Course Title

WINTER NAMM 2013 ESSENTIAL PURCHASING TIPS “TOGETHER WE ALL MOVE FORWARD”

COMMUNICATION COMMUNICATION- Such an important word but how successful are we at effective communication? Webster says that communication is “the interchange of thoughts to result in directness of action. Usually done by speaking, telephone, telegraph, couriers, radio, or couriers.” The 2013 Google definition is about the same but the telegraph has been replaced with and texting.

TWO GREAT RULES OF THUMB “the palest ink is better than the best memory”! “if it is written it is real!” (well at least most of the time)

STARTING GATE Communication is a two-way street, so find out what your vendors need from you to make things run smoothly Explain what you need from them and update as needed to keep the lines of communication open.

ITEMS EASILY CONFUSED BY PHONE Money Numbers Letters Colors Sizes- small- medium- large- XL, XXL

PURCHASE ORDERS & CONFIRMATIONS Does you business use purchase orders for placing orders? Does your business request/ require confirmations from your vendors after the purchase order is placed? Before the order is placed?

ELEMENTS OF EFFECTIVE PURCHASE ORDERS RETAIL IS DETAIL! Your items that should appear on purchase orders Company name Complete company address- billing and shipping, store location, location number for multiple locations, Company contact name & address Account number Purchase order number Purchase order date

ELEMENTS OF EFFECTIVE PURCHASE ORDERS Shipping method details and freight agreements Ship to address Requested receipt date & place for ETA from vendor Detailed terms Vendor item numbers- CAUTION!- your inventory # may not match Line item numbers Item descriptions- this can sometimes help with incorrect item numbers Well defined quantities and units of measure

ELEMENTS OF EFFECTIVE PURCHASE ORDERS Vendor name Retail price Expected cost prices- ?? and extensions Invoice discounts or specials Number of pages Fax number Name of person order was sent to or who took the order if verbal Signature line

ELEMENTS OF EFFECTIVE PURCHASE ORDERS Statements explaining terms of the purchase order and information needed for the purchase order to be valid Back orders- allowed or not? Consolidated or split shipments? Cancellation policies? Scheduling dates?

EXAMPLES OF WHY WE NEED CONFIRMATIONS Incorrect items / model numbers Many companies have several items in their system with the same item numbers Sheet music and music books product numbers Incorrect quantities- as a result of human error or units of measure Shipping to incorrect location Incorrect colors Incorrect sizes Incorrect brand names or strengths on reeds

WHY WE NEED CONFIRMATIONS- CONT’D Incorrect prices and extensions “specials” are not always communicated to the company computer on all items Accounts payable needs to know exactly what to pay on the invoice and when to pay it To be sure the order was actually received?

WHY WE NEED CONFIRMATIONS- CONT’D Do the cost prices quoted on the purchase order confirmation apply to any and all future shipments on this purchase order? Prices can change before the item ships but you need a guarantee on what you will be paying and when TERMS- there are a myriad of terms and that is why I suggest detailed terms should appear on the Purchase Order Open, net 30, 30/60, 30/60/90, 30/60/90/120, master order, fall terms, winter dating, school bid terms, credit card; early pay discounts; flooring terms- no interest, delayed interest, check in advance, COD Check closely to be sure that the correct terms appear on the confirmation. ETA- They want it WHEN?? INSISTENCE AND PERSISTENCE ARE THE KEYS!

KEEP GOOD RECORDS! List of purchase orders placed and confirmed with dates on both Follow up daily/ weekly to be sure all purchase orders have been confirmed properly Sometimes we “think” an order is placed and it has not Vendor representative out sick, vacation, junk mail, etc. Example following this slide

EXAMPLE OF PURCHASE ORDER LIST LOCATION #1LOCATION #2 P.O. #VENDORORDER DATE CONFIRMED DATEP.O.# 1XYZ1/27/

GENERAL SUGGESTIONS Reminder- dot all of the “i”s and cross all of the “t”s before moving on to lunch, dinner, or personal conversations with the vendor representative Don’t be too hard on yourself if you leave something off- you will get it the next time. We all learn best from our own experiences and mistakes

GENERAL SUGGESTIONS Correction of errors- BE PROMPT! Phone calls are OK but always confirm the discussion via and request a reply on the correspondence. Some companies provide confirmations but have limits on the amount of time you can challenge errors. These range from 1 hour to 24 hours Should you have a disclaimer on this?

GENERAL COMMENTS PRAISE AND COMPLIMENTthose who perform well in this process! They won’t forget you and will continue to make your life run smoothly! Keep good records since your vendor contacts may change quickly Forward confirmation information to accounts payable, receiving, and sales associates as needed

FREIGHT Freight- prepaid? ½ freight? Are you using NAMM Partnership? Other freight brokers? Examine your freight costs by vendor as a % of the total invoice Nothing in life is FREE but freight is often easier to negotiate than discounts on products Does free freight apply to all shipments (when back orders are allowed) or only the initial shipment on this purchase order

INDUSTRY PROFESSIONAL QUESTIONS How do I negotiate better deals without spending more money? System for keeping up with who has the best deal? Criteria for consolidating to save MONEY? Additional questions?

HELPFUL HINTS Two, three, and four heads are always better than one; involve others in decisions It’s only a deal if you NEED it? Price should not be the only consideration Supplier relationships should be partnerships

MORE HELPFUL HINTS Good relationships require fair treatment of both parties so negotiation should also be done in a professional manner Maintaining that long term relationship is much more important than knocking out a one time “killer deal ”

MORE HELPFUL HINTS More inventory = Happy customers but buyers have to consider: 1. GMROI- Gross Margin Return on Investment “gross margin dollars/average inventory” 2. Product turns- 1 month, 3 months, 6 months? 3. Products “life expectancy” to be COOL 4. Seasonal sales and products

CLOSING IDEAS ON PURCHASING? Can I sell it and make money selling it? How many can I sell? How long will it take me to sell it? How long do I have to pay for it? Can I provide service after the sale?

THANK YOU! Contact Information: Mike Guillot Mississippi Music Inc. Cell=