M G T575 Purchasing by zO52Btv

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									Purchasing




  MGT 575 Summer 2008
 Steps in the Purchasing Process
• Accurate description of desired commodity or
  service
• Selection of possible sources of supply
• Determination of price and terms
• Preparation of purchase order
• Follow-up or expediting
• Receipt and inspection of goods
• Clearing the invoice and payment
• Maintenance of records

Source: Leenders & Fearon   MGT 575 Summer 2008
    Description of Product or Service
• Description by brand
• “or equal”
• Description by specification
• Specification by physical or chemical
  characteristics
• Specification by material & method of
  manufacture
• Specification by performance or function
• Description by engineering drawing
Source: Leenders & Fearon   MGT 575 Summer 2008
    Determination of Price and Terms
•   Use of quotations and competitive bidding
•   Firm bidding
•   Determination of most advantageous bid
•   Collusive bidding
•   The problem of identical prices
•   Negotiation
•   Provision for price changes
•   Discounts
•   Contract cancellation

                            MGT 575 Summer 2008
Source: Leenders & Fearon
 Negotiation as a Method of Price
          Determination

• Framework for planning and preparing for
  negotiation
• Ground rules for successful negotiation




                MGT 575 Summer 2008
                            Best Buy
 The best buy is the best combination of
  technical and procurement factors.
Technical Factors                          Procurement Factors
•Useful life                               •Price
•Materials of construction                 •Delivery
•Design                                    •Lead time




Source: Leenders & Fearon   MGT 575 Summer 2008
Stockless Purchasing or Systems
          Contracting




           MGT 575 Summer 2008
  Legal Aspects of Purchasing

Four Factors of a Valid Contract
• Competent parties
• Legal subject matter or purpose
• An offer and an acceptance
• Consideration



                MGT 575 Summer 2008
  Legal Aspects of Purchasing

Warranties
• Express warranty
• Implied warranty of merchantability
• Implied warranty of fitness for a particular
  purpose
• Warranty of title


                  MGT 575 Summer 2008
     Acquisition of Capital Assets
• Life Cycle Costing (LCC) or Total Cost of
  Ownership (TCO)
• Procurement of used equipment
• Lease vs buy
• The acquisition of construction




Source: Leenders & Fearon   MGT 575 Summer 2008
            Acquisition of Services
•   Value of the service
•   Degree of repetitiveness
•   Degree of tangibility
•   Direction of the service
•   Production of the service
•   Nature of the demand
•   Nature of the service delivery
•   Degree of standardization
•   Skills required for the service

Source: Leenders & Fearon   MGT 575 Summer 2008
 The Purchase Agreement for
          Services
Short term/Long term

Standard/Custom contract

                      •Fixed price
                      •Unit price
                      •Cost plus % fee
                      •Cost plus fixed fee
                      •Incentive


               MGT 575 Summer 2008
    Service Contract Administration

• Follow-Up
• Postservice Quality Control and Supplier
       Evaluation
• Payment
• Records and Other Aspects of Contract
      Administration




                   MGT 575 Summer 2008
Opportunities for Joint Purchasing




            MGT 575 Summer 2008

								
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