 19 thousand dong per kg while imported material costs 18 thousand plus 1.4 thousand of freight and storage, so 19.4 thousand.
Easy to get wrong
Comparing quoted prices is the wrong comparison. Two options line up only at the same delivery point and the same loss rate.
14Certificate of analysisChứng nhận phân tích
Definition
A sheet the supplier issues per lot, showing test results for the agreed specification points.
Examples
- The certificate for a sugar lot reports moisture at 0.04 percent against a limit of 0.06 percent.
- Of 120 lots received last year, 4 came with certificates outside the limits and were held for review.
Easy to get wrong
The certificate is the supplier self reporting. It does not replace incoming inspection at the plant.
15Supplier auditĐánh giá nhà cung cấp
Definition
An on site check at the supplier plant to see whether its production and quality system meets the requirement.
Examples
- The audit scores 100 points across 12 sections; this supplier reached 78 points with 5 non conformities.
- The pass mark is 80 points and the supplier gets 90 days to close the gaps before a re audit.
Easy to get wrong
A passed audit does not guarantee every lot passes. An audit looks at the system, incoming inspection looks at the lot.
16Approved supplier listDanh sách nhà cung cấp được duyệt
Definition
The list of suppliers that have passed evaluation and are cleared to ship to the plant.
Examples
- The approved list holds 42 suppliers across 9 material groups, with at least 2 suppliers per group.
- Last year 3 of the 42 were removed after their audit score fell below 80, which is 7 percent.
Easy to get wrong
Being on the list is not a permanent licence. Each supplier has to be re evaluated on a cycle, usually 24 months.
17Dual sourcingNguồn cung kép
Definition
Running at least two approved suppliers for the same material.
Examples
- Sugar is split 70 percent to supplier A and 30 percent to supplier B across 144 tonnes a year.
- When supplier A stopped for a month, supplier B lifted that month from 3.6 tonnes to 12 tonnes.
Easy to get wrong
Two suppliers drawing from one upstream plant is not real dual sourcing. The risk still sits on a single point.
18TraceabilityTruy xuất nguồn gốc
Definition
The ability to follow a finished lot back to each material lot and supplier that went into it.
Examples
- One finished lot of 20 thousand noodle packs traces back to 3 flour lots and 2 frying oil lots.
- The trace drill requires a full file within 4 hours; the last run took 2 hours 40 minutes.
Easy to get wrong
Tracing has to work in both directions. From one material lot you must also find every finished lot that used it.
19Batch numberSố lô nguyên liệu
Definition
A code given to a quantity of material made under the same conditions, used to identify and trace it.
Examples
- Sugar batch S24 holds 24 tonnes, enough for 2 months at 12 tonnes a month.
- One 30 tonne flour truck carried 3 different batch numbers of 10 tonnes each.
Easy to get wrong
One truck can carry several batch numbers. Recording a single number for the whole truck breaks traceability.
20Material shelf lifeHạn dùng nguyên liệu
Definition
The period a material still meets its quality specification when stored in the right conditions.
Examples
- A flavour has a 12 month shelf life and the plant accepts only lots with at least 9 months left.
- A yeast lot has a 6 month shelf life; stock is 800 kg against usage of 100 kg a month, so 200 kg will expire unused.
Easy to get wrong
The date on the bag holds only under the right storage. A hot warehouse spoils material before that date.
21Goods receipt notePhiếu nhập kho
Definition
The warehouse document raised on delivery, recording item, batch number, quantity actually received and condition.
Examples
- The order was 500 cases but the truck delivered 480, and the receipt note records 480.
- The note flags 2 crushed cases out of 480 received, which is 0.4 percent.
Easy to get wrong
The note must carry the quantity actually received, not the quantity on the order. Copying the order corrupts both stock and payables.
22Incoming inspectionKiểm tra hàng nhập
Definition
The check on material as soon as it reaches the warehouse, before it is released to production.
Examples
- Inspection draws 8 samples per 20 tonne lot and results take 6 hours on average.
- Across 120 lots last year inspection stopped 5, including 1 whose certificate of analysis said it passed.
Easy to get wrong
Material awaiting results still sits in the warehouse but must be locked. Mixing held stock with released stock is the most common way it gets used by mistake.
23Material lossHao hụt nguyên liệu
Definition
The share of material lost in storage and production that never becomes finished product.
Examples
- The noodle line loses 3 percent of its flour, which is 390 kg on every 13 tonnes fed in.
- At 9 million dong per tonne, that 390 kg of loss is worth 3.51 million dong per run.
Easy to get wrong
Loss is not the same as reject. Loss is material gone during the process; a reject is finished product that failed.
24Material specificationQuy cách kỹ thuật nguyên liệu
Definition
The document listing the required attributes of a material, with acceptance limits and test methods.
Examples
- The flour spec sets moisture at 14 percent maximum and protein from 10.5 to 11.5 percent.
- The carton spec sets board weight at 380 grams per square metre and compression strength at 250 kg minimum.
Easy to get wrong
A spec must name the test method. Two labs using two methods produce two results on one lot and the argument has no end.
25Supplier returnTrả hàng cho nhà cung cấp
Definition
Sending a failed material lot back to the supplier with the file and a request for corrective action.
Examples
- A 20 tonne flour lot at 14.8 percent moisture was returned and the replacement arrived 5 days later.
- The 3 million dong return freight went into the claim file along with the 5 day wait for replacement.
Easy to get wrong
Returning the lot does not close the issue. Without a root cause report from the supplier, the next lot repeats the same fault.
26Commodity priceGiá hàng hóa cơ bản
Definition
The market price of a base material such as sugar, palm oil or flour, set by broad supply and demand rather than by one supplier.
Examples
- Sugar moved from 18 to 21 thousand dong per kg over 6 months, a rise of 16.7 percent.
- Palm oil is 8 percent of the cost of goods of a noodle pack, so a 25 percent oil rise lifts cost of goods by 2 percent.
Easy to get wrong
A supplier does not control the base price. Squeezing it in a rising market usually pushes the supplier to cut quality or walk away.
27Forward price lockChốt giá kỳ hạn
Definition
An agreement fixing the price of a volume over a future period to remove price swings.
Examples
- The plant locks 72 tonnes of sugar at 18 thousand dong per kg for 6 months, half of the 144 tonne yearly need.
- With the market at 21 thousand dong, the locked portion avoids 216 million dong of extra spend.
Easy to get wrong
A lock buys stability. If the market falls below the locked price, the plant still pays above market.
28Purchasing savingTiết kiệm chi phí mua hàng
Definition
The gap between a reference price and the price actually paid, measured on the volume actually bought in the period.
Examples
- Carton price fell from 6600 to 6100 dong, which on 500 thousand cases a year is a saving of 250 million dong.
- The new price starts at the beginning of month four, so this year books 9 of the 12 months, or 187.5 million dong.
Easy to get wrong
A lower price is not yet money saved if the volume misses plan. The number has to sit on the volume actually bought.
29Volume discountChiết khấu theo sản lượng
Definition
A price reduction the supplier grants once purchased volume reaches an agreed threshold.
Examples
- From 100 tonnes a year the discount is 3 percent, and from 150 tonnes it is 5 percent.
- The plant buys 144 tonnes of sugar at 18 thousand dong per kg and earns the 3 percent tier, worth 77.76 million dong.
Easy to get wrong
Buying extra just to reach a tier is a risky move. The extra volume sitting in the warehouse can cost more than the discount.
30Contract manufacturingGia công bên ngoài
Definition
Hiring another plant to make or pack a product that carries your own brand.
Examples
- In peak season the plant outsources 30 percent of volume, or 6 million packs out of 20 million a quarter.
- The contract fee is 900 dong per pack against a variable cost of 750 dong to make it in house.
Easy to get wrong
Outsourcing does not move the quality responsibility. The brand owner still answers to the shopper.
31Tier two supplierNhà cung cấp cấp hai
Definition
The supplier to your own direct supplier, one step further back in the chain.
Examples
- The plant buys cartons from 2 printers and both printers take board from 1 paper mill.
- That paper mill stopped for 3 weeks after a boiler failure and both printers ran late.
Easy to get wrong
A supplier map that stops at tier one is an incomplete map. Most disruptions start at tier two or further back.
32Supply disruption riskRủi ro đứt gãy nguồn cung
Definition
The chance that material arrives late or not at all, which forces production to stop.
Examples
- The plant scores 25 materials on impact and likelihood, and 4 of them land in the high risk box.
- An imported flavour has a 45 day lead time and the plant holds 60 days of stock, so the buffer is 15 days.
Easy to get wrong
The most expensive material is not always the riskiest. Risk sits with what is hardest to replace, and a cheap yeast can stop the whole plant.
33Material requirements planningKế hoạch nhu cầu nguyên liệu
Definition
Working out how much material to buy and when, from the production plan, the bill of materials and current stock.
Examples
- A plan of 200 thousand packs needs 13 tonnes of flour; with 4 tonnes in stock, only 9 tonnes must be bought.
- With a 7 day lead time, the 9 tonne order has to be issued at least 7 days before the run.
Easy to get wrong
The buy quantity is requirement minus stock on hand. Ignoring stock inflates the order and ties up cash in the warehouse.
34Annual volume commitmentCam kết sản lượng năm
Definition
A clause binding the buyer to take a minimum volume in the year in exchange for a better price.
Examples
- Committing to 120 tonnes of sugar a year secures 17.5 thousand dong instead of 18 thousand dong per kg.
- Buying only 100 tonnes means paying back the 500 dong per kg gap on what was bought, or 50 million dong.
Easy to get wrong
A commitment is only worth signing on a forecast you trust. A 2.8 percent discount does not cover the clawback when volume falls short.
35Three way matchingĐối chiếu ba chứng từ
Definition
Checking the purchase order, the goods receipt note and the invoice against each other before payment is approved.
Examples
- The order says 500 cases, the receipt says 480 and the invoice says 500, so accounting holds back the 6.4 million dong gap.
- Of 1200 invoices last year, 36 failed the match, which is 3 percent.
Easy to get wrong
Matching quantity is not enough. Unit price has to match too, or an unannounced price increase slips straight through.
36Days payable outstandingSố ngày phải trả người bán
Definition
The average number of days from receiving goods to actually paying the supplier.
Examples
- Average payables of 1.2 billion dong against 14.6 billion dong of yearly purchases works out to 30 days.
- Moving from 30 days to 45 days keeps roughly 600 million dong of extra cash inside the plant.
Easy to get wrong
A high figure is not automatically good. Paying too slowly makes suppliers tighten credit or price their capital cost back in.
37Alternative materialNguyên liệu thay thế
Definition
A second approved material used when the main one is short or too expensive, provided finished product quality holds.
Examples
- Palm oil and rapeseed oil are both approved for one formula, with substitution capped at 30 percent.
- When palm oil rises 25 percent, swapping 30 percent to rapeseed pulls the cost of goods rise from 2 percent down to 1.4 percent.
Easy to get wrong
An alternative has to be trialled and approved in advance. Deciding to swap during a shortage is how quality faults get made.
38Material change noticeThông báo thay đổi nguyên liệu
Definition
The notice a supplier sends before changing the formula, origin or process of a material it currently supplies.
Examples
- The contract requires 90 days notice for any change that touches the specification.
- The supplier moved production to another plant with only 10 days notice, so 3 trial runs had to be repeated.
Easy to get wrong
A small change at the supplier can still stop the line. A different carton glue is enough to jam the case packer several times in one shift.
39First article approvalMẫu duyệt đầu tiên
Definition
The first sample lot from a new supplier or new process, which must be tested and approved before regular supply starts.
Examples
- The plant runs 3 trial batches of 500 kg each before approving a new flour supplier.
- The full approval takes 21 days: 7 days of laboratory testing and 14 days of line trials.
Easy to get wrong
A sales sample is not a first article. A sales sample is hand picked, while the first article must come from a real production lot.
40Indirect procurementMua hàng gián tiếp
Definition
Buying things that never enter the finished product, such as cleaning chemicals, machine spares and maintenance services.
Examples
- Indirect spend runs 8 billion dong a year, which is 12 percent of the 66 billion dong total purchasing spend.
- Packing machine spares alone are 1.2 billion dong spread over 340 small orders at 300 thousand dong of processing cost each.
Easy to get wrong
Indirect spend gets ignored because each order is tiny. Added up it is still 12 percent of total purchasing spend.
41Consignment stockHàng ký gửi
Definition
An arrangement where the supplier keeps stock in the plant warehouse and ownership passes only when the plant draws it.
Examples
- The supplier holds 20 tonnes of consigned sugar in the plant warehouse and invoices only what is drawn.
- That month the plant used 12 tonnes at 18 thousand dong per kg, so it booked 216 million dong of payables and the other 8 tonnes stayed with the supplier.
Easy to get wrong
Consigned stock still takes space and still needs proper storage. Contracts usually put damage risk on whoever holds the goods.
42Certificate of originGiấy chứng nhận xuất xứ
Definition
The document confirming where goods were produced, used to claim preferential duty and to clear customs.
Examples
- A flavour shipment worth 24 thousand dollars carries a valid certificate of origin, so duty falls from 10 percent to 0 percent.
- Without it, the same shipment pays another 2400 dollars of duty.
Easy to get wrong
A certificate of origin is not a certificate of analysis. One states where the goods were made, the other states which limits they met.
43Import dutyThuế nhập khẩu
Definition
The tax charged on the declared value of imported goods at customs, which goes straight into material cost.
Examples
- A flavour shipment declared at 24 thousand dollars pays 10 percent duty, or 2400 dollars.
- Adding 300 dollars of clearance fees, the landed cost of the shipment is 26.7 thousand dollars.
Easy to get wrong
On CIF terms, duty is charged on a value that includes freight and insurance. Computing duty on the goods value alone always understates it.
44Exchange rate exposureRủi ro tỷ giá
Definition
The chance that imported material cost rises because the local currency weakens against the currency of payment.
Examples
- A 24 thousand dollar shipment at 25 thousand dong per dollar equals 600 million dong.
- At 26 thousand dong per dollar the same shipment becomes 624 million dong, up by 24 million dong.
Easy to get wrong
A flat dollar price does not mean flat cost. Real cost has to be measured in the currency the plant sells in.
45Procurement ethicsĐạo đức mua hàng
Definition
The rules that keep buying decisions on published criteria rather than on the private interest of the decision maker.
Examples
- The internal rule bans accepting any gift worth more than 500 thousand dong from a supplier.
- Every package above 500 million dong needs at least 3 quotes and 2 approval signatures.
Easy to get wrong
A conflict of interest does not need money to be real. A relative working at the supplier still has to be declared and the buyer steps out of the scoring.