Presentation Transcript

Industrial vs. consumer markets :

Industrial vs. consumer markets Aspect Industrial market Consumer market

Industrial markets: basic characteristics :

Industrial markets: basic characteristics Professional purchasing: professional buyers with

The purchasing process :

The purchasing process - Establish expediting routine - Expediting - 'Trouble- shooting' - Vendor
rating - Vendor - Establish Order routine - Develop orderroutines - Orderhandling Order Proc.
Role Elements Documents - Prepare contract - Contracting expertise - Negotiating expertise
Contract - Assure adequate supplier selection - Prequalification of suppliers - Request for
quotation Supplier selection proposal Get specification - Functional specification Technical
changes Bring supplier knowledge to engineering - - - - - Functional specification Norm/spec.
control Define specification Select supplier Contract agreement Ordering Expediting Evaluation
Follow up Overdue list - Vendor performance evaluation - Settling contract problems evaluation
- Vendor balanced score card - Vendor profile - Vendor ranking

The purchasing process :

The purchasing process - Establish expediting routine - Expediting - 'Trouble- shooting' - Vendor
rating - Vendor - Establish Order routine - Develop orderroutines - Orderhandling Order Proc.
Role Elements Documents - Prepare contract - Contracting expertise - Negotiating expertise
Contract - Assure adequate supplier selection - Prequalification of suppliers - Request for
quotation Supplier selection proposal Get specification - Functional specification Technical
changes Bring supplier knowledge to engineering - - - - - Functional specification Norm/spec.
control Define specification Select supplier Contract agreement Ordering Expediting Evaluation
Follow up Overdue list - Vendor performance evaluation - Settling contract problems evaluation
- Vendor balanced score card - Vendor profile - Vendor ranking
The purchasing process :

The purchasing process Process approach: the various steps in the model are closely connected
and the quality of the output of the preceding steps determines to a large extent the quality of the
subsequent steps Defining the interfaces: the output of each phase has to be clearly defined,
preferably with a document Determining responsibilities: purchasing is considered to be a cross-
functional responsibility. Therefore, the tasks, responsibilities and authority of the parties
involved should be clearly indicated in each phase Combining different skills, different types of
knowledge and expertise: key question is how to combine the different types knowledge, skills
and expertise in such way that all parties involved arrive at an optimal solution for the company

The purchasing process :

The purchasing process The added value of the professional buyer lies in the ability to act as a
facilitator for the supply process: Being involved in new product development and investment
projects Preparing a list of approved suppliers, drawing up requests for quotations and selecting a
supplier together with the internal customer Preparing and carrying out contract negotiations
setting up requisitioning and ordering routines (e.g. through electronic buying catalogues, e-
Procurement) in such a way that users can place orders themselves Place orders at suppliers and
maintain and monitor order, contract and supplier files Monitoring outstanding orders and
financial obligations Follow up and evaluation of supplier performance and maintaining relevant
supplier documentation

Ad 4) Inkoopclassificatie :

Ad 4) Inkoopclassificatie New task situatie Completely new product from unknown suppliers
High uncertainty regarding outcome (e.g. acquisition of capital goods) Modified Rebuy New
product from known supplier Existing product, new supplier Moderate uncertainty regarding
outcome Straight rebuy Known product from known supplier Low uncertainty regarding
outcome (e.g. consumable items like MRO) Three types of purchasing situations:

Major bottlenecks and problems :

Major bottlenecks and problems Supplier or brand specifications: most buyers are involved only
to a minor extent in the specification phase, so the specifications of the user are often designed
‘towards’ a particular supplier Inadequate supplier selection: Insufficient screening of suppliers
on financial strenghts and technical capabilities leading to discontinuities of supply in delivery
stage Insufficient contracting expertise: leading to misunderstandings on how supplier should
perform and difficulties in solving delivery and quality problems Too much emphasis on price:
Decisions need to be based upon total-cost-of- ownership (TCO) rather than price only
Administrative organisation: lack of clear procedures with regard to procurement or
authorisation of orders, leads to lack of control on purchasing expenditure and costs
Four dimensions of the purchasing function :

Four dimensions of the purchasing function Purchasing function Technical dimension Determine
specifications Audit suppliers’ quality organisation Value analysis Quality Control Supplier
selection Draw up contract Logistical dimension Optimisation of ordering policy Order
expediting and follow-up Incoming inspection Monitoring delivery reliability Commercial
dimension Supply market research Supplier visits Requests for quotations Evaluate quotations
Negotiations with suppliers Administrative dimension Order handling, expediting and filing
Checking supplier invoices Checking payments to supplier

Models of industrial buying behavior :

Models of industrial buying behavior 1. Variables that affect the buying process Characteristics
of the product Strategic importance of the purchase Sums of money involved in the purchases
Characteristics of supply markets Degree of risk related to the purchase Role of the purchasing
department in the organisation Degree to which the purchase product affects existing routines in
the organisation

Models of industrial buying behavior :

Models of industrial buying behavior 2. Variables that affect the buying decision Task variables:
variables that are related to the tasks, responsibilities and competences assigned by the
organisation to the person involved in the purchase decision Non-task variables: variables that
are related to the professional’s personality Webster and Wind, 1972

Slide 12:

Full-length Buying Process in the Case of Building Products for a New Building.

Slide 13:

Figure 1. The Suggested Sales Model for Capturing the Rational Behaviour of the Buying Centre
in Question.

Models of industrial buying behavior :

Webster and Wind, 1972 Models of industrial buying behavior 1. Identification of need 2.
Establishing specification & scheduling the purchase 3. Identifying buying alternatives 4.
Evaluating alternative buying actions 5. Selecting the suppliers User Influencer Buyer Decider
Gatekeeper
Models of industrial buying behavior :

Models of industrial buying behavior Within the Decision Making Unit various roles can be
distinguished… Users: people who will work with the product Influencers: people who are able
to affect the outcome of the purchasing process by means of solicited or unsolicited advice
Buyers: people who will negotiate with the suppliers about terms and conditions and who place
the order Decisionmakers: people who actually determine the selection of the supplier
Gatekeepers: people who control the flow of information from the supplier towards the other
members of the DMU

Models of industrial buying behavior :

Models of industrial buying behavior 2. Variables that affect the buying decision Task variables:
variables that are related to the tasks, responsibilities and competences assigned by the
organisation to the person involved in the purchase decision Non-task variables: variables that
are related to the professional’s personality Webster and Wind, 1972