L9, Purchasing function and process Flashcards
How do you communicate the role and importance of the purchasing function within companies?
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What descriptions are involved in purchasing?
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Describe the importance of suppliers for purchasing and how they can be integrated or involved?
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what is b2b purchasing and marketing about?
managing relatively stable, long-lasting relationships and networks
Describe the flow between the supplier and the buyer according to Van reelle model!
Van reelle model:
The transaction is between the sales manager and the buyer.
The sales manager is working within the marketing/sales department
The buyer is working within the purchasing department.
Both the buyer and the supplier has different:
- goals
- resources
- constraints
- problem-solving activities
- people
describe the purchasing process
- need/problem recognition
- determining product specification
- supplier & product search
- evaluation of proposals and supplier selection
- specification of order routine
- performance feedback and evaluation
Describe how money can be saved in the purchasing process
- If applied well the process can save between 2-40% on total costs for a company.
- Data shows that the majority of savings can be achieved on the pre-contract phase
- 10-25% on specification
- 5-10% on supplier selection
- 2-5% on negotiation
The price ins internal resistance to change in companies. e.g. doctors or engineers preferring specific brands or suppliers
How and why the decision-making process enacted by organizational customers might vary?
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Name some variables affecting the purchasing process
- characteristics of the product
- strategic importance of the purchase
- sum of the money involved
- characteristics of purchasing markets
- degree of risk related to the purchase
- role of purchasing department
- purchased products affecting existing routines
- purchasing situation
—> new task
—> straight rebuy
—> modified rebuy - Supplier relationship
what is an in-supplier?
A supplier which are already known to an organization and which they will purchase from with confidence
what is an out-supplier?
Supplier the buying organization has not had dealings with before and will therefor be considered with risk
What is common during a purchase for a new task with an out-supplier vs an in-supplier?
The purchase will be strategic and judgemental
OUT-SUPPLIER
- track search and communication behavior
- secure purchase and specification information
- tailor solutions to specific supply needs
IN-SUPPLIER
- Anticipate & monitor changing needs
- offer consultation in specifying need
What is common during a purchase for a modifier rebuy with an out-supplier vs an in-supplier?
Marketer actions will be complex and simple??
OUT-SUPPLIER
- develop customer insight
- crate communication messages to present value adding supply alternatives
- Deliver messages to march customer search behavior
IN-SUPPLIER
- Try to move to straight rebuy
- Reduce perceived benefits of supply switch
What is common during a purchase for a straight rebuy with an out-supplier vs an in-supplier?
ROUTINE: CASUAL
OUT-SUPPLIER
- examine total cost of ownership
- Target users, designers, engineers
IN-SUPPLIER
- Reinforce relationship with regular communication
- automated ordering
Describe maverick buying!
42%
— impatience, unwillingness to comply with procurement process
25%
— unplanned items needed
23%
— uniquw, one-off purchases
10%
— off-catalogue items needed
9%
— other
Describe different buyer-supplier relationship types
- Arm’s length
—> traditional, cost-based, free market, short duration, purchase-ordered driven relationships - Modifier vendor relationships
—> value-added services (e.g. supplier managed inventory) - Long-term contracts
—> long-term supply contracts
4. Non-equity based collaboration —> R&D consortia —> cross-marketing agreements —> cross-production agreements —> joint purchasing activities
- minority equity investments
—> invest in supplier - Licensing arrangements
—> provide license to supplier in technology that host firm develops but in which it wants to limit investments - investments integration
—> coordinate investment jointly - joint venture or strategic alliances
—> allow firms to exchange certain goods, services, information or expertise while maintaining a formal trade relationship on others - asset ownership
—> host firm retains ownership for critical assets in adjacent stages of the industry chain but contracts out all other aspects of ownership and control - host firm fully owns activity
Strengths and weaknesses with single and close suppliers?
STRENGTHS
- potentially higher quality as easier to assess Q-work
- Stronger relations
- higher dependence creates higher commitment
- better communication
- more Economy of scale, gives lower cost and stronger negotiation power
- easier to work with joint process- and product innovations
WEAKNESSESS:
- Increased sensitivity for delivery probems
- being more affected of volume fluctuations
- decreased supply market knowledge
- supplier could increase prices if no alternative supplier exists
Strengths and weaknesses with multiple and transactional suppliers?
STRENTHS
- purchaser can put pressure on pricey competition
- suppliers can easily be replaced if delivery problems
- a broad competence base is created b having many suppliers
WEAKNESSESS:
- Difficult to get commitment
- Difficult to make deep assessments e.g. quality of work
- more work to communicate
- suppliers less interested to invest in new processes
- more difficult to leverage economy of scale
How should a company treat it’s different suppliers?
- Due to the different economical importance of different suppliers, a company cannot provide the same attention to all suppliers
- A company should utilize a mix of different models which can be individualized for any specific supplier or specific type of suppliers
Name 2 different ways of segmenting the suppliers!
- Customization
—> highly customized parts
—> semi customized parts
—> standard parts
2. Ownership of supplier — Fully or partly owned suppliers —> very close relationship —> sharing information —> co-design and planning
— Partly owned/independend suppliers
—> close relationship
—> sharing information
—> development planning
— independent suppliers
—> upon contract relationship
—> arm length relationship
Describe the kraljic’s portfolio approach
The model is categorizing products into 4 categories depending n their customer value and customer risk.
Routine products:
— Products with low customer value and low customer risk
Leverage products:
— Products with high customer value and low customer risk
Bottleneck products:
— products with low customer value but high customerr isk
Strategic products:
— products with high customer value and high bottleneck products
Give an example of the purchasing portfolio for cykepick
Routine products: — indirect material — uniforms — paint — bikers
Leverage products:
— GPS-system
— cell-phones
Bottleneck products:
— handling space?
— trailers
Strategic products:
— advertisement
— electric bikes
— charging station
How could the supplier strategies be adapted to krajlic’s portfolio approach?
Routine products: — Category management and E-procurement solutions —> large product variety —> high logistics complexity —> labor intensive
Leverage products
— Competitive bidding
—> alternative sources of supply available
—> substitution possible
Bottleneck products:
— secure supply
—> monopolistic market
—> large entry barriers
Strategic products:
— Performance based partnership
—> critical for product’s cost price
—> dependence on supplier
In what way can the supplier be involved at different stages of the purchasing process?
The development process traditionally consist of 5 phases
- idea generation
- business and technology assessment
- concept development
- ergonomics and detailed design
- prototype/ ramp-up
Suppliers in the early phases:
- suppliers of more complex items
- suppliers of systems or sub-systems
- suppliers of critical items or technologies
- strategic allience suppliers
- “blackbox” suppliers
Suppliers in the later phases:
- suppliers of simpler items
- supplier of single components
- support of less-critical items or technologies
- non-allied suppliers
- “white-box” suppliers
Name some important questions with regard to supplier base?
- how many suppliers will you work with?
- where are they. from?
- local or global?
- Hw close should you be with them?
Name the different supplier base size!
- single sourcing
- multipel sourcing
- sole sourcing
- dual sourcing
- parallel sourcing
Name the drivers of global sourcing!
- globalization
- new tehcnology
- availability of local suppliers
- lower costs of labor and material
- better quality
- supplier willingness to solve problems
- on-time delivery
- to gain competitive advantage
How does the out-sourcing look ina global perspective?
- 82% of large firms in Europe, Asia and North America have some sort of outsourcing arrangements
- 51% source offshore
- 10% are happy with cost savings
- 6% are happy with the overall offshore sourcing
name some challenges with global sourcing
- infrastructure availability
- compatibility
- total cost of purchase
- transport delays
- quality assurance
- supply chain integrity
- political instability
- Currency fluctuation
What was Toyotas plan to reduce the risk of outsourcing in Japan?
- Suspended production in Japan
- Asking suppliers to make the same part at multiple locations or getting it from multiple suppliers
- carry larger inventories of sensitive parts
How has the digital technology facilitated the tasks of organizational buying and what are the consequences of this for the B2B marketer?
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