Chapter 23 Purchasing 1

Marketing EssentialsMarketing Essentials

Chapter 23 Purchasing

Section 23.2 The Purchasing Function

Chapter 23 Purchasing 2

SECTION 23.2SECTION 23.2

What You'll LearnWhat You'll Learn

The Purchasing FunctionThe 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

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SECTION 23.2SECTION 23.2 The Purchasing FunctionThe Purchasing Function

Why It's ImportantWhy 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.

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SECTION 23.2SECTION 23.2 The Purchasing FunctionThe Purchasing Function

Key TermsKey Terms

want slips

resident buying offices

consignment buying

memorandum buying

reverse auction

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SECTION 23.2SECTION 23.2 The Purchasing FunctionThe 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

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SECTION 23.2SECTION 23.2 The Purchasing FunctionThe Purchasing Function

Types of Purchase Situations

There are three types of purchase situations:

new-task purchase

modified rebuy

straight rebuy

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SECTION 23.2SECTION 23.2 The Purchasing FunctionThe 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.

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SECTION 23.2SECTION 23.2 The Purchasing FunctionThe 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 YOURSUPERVISOR.

Employee Signature____________________________

Store No. _______ Dept. No. _______ Date________

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SECTION 23.2SECTION 23.2 The Purchasing FunctionThe 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

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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

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SECTION 23.2SECTION 23.2 The Purchasing FunctionThe 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

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SECTION 23.2SECTION 23.2 The Purchasing FunctionThe 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

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SECTION 23.2SECTION 23.2 The Purchasing FunctionThe 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

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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

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SECTION 23.2SECTION 23.2 The Purchasing FunctionThe 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

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SECTION 23.2SECTION 23.2 The Purchasing FunctionThe 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

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SECTION 23.2SECTION 23.2 The Purchasing FunctionThe 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

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SECTION 23.2SECTION 23.2 The Purchasing FunctionThe 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

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23.2 ASSESSMENTASSESSMENT

Reviewing Key Terms and Concepts1. 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?

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23.2 ASSESSMENTASSESSMENT

Thinking Critically

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

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23.2 Graphic OrganizerGraphic Organizer

Criteria for Selecting Suppliers

SelectingSelecting AA

SupplierSupplier

SelectingSelecting AA

SupplierSupplier

Special ServicesSpecial Services

Special Buying Arrangements

Special Buying Arrangements

Past Experiences

Production CapabilitiesProduction Capabilities

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Marketing EssentialsMarketing Essentials

End of Section 23.2