Section 23.2 The Purchasing Function Marketing Essentials n Chapter 23 Purchasing Section 23.2 The Purchasing Function

The Purchasing Function SECTION 23.2 The Purchasing Function What You'll Learn 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

The Purchasing Function 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.

The Purchasing Function SECTION 23.2 The Purchasing Function Key Terms want slips resident buying offices consignment buying memorandum buying reverse auction

The Purchasing Function SECTION 23.2 The Purchasing Function The Buying Process 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 Purchasing Function SECTION 23.2 The Purchasing Function Types of Purchase Situations There are three types of purchase situations: new-task purchase modified rebuy straight rebuy

The Purchasing Function 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.

The Purchasing Function 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 ________

The Purchasing Function SECTION 23.2 The Purchasing Function Modified Rebuy 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.

The Purchasing Function SECTION 23.2 The Purchasing Function Straight Rebuy 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.

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

The Purchasing Function SECTION 23.2 The Purchasing Function Production Capabilities 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.

The Purchasing Function SECTION 23.2 The Purchasing Function Past Experiences 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.

The Purchasing Function SECTION 23.2 The Purchasing Function Special Buying Arrangements 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.

The Purchasing Function SECTION 23.2 The Purchasing Function Special Services 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.

The Purchasing Function SECTION 23.2 The Purchasing Function Negotiating Terms 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.

The Purchasing Function SECTION 23.2 The Purchasing Function Internet Purchasing 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. Slide 1 of 2

The Purchasing Function SECTION 23.2 The Purchasing Function Internet Purchasing 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. Slide 2 of 2

Reviewing Key Terms and Concepts ASSESSMENT 23.2 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?

ASSESSMENT Thinking Critically 23.2 How do you see the job description of a buyer or procurement manager changing with the advent of Internet purchasing?

Graphic Organizer 23.2 Criteria for Selecting Suppliers Selecting A Production Capabilities Selecting A Supplier Past Experiences Special Buying Arrangements Special Services

Marketing Essentials End of Section 23.2