Purchasing Foundations
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This document provides an overview of key concepts in purchasing and supply chain management. It discusses the purchasing process and how purchase orders are created when an agreement is reached between the buyer and supplier. It also outlines different purchasing structures organizations use and factors to consider when evaluating and selecting suppliers, such as understanding requirements and identifying potential suppliers. Additionally, it mentions the importance of supplier quality management, performance evaluation, and focusing on customers.
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The document discusses key concepts related to customer value, satisfaction, loyalty and relationship management. It defines customer perceived value as the difference between benefits and costs of an offering compared to alternatives. Steps in a customer value analysis include identifying valued attributes, assessing importance and performance. Loyalty is a commitment to rebuy from a preferred brand. Measuring satisfaction involves surveys, customer loss rates and mystery shopping. Maximizing lifetime value means optimizing revenue, equity and profit over a customer's lifetime. Customer relationship management uses detailed customer data to improve loyalty.
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Customer equity is the total lifetime value of a firm's customers and considers customers as financial assets rather than just current sales. It has three main components: value equity based on customer evaluations, brand equity based on customer opinions, and relationship equity based on customer-firm links. Measuring customer equity is important for companies as it acts as a marketing system, focuses on reinforcing customer relationships, and provides a better measure of performance than current sales. Higher customer equity leads to higher revenues and market value for a company.
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The document outlines key phases in the business buying process including need recognition, defining specifications, evaluating proposals, and supplier selection. It also discusses the roles of initiators, influencers, users, buyers, and deciders in organizational buying. Higher risk purchases involve more entities and place less emphasis on price as a decision criterion. Types of uncertainty include need, market, and transaction uncertainty. The document also defines new buy, modified re-buy, and straight re-buy situations.
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Chapter 4Business, Government, and Institutional Buying©.docx
Chapter 4
Business, Government,
and Institutional Buying
© McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.
Chapter Outline
Categories of organizational buyers
The organizational buying process
Purchase-type influences on organizational buying
Structural influences on organizational buying
Behavioral influences on organizational buying
Stages in the organizational buying process
© McGraw-Hill Education
Business-to-Business or B 2 B Marketing
Marketing products and services to producers, intermediaries, government agencies, and other institutions rather than to consumers
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© McGraw-Hill Education
Categories of Organizational Buyers
Producers: Buy goods and services in order to produce other goods and services for sale
Intermediaries: Purchase products to resell at a profit
Government agencies: Operate at the federal, state, and local levels
Other institutions: Hospitals, museums, universities, nursing homes, and churches
© McGraw-Hill Education
Figure 4.1: A Model of the Organizational Buying Process
Jump to Figure 4.1: A model of the Organizational Buying Process, Appendix
© McGraw-Hill Education
5
Purchase-Type Influences on Organizational Buying, 1
Straight rebuy: Routinely reordering a product from the same supplier that it had been purchased from in the past
Fast and requires few employees
Common among organizations that practice just-in-time inventory
Just-in-time inventory: System of replenishing parts or goods for resale just before they are needed
Modified rebuy: Consideration of a limited number of alternatives before making a selection
Organizational buyer considers the new information and decides what changes to make
If the change proves satisfactory and the product is required routinely, the buyer may then make it a straight rebuy
© McGraw-Hill Education
Purchase-Type Influences on Organizational Buying, 2
New task purchase: Involves an extensive search for information and a formal decision process
Used for big-ticket items
Time consuming
Involves a relatively large number of decision makers
May involve joint decision making
© McGraw-Hill Education
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Purchasing Foundations
- 1. Lynda Certification: Purchasing Foundations TAYLOR L. CANNON BUSINESS STUDENT AT PENN STATE MONT ALTO
- 2. The Purchasing Process Purchasing is important to a company because of the impact of cost.
- 3. Purchase Orders The purchase order is created when the buyer and supplier reach an agreement.
- 4. Purchasing Policies Purchasing Policies are put into place to define the responsibilities of the purchasing department.
- 5. The Purchase Organization The three type of purchasing structures are centralized purchasing, decentralized purchasing, and the hybrid approach.
- 6. Supplier Evaluation and Selection When selecting a supplier you must recognize that you have a need, understand the requirements of the customer, determine the right strategy for buying this item, identify the potential suppliers, and then pick a supplier with quality products.
- 7. Supplier Quality Management Supplier quality should focus mainly on the customers.
- 8. Supplier Management and Development To determine the right supplier for your company you must evaluate the supplier's performance.
- 9. World-Wide Sourcing Globalization has allowed companies to use suppliers all around the world regardless of their location.
- 10. Category Management Category management is different from company to company. The strategic sourcing group for each company is the most knowledgeable for this topic.
- 11. Negotiation Planning Not all purchases require negotiation, but effective planning is important for negotiation.
- 12. Contract Management The sale and purchase of good or property can be contracted.
- 13. Legal and Ethical Considerations Buyers should avoid accepting favors, reciprocity, and not revealing company information.
- 14. Price and Cost Analysis When spending the company’s money, buyers are expected to find value in their spending.
- 15. Should-Cost Analysis As a buyer you are looking to find a fair and reasonable price to pay the supplier.
- 16. Total Cost of Ownership There are four categories to total ownership, purchase price itself, acquisition costs, usage cost, and end-of- life costs.
- 17. Target Costing When entering a new product to the market you must make a lower price and still make a profit.
- 18. Learning Curve Analysis Learning curve analysis helps establish the rate of improvement, and the direct labor costs as production volume increases.
- 19. Purchasing Services Buyers also have to purchase indirect goods and services that are not directly a part of providing a product to the customer.
- 20. E-Sourcing Buyers are making company purchases through electronic transactions.
- 21. Supply Management Performance Measurement It is important that the purchasing department measures their own performance.
- 22. Bottom-Line The purchasing department needs to do a lot of strategic planning to make sure they are finding value in their spendings.
- 23. Thank you for your time!