The Purchasing Function

1. Chapter 23  Purchasing
1
Marketing Essentials
 Chapter 23 Purchasing
Section 23.2 The Purchasing
Function

2. Chapter 23  Purchasing
2
SECTION 23.2
What You'll Learn
The Purchasing Function
The three types of purchase situations
The criteria for selecting suppliers
The factors involved in negotiating terms of
a sale
The various Internet purchasing methods

3. Chapter 23  Purchasing
3
SECTION 23.2 The Purchasing Function
Why It's Important
Knowing the details of the purchasing
function will give you a better idea of what is
involved in the overall job description. It is
especially important to recognize the impact
of the Internet on the purchasing function.
You can expect changes in job descriptions
for buyers in the near future due to the
significant increase in online purchasing.

4. Chapter 23  Purchasing
4
SECTION 23.2 The Purchasing Function
Key Terms
 want slips
 resident buying offices
 consignment buying
 memorandum buying
 reverse auction

5. Chapter 23  Purchasing
5
SECTION 23.2 The Purchasing Function
Planning purchases is the preliminary step
in the buying process. The buying process
involves several types of purchasing
situations, selecting suppliers, negotiating
terms, and sometimes using the Internet.
The Buying Process

6. Chapter 23  Purchasing
6
SECTION 23.2 The Purchasing Function
Types of Purchase Situations
There are three types of purchase situations:
 new-task purchase
 modified rebuy
 straight rebuy

7. Chapter 23  Purchasing
7
SECTION 23.2 The Purchasing Function
New Task Purchase
A new-task purchase is a purchase that is
made for the first time. This can be the most
complicated purchase. It could be anything
from a special item that a customer has
requested and a store doesn’t carry to
complex manufacturing equipment to be
used to automate production.

8. Chapter 23  Purchasing
8
SECTION 23.2 The Purchasing Function
Want Slip
Salespeople often prepare
want slips and give them to
the buyer for their
department. Why are want
slips so valuable to a
buyer? What other
information might a buyer
need before making a
new-task purchase?
Item Required ___________ Brand Name __________
Size ________ Style __________ Quantity_________
Item Description_______________________________
____________________________________________
Your Name___________________________________
Address _____________________________________
(Street) (City) (State) (Zip Code)
Telephone ( ) ______________________________
EMPLOYEE: PLEASE FORWARD IMMEDIATELY TO YOUR
SUPERVISOR.
Employee Signature____________________________
Store No. _______ Dept. No. _______ Date________

9. Chapter 23  Purchasing
9
SECTION 23.2 The Purchasing Function
In a modified-rebuy situation, the buyer
has had experience buying the good or
service, but some aspect of the purchase
changes, such as purchasing from a new
vendor. A buyer usually gets proposals
from several vendors before making a
buying decision.
Modified Rebuy

10. Chapter 23  Purchasing
10
SECTION 23.2 The Purchasing Function
In a straight-rebuy situation, the buyer
routinely orders the goods and services
purchased from the same vendor(s) as in
the past. Staple goods such as office
supplies fall into the straight-rebuy category
for wholesale and retail buyers.
Straight Rebuy

11. Chapter 23  Purchasing
11
SECTION 23.2 The Purchasing Function
The criteria for selecting suppliers fall into a
few key categories:
 production capabilities
 past experience
 product and buying arrangements
 special services
Selecting Suppliers

12. Chapter 23  Purchasing
12
SECTION 23.2 The Purchasing Function
When dealing with a source for the first time,
buyers may request specific information
about the source's production capabilities.
They may visit the production facility, get
references, and ensure the facility is not
a sweatshop. A sweatshop is a factory
characterized by poor working conditions and
negligent treatment of employees.
Production Capabilities

13. Chapter 23  Purchasing
13
SECTION 23.2 The Purchasing Function
Many buyers maintain resource files that
document past experiences with vendors,
with basic information such as products
carried, prices, and delivery and dating
terms, to evaluations of products, delivery
performance, and customer service.
Past Experiences

14. Chapter 23  Purchasing
14
SECTION 23.2 The Purchasing Function
Two special types of sales and return policies
are called consignment buying and
memorandum buying.
 In consignment buying, goods are paid
for only after they are purchased by the
customer.
 Memorandum buying occurs when the
supplier agrees to take back any unsold
goods by a certain date.
Special Buying Arrangements

15. Chapter 23  Purchasing
15
SECTION 23.2 The Purchasing Function
Businesses today demand more services
from their suppliers than just the basic
return policy. One common demand is
placement of Universal Product Codes
(UPCs) on goods, which makes it easier
for businesses to track products.
Special Services

16. Chapter 23  Purchasing
16
SECTION 23.2 The Purchasing Function
To evaluate suppliers, buyers must negotiate
their prices, dating terms, delivery
arrangements, and discounts. One common
discount is dating terms, discounts for paying a
bill before the due date. Buyers can negotiate
for bigger discounts or a longer deadline for
payment.
Negotiating Terms

17. Chapter 23  Purchasing
17
SECTION 23.2 The Purchasing Function
Business-to-business electronic commerce
has revolutionized the purchasing function
for businesses in the industrial and reseller
markets. Electronic exchanges allow
registered users to buy and sell goods
online, often within specific industries.
Internet Purchasing
Slide 1 of 2

18. Chapter 23  Purchasing
18
SECTION 23.2 The Purchasing Function
Online auction companies register parties
interested in selling an item or a service.
Usually a seller sets an asking price and
buyers try to outbid each other. This type of
auction is available through the online
exchanges of many industries.
In a reverse auction, companies post
what they want to buy and suppliers bid
for the contract.
Internet Purchasing
Slide 2 of 2

19. Chapter 23  Purchasing
19
23.2 ASSESSMENT
Reviewing Key Terms and Concepts
1. List the three types of purchase situations.
2. What four things can buyers do to stay abreast
of industry trends?
3. Name four criteria buyers use in selecting
supply sources.
4. What is the difference between consignment
and memorandum buying?
5. What are electronic exchanges and in what
types of industries are they found?

20. Chapter 23  Purchasing
20
23.2 ASSESSMENT
Thinking Critically
How do you see the job description of a
buyer or procurement manager changing
with the advent of Internet purchasing?

21. Chapter 23  Purchasing
21
23.2 Graphic Organizer
Criteria for Selecting Suppliers
SelectingSelecting
AA
SupplierSupplier
SelectingSelecting
AA
SupplierSupplier
Special
Services
Special
Services
Special Buying
Arrangements
Special Buying
Arrangements
Past
Experiences
Production
Capabilities
Production
Capabilities

22. Chapter 23  Purchasing
22
Marketing Essentials
End of Section 23.2