L5, Buying behavior and orientation Flashcards
(34 cards)
why is the role of purchasing more and more important?
- Due to the increasing specialization of labor
- Every organization specializes in an increasingly smaller range of value added in the production process, which leads to increased share of externally acquired goods and services
What are the primary activities in the role of purchasing in the value chain? (5 st)
- Inbound logistics
- Operations
- Outbound logistics
- Marketing and Sales
- Service
What are the support activities in the role of purchasing in the value chain?
- Procurement
- Technology development
- Human resource management
- Firm infrastructure
Describe the role of purchasing in the value chain!
The van weele model describes the primary and secondary activities in the role of purchasing and that the margins has to cover all activities included by the role of purchasing
What are the primary activities in the role of purchasing in the value chain? (5 st)
(According to van weele)
- Inbound logistics
- Operations
- Outbound logistics
- Marketing and Sales
- Service
What are the support activities in the role of purchasing in the value chain?
(According to van weele)
- Procurement
- Technology development
- Human resource management
- Firm infrastructure
What are the support activities in the role of purchasing in the value chain?
(According to van weele)
- Procurement
- Technology development
- Human resource management
- Firm infrastructure
What is purchasing?
- all activities for which the company receives an invoice from outside parties
- The process of acquiring resources and capabilities for the firm from outside providers
- The management of the company’s external resources in such way that the supply of all goods, services, capabilities and knowledge which are necessary for running, maintaining and managing the company’s primary and support activities is secured at the most favorable conditions.
why has the importance of purchasing function for companies’ results increased?
- purchasers show they can add millions to the bottom line
Describe purchase goods and services as percentage of cost if goods sold in different industries!
- Retailers
- 60-85% of the cost of goods sold - computers
- 60-80% of the cost of goods sold - Consumer electronics
- 50-70% of the cost of goods sold - Automotive
- 60-80% of the cost of goods sold - Phama
- 25-50% - Service industry
- 10-40%
Describe purchase goods and services as percentage of cost if goods sold in different industries!
- Retailers
- 60-85% of the cost of goods sold - computers
- 60-80% of the cost of goods sold - Consumer electronics
- 50-70% of the cost of goods sold - Automotive
- 60-80% of the cost of goods sold - Phama
- 25-50% of the cost of goods sold - Service industry
- 10-40% of the cost of goods sold
What can be said about the purchasing expenditures?
A saving of 2% on purchasing expenditures leads to an increase in return on capital employed of 9,2% using the Dupont model
Name some costs that are affected by purchasing!
- production costs
- Goods handling costs
- storage costs
- capital costs
- supplier handling costs
- administrative costs
- development costs
what is total costs of ownership (TCO)?
A financial estimate intended to help buyers and owners determine the direct and indirect costs of a product.
E.g.
- acquisition costs
- price
- transportation - Conversion costs
- storage costs
- use
- repair - Training and education
- warranty cost
- labour cost
- risk management and safety
- environmental impact
- Energy/fuel use
- Purchase
- Disposal costs
Give an example of the TCO of a car!
- Depreciation
- 39% - Cost per mile
- 35% - Full coverage
- 11% - Finance charge
- 9% - Licence, registration, taxes
- 7%
Name some facts about competition vs relationship
The price can be reduced by playing 1,2 and 3 against each other
OR
the indirect costs can be reduced by developing the relationship with 3
How will total cost of ownership affect the way in which a business marketer prices it’s products?
Apart from saving on prices, purchasing can contribute to the company’s success by:
- supply
- quality
- design
- innovation and technology
- stock reduction
- total cost of ownership (TCO)
What is a purchasing orientation/ philosophy?
A philosophy that guides managers making purchasing related decisions
- Delineates domain & spa of influence
- Varies between customers
- Varies within a single organization
- matched with specific product category
What are the three purchasing orientations?
- Buying orientation
- procurement orientation
- supply management orientation
Name some facts about the buying orientation?
- focusing on reducing price and purchasers are awarded based on price reductions
- Obtaining the best deal: price is in focus
- arm-length relationships
- Maximizing power over suppliers
- avoiding risk
- target pricing
what is the traditional view of purchasing?
- suppliers are opponents rather than partners
- many suppliers for the same product
- the suppliers are played against each other
- Price reduction through competition
Name some facts about the procurement orientation?
- More strategic than buying orientation
- Buyers become managers of external resources
- improving quality
- reducing total cost ownership
- Cooperating with suppliers (e.g. integration, target costing)
Name some facts about the supply management orientation?
- firms realize that their operations are interlinked with other firms
- focus on end-users: from push to pull
- Sourcing strategy (what to make/buy)
- build a supply network (e.g. lean enterprise)
- maintain and develop high collaborative relationships with suppliers and sub-suppliers
- integration and coordination internally and different functions and externally
Name some purchasing activities according to the traditional purchasing role!
- price negotiation
- market testing via competitive quotes
- Expeding information and parts delivery
- quality problems
- administration
