Chapter 3 - The purchasing function. This chapter includes contents: The purchasing department’s function, purchase price vs. total cost, methods to examine and compare costs, total cost of ownership of a tangible product, using value analysis, steps in the buying process, vendor analysis ratings,. | McGraw-Hill/Irwin Copyright © 2009 by the McGraw-Hill Companies, Inc. All rights reserved. Chapter 3 The Purchasing Function THE PURCHASING DEPARTMENT’S FUNCTION IS TO: PROVIDE APPROPRIATE LEVELS OF SUPPLY AT THE APPROPRIATE LEVEL OF QUALITY FOR THE LOWEST TOTAL COST 3- PURCHASE PRICE Vs. TOTAL COST PURCHASE PRICE = THE DOLLAR VALUE PAID TOTAL COST = PURCHASE PRICE + DELIVERY + STORAGE + SERVICE 3- METHODS TO EXAMINE AND COMPARE COSTS TOTAL COST OF OWNERSHIP ECONOMIC ORDER QUANTITY (EOQ) VALUE ANALYSIS 3- TOTAL COST OF OWNERSHIP OF A TANGIBLE PRODUCT TOTAL COST OF OWNERSHIP = PRODUCT PRICE + DELIVERY + INSTALLATION + MAINTENANCE / REPAIR + POWER COSTS + SUPPLY COSTS + OPERATING COSTS + FINANCING 3- ECONOMIC ORDER QUANTITY THE QUANTITY THAT MINIMIZES ORDERING COSTS AND STORING COSTS 3- USING VALUE ANALYSIS THE OBJECTIVES OF VALUE ANALYSIS: REDUCE COSTS AND/OR IMPROVE DESIGN What is New Currently Alternatives Being Done Being Considered COMPARE BENEFITS RECEIVED . | McGraw-Hill/Irwin Copyright © 2009 by the McGraw-Hill Companies, Inc. All rights reserved. Chapter 3 The Purchasing Function THE PURCHASING DEPARTMENT’S FUNCTION IS TO: PROVIDE APPROPRIATE LEVELS OF SUPPLY AT THE APPROPRIATE LEVEL OF QUALITY FOR THE LOWEST TOTAL COST 3- PURCHASE PRICE Vs. TOTAL COST PURCHASE PRICE = THE DOLLAR VALUE PAID TOTAL COST = PURCHASE PRICE + DELIVERY + STORAGE + SERVICE 3- METHODS TO EXAMINE AND COMPARE COSTS TOTAL COST OF OWNERSHIP ECONOMIC ORDER QUANTITY (EOQ) VALUE ANALYSIS 3- TOTAL COST OF OWNERSHIP OF A TANGIBLE PRODUCT TOTAL COST OF OWNERSHIP = PRODUCT PRICE + DELIVERY + INSTALLATION + MAINTENANCE / REPAIR + POWER COSTS + SUPPLY COSTS + OPERATING COSTS + FINANCING 3- ECONOMIC ORDER QUANTITY THE QUANTITY THAT MINIMIZES ORDERING COSTS AND STORING COSTS 3- USING VALUE ANALYSIS THE OBJECTIVES OF VALUE ANALYSIS: REDUCE COSTS AND/OR IMPROVE DESIGN What is New Currently Alternatives Being Done Being Considered COMPARE BENEFITS RECEIVED FUNCTIONS OF PRODUCT COST OF MATERIALS WORK PROCESS INVOLVED OUTCOME: GREATER VALUE FOR LESS COST 3- Step 8 Evaluation of product performance Step 7 Selection of an order procedure Step 6 Evaluation of proposals and selection of a supplier Step 5 Acquisition and analysis of proposals Step 4 Search for qualified suppliers Step 3 Development of detailed specifications Step 2 Definition of the product-type needed Step 1 Recognition of a need EXHIBIT 3-3 STEPS IN THE BUYING PROCESS 3- BUY-PHASES NEW TASK COMPLETE BUYING PROCESS REQUIRED EMPHASIZES PRODUCT DEFINITION AND SPECIFICAIONS MODIFIED REBUY EMPHASIZES SUPPLIER SEARCH AND EVALUATION STRAIGHT REBUY EMPHASIZES NEED RECOGNITION AND PURCHASE 3- VENDOR ANALYSIS RATINGS A RATING FORM SHOULD LIST The most important product attributes The most important service support attributes Pricing variables Delivery variables Quality variables Supplier capabilities 3- PURCHASING PARTNERSHIPS ARE MADE WITH VENDORS WHO PROVIDE: .
