Purchasing, Inventory, and Vendor Management Flashcards

What is the usual correct sequence in a basic purchasing cycle?

Answer: Purchase requisition, purchase order, receipt of goods, invoice verification, payment

A request (requisition) leads to an approved purchase order. Once goods arrive they are checked against the order and the invoice before payment is made, which is the basis of a three-way match.

What is the purpose of a purchase order (PO)?

Answer: To formally authorize a purchase and set out the items, quantities and agreed prices with a vendor

A PO is a legal document from the buyer to the vendor that authorizes a purchase and states what is being ordered, in what quantity and at what price. It also serves as a control and audit record.

When goods arrive, what should the office manager compare them against to confirm the order is correct?

Answer: The purchase order and the packing slip

Received goods should be checked against the purchase order and the packing slip for item, quantity and condition. The invoice is then matched to those before payment is approved.

An office wants to avoid running out of printer paper while also avoiding overstock. Which inventory practice helps most?

Answer: Setting a reorder point and a minimum stock level based on usage and delivery lead time

A reorder point set from average usage and vendor lead time triggers a new order before stock runs out, which balances availability against storage and carrying costs.

Which is generally the best approach when selecting a vendor for a significant office purchase?

Answer: Obtain several competitive quotes and compare price, quality, reliability and terms

Comparing multiple quotes against total value, including quality, delivery reliability, warranty and payment terms, supports a well-informed decision. The lowest price may not provide the best value.

Which inventory method means the oldest stock is used or sold first, which is important for items that expire?

Answer: FIFO (first in, first out)

FIFO uses the oldest stock first, which reduces waste and obsolescence. LIFO uses the newest first, ABC analysis classifies items by value, and just-in-time schedules delivery to match demand.