Producers OEM purchasers End users Resellers Government agencies Institutions Consumers
They buy products and services to manufacture and sell their products and services to customers.
Buyers for original equipmentmanufacturers (OEMs)purchase goods to use in making their products.
When producer buy goods and services to support their own production and operations.CAPITAL EQUIPMENTSItems are major purchases, such as mainframe computers and machine tools that the producer uses for a number of years.
They buy finished products or services with the intention to resell them to business and customers.
Effective selling to government agencies requires a thorough knowledge of their unique procurement procedures and rules.
Another important customer group consists of public and private institutions as churches, hospitals and colleges.
Consumer purchase products and services for use by themselves or by their families.
The typical organizational purchase is much larger and more complex than the typical consumer purchase.Organizational buying decisions often involve extensive evaluations and negotiations overtime.
DERIVED DEMAND means that purchases made by these customers ultimately depend on the demand for their products – either other organizations or consumers.
Steps in the Buying Process Creeping Commitment
1. Recognizing a need or a problem2. Defining the type of a product needed3. Developing product specification4. Searching for qualified suppliers5. Acquiring and analyzing proposals6. Evaluating proposals and selecting a supp7. Placing an order and receiving the product8. Evaluating product performance
Someone realizes that a problem or a need exists.Who can recognize the problem?Employees in the customer’s firm or outside salespeople can trigger this recognition.
Developing general approach ainneed.solving the existing problem orTheof purchasing a product or interms product solution is defined service- the automated assembly needed.
The specificationsproblemproductneeded to solve the for the are prepared.Potential suppliers willproposals.specification to develop use these
Color Size Price WarrantyNote:Step 2 and 3 offer greatopportunities forsalespeople to influencethe outcome of thebuying process.
Looking for the potential supplier is being held. ◦ Contact pervious suppliers ◦ Go through extensive search procedure
Many organization nowadays use the internet to locate suppliers other than asking suppliers for proposals.
Suppliers are ask to submit proposals. Salespeople work with people in their company to develop their proposal.Salespeople work with people in their company to develop their proposals.
Customer evaluates the proposals Afternegotiations supplier is selected,further a preferred may occur concerning price, delivery or specific performance features.
Order is placed with the selectedsupplierOrder goes to supplierThe product is shipped to the buyingfirm.During this step the salespeople need to make sure the paperwork is correct and their firm knows what has to be done to satisfy the customer’s requirements.
The product’s performance is beingevaluated. the evaluation maybe formalpeople informal assessment made by or involved in the buying process.
New Task Straight Rebuy Modified RebuyFirst time Same product; Same product;Buyer same source unsatisfied needsLimited Considerable Interestinknowledge knowledge obtaining new informationInitial buying Satisfy with the in-suppliersprocess steps suppliers performsare critical performance unsatisfactorily
SALES PEOPLE NEED TO KNOW THE NAMES AND RESPONSIBILITIESOF ALL PEOPLE IN THE BUYING CENTER FOR A PURCHASEDECISION, AND SOMETIMES THEY NEED TO MAKE SURE THAT THERIGHT PEOPLE ARE PARTICIPATING.
SUCH AS THE MANUFACTURING AREA PERSONNEL FOR OEM PRODUCTS AND CAPITAL EQUIPMENT, TYPICALLY DO NOT MAKE THE ULTIMATE PURCHASE DECISION. HOWEVER, THEY OFTEN HAVE INLUENCE ON THE BUYING PROCESS.
ANOTHER ROLE OF THE BUYING PROCESS IS THATOF INITIATOR, OR THE PERSON WHO STARTS THEBUYING PROCESS.
THIS IS THE PEOPLE INSIDE OR OUTSIDE THE ORGANIZATION WHO DIRECTLY OR INDIRECTLY PROVIDE INFORMATION DURING THE BUYING PROCESS.
IT CONTROLS THE FLOW OF INFORMATION ANDMAY LIMIT THE ALTERNATIVES CONSIDERED.
IN ANY BUYING CENTER ONE OR MORE MEMBERS OF THE GROUP,DECIDERS, MAKE THE FINAL CHOICE.
THE OBJECTIVES OF BUSINESSES IS TO MAKE PROFIT. THUS BUSINESSES ARE VERY CONCERNED ABOUT BUYING PRODUCTS AND SERVICES AT THE KWEST COST.
QUALITY FIRMS RECOGNIZE THAT THE QUALITYAND RELIABILITY OF THEIR PRODUCT ARE ASIMPORTANT TO THEIR CUSTOMERS AS PRICE.
ORGANIZATIONAL BUYERS WANT MORE THATN PRODUCTS THAT ARE EXPENSIVE, PERFORM RELIABLY, AND ARE AETHETICALLY PLEASING.
MEMBERS OF THE BUYING CENTER TEND TO BE MORE CONCERNED ABOUT LOSING BENEFITS THEY HAVE NOW THAN ABOUT INCREASING THEIR BENEFITS.
THIS IS TO CONTINUE BUYING FROM SUPPLIERSTHAT HACE PROVE SATISFACTORY IN THE PAST.
BY CONVERTING BUYING DECISIONS INTO STAIGHT REBUYS, THE DECISIONS BECOME ROUTINE, MINIMIZING THE CHANCES OF A POOR DECISION.
THIS MEANS THAT THE BUYER WILL ALWAYSALLOCATE ONLY A SHARE TO EACH VENDOR
Supply Chain ManagementThe Internet and Business-to-Busine
Just- in- time Inventory System Advantage and Disadvantage Material Requirements Planning (MRP) system Automatic Replenishment (AR)Supplier Relationship Management
Set of programs undertaken to increase the efficiency of the distribution channel that moves products form producer’s facilities to the end user.
used by a producer to minimize its inventory by having frequent deliveries, sometimes daily, just in time for assembly into the final product.The ultimate goal is to eliminateall inventory except products in production and transit. Inventory is waste.Rely on one supplier.
Funds that were tied up in inventories can be used elsewhere.Areas previously used, to store inventories can be used for other more productive uses.Throughput time is reduced, resulting in greater potential output and quicker response to customers.Defect rates are reduced, resulting in less waste and greater customer satisfaction.
PCs Just In Time Management:Del Computer Corporation has finally tuned its Just-in-Time system, Dells low cost production system allows it to under price its rivals by 10% to 15%. How does the companys just in time system deliver lower costs? "While machines from Compaq and IBM can languish on dealer shelves for two months Dell does not start ordering components and assembling computers until an order is booked.
That may sound like no biggie, but the price of PC parts can fall rapidly in just a few months. By ordering right before assembly, Dell figures itsparts, on average,are 60 days newer than those in an IBM or Compaqmachine sold at the same time. That can translate into a 6% profit advantage in components alone."
JIT manufacturing also opens businesses to a number of risks, notably those associated with your supply chain. With no stocks to fall back on, a minor disruption in supplies to your business from just one supplier could force production to cease at very short notice.
Toyota the Developer of JIT SystemJust-in-time manufacturing system has many advantages, but they are vulnerable to unexpected disruptions in supply. A production line can quickly come to a halt if essential parts are unavailable. Toyota, the developer of JIT, found this out the hard way. One Saturday, a fire at Aisin seiki Companys plant in Aichi Prefecture stopped the delivery of all break parts to Toyota. By Tuesday,
Toyota had to close down all of its Japanese assembly line. By the time the supply of break parts had been restored, Toyota had lost an estimated $15 billion in sales.
these systems are used to forecast sales, develop a production schedule, and then order parts and raw materials with delivery dates that minimize the amount of inventory needed, thereby reducing costs.
Week 1 2 3 4 5 6 7 8Gross RequirementsScheduled ReceiptsProjected on hand IPlanned ReceiptsPlanned order releases
A form of Just-in-time where the supplier manages inventory levels of the customer. The materials are provided on consignment, meaning the buyer doesn’t pay for them until they are actually used. (industrial settings)
Computer-to-computer linkages between suppliers and buyers sharing information about sales, production and shipment and receipts of products.
Sales Forecasts Promotion Schedule Request For Quote Change Order BUYER Material Release SUPPLIER Sh Quote Order A ip no dv m Acknowledge Bi ti an en r ll ce ce t de of d S t Shipping NoticePi t or sh at us enck La ip us Invoice up at m nd up pi ip in ck nPromotion Sh or g g Pi Schedule de st r CARRIER
is a strategy by which organizational buyers evaluate the relative importance of suppliers and use that information to determine with whom they want to develop partnerships.
Is the amount that is spent with each vendor (supplier) and for what products.
The buyer rates the supplier and its product on a number of criteria such as; ◦ Price ◦ Quality ◦ Performance ◦ On- time Delivery
The ratings of suppliers can be affected by perceptions and personal needs of the buyers.
The ratings are weighted by importance of the characteristics.
Electronic ordering through EDI (Electronic Data Interchange) has been common practice in business for more than 10 years.
EDI activity, nowadays, was transacted over private networks that required buyers and sellers to use specialized software to communicate with each other. Special secure Internet-based networks connecting buyers and suppliers are called extranets.
Reduced costs by making manuals and technical documentation available online to trading partners and customers more effective collaboration between business partners - perhaps members of a project team - by enabling them to work online on common documentation improved business relationships with key trading partners because of the close collaborative working that extranets support
improving the security of communications between you and your business partners, since exchanges can take place under a controlled and secure environment