Purchasing Intersts and Definition

Purchasing Intersts and Definition:

Purchasing

OEM: Original Equipment Manufacturers – Term that refers to a company that builds a product or subproducts that are purchased by another firm to include them or use them inside the final product and resell it. Interl processors inside computers of different brands

Purchasing perimeter:

• Produtcion:

• Consummate (energy), transformed raw material and integrated (OEM parts and outsourcing)

• Working: office supplies, training, consulting, services – Purpose is to help a companies working process.
• Investment: Buildings, machines (assets)
• Trade purchasing: Bought and resold products.

Direct purchasing: Production buying

Indirect purchasing: Non-production purchasing (transport, advertising, MKT)

Purchasing Firms:

1. Industrial manufacturers: Buy raw materials and transfor them to be sold thru B2B
2. Intermediate organizations: Retailers – No added value to the product
3. Government: Buy products and services to be used or to give to the populations or subsidize.
4. Institutions: Schools, hospitals.

IMPORTANCE OF RIGH PURCHASING?

• Cost reduction
• Selection of the right supplier – Safety , quality, delivery etc.
• Abide by the law – Avoid incurring in faults.
• Making sure the products being purchased are truly needed.

Eagersaver study case and solution:

1

[pic 1]^[1][pic 2]

Rationalize and Standarize key procedures of the company:

• Marketing director will no longer have the final say on purchasing, instead it will work along with the PD who according to the budgetary allocation will have the final say. In case a good marketing strategy in the eyes of the MD is refused, escalation to Managing Director may be accepted.
• Reorganization of suppliers will be needed.
• Creation and signing  of contracts will take place,  and nepotism will no longer be accepted. Only the most qualified suppliers will remain.
• Prices will be the same for each site, difference will only depend on transportation costs or a specific characteristic of a site.
• Signed contracts that seem to unilateral will be renegotiated – Supplier management.

2 Managing director no longer has final say on every contract awarding. Depending on importance it shall be discussed with the CEO.

3 Expenditure managing has already been explained.

Purchasing function and strategy

What is a centralized and decentralized procurement organization?

What is OTIF (On Time In Full)

What is a Hybrid Purchasing Strategy?

Total cost of ownership? Is the price paid for an item plus the cost of operation in the long run. Example new car will csot 1000 but it will yearly consume 50 in fuel, 20 in repairs, 100 in services, 30 for insurance etc.

...