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C HAPTER T HREE Purchasing. PURCHASING OBJECTIVES 1. Provide appropriate levels of supply (quantity) JIT EDI 2. The appropriate level of quality 3. The.

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Presentation on theme: "C HAPTER T HREE Purchasing. PURCHASING OBJECTIVES 1. Provide appropriate levels of supply (quantity) JIT EDI 2. The appropriate level of quality 3. The."— Presentation transcript:

1 C HAPTER T HREE Purchasing

2 PURCHASING OBJECTIVES 1. Provide appropriate levels of supply (quantity) JIT EDI 2. The appropriate level of quality 3. The lowest TOTAL cost More than just the product price What else is included? Chapter 3 - Purchasing

3 COSTS OF OWNERSHIP Total cost of ownership = Product price + Delivery + Installation + Maintenance / repair + Costs to run equipment + Supply costs + Operating costs + Financing Chapter 3 - Purchasing

4 VALUE ANALYSIS Reduce costs and/or Improve design What is New Currentlyvs. Alternatives Being Done Chapter 3 - Purchasing Compare Benefits receivedCost of materials Function of productWork process involved vs.

5 ORGANIZATIONAL BUYING PROCESS 1. Recognition of need 2. Definition of the product 3. Detailed specifications 4. Supplier search 5. Analysis of supplier proposals 6. Supplier selection 7. Selection of order procedure 8. Evaluation of product performance Chapter 3 - Purchasing Need Evaluate Alternatives Make Choice Evaluate Choice

6 BUY CLASS New Buy Modified Rebuy Straight Rebuy How does the buy class impact the process? Chapter 3 - Purchasing

7 MARKETING’S ROLE BY BUY CLASS New BuyAdvertising? Selling? Modified RebuyAdvertising? Selling? Straight RebuyAdvertising? Selling? Chapter 3 - Purchasing

8 PURCHASING TRENDS 1. REDUCE PURCHASING COSTS  Cutback on employees  Reduce number of vendors/ transactions  Centralize purchasing activities  Use the internet (hubs and orders) 2. OUTSOURCING 3. STRONGER SUPPLIER RELATIONSHIPS 4. CROSS-FUNCTIONAL TEAMS 5. INCREASE PROFESSIONALISM  Certification programs and establish a code of ethics Chapter 3 - Purchasing

9 SUCCESSFUL CROSS-FUNCTIONAL TEAMS Appropriate leadership Face-to-face communication (what are the benefits of face-to-face?) Continuity– in it for the long term Top-level management commitment Embracing diversity (different skills, knowledge, education, training) Chapter 3 - Purchasing

10 THE TYPICAL PURCHASING AGENT 67% Male 63% Business degrees 21% Certified purchasing agents 20%Other certification 50%On product development teams 45.8 Years old 15Years experience They earn $67,000 per year They spend $28.4 million per year How do we get their attention? Chapter 3 - Purchasing

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