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Purchasing. Steps in the Purchasing Process. Accurate description of desired commodity or service Selection of possible sources of supply Thomas Register Determination of price and terms Preparation of purchase order Follow-up or expediting Receipt and inspection of goods

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Presentation Transcript
purchasing

Purchasing

MGT 560

steps in the purchasing process
Steps in the Purchasing Process
  • Accurate description of desired commodity or service
  • Selection of possible sources of supply
    • Thomas Register
  • 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 560

description of product or service
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 560

determination of price and terms
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 560

Source: Leenders & Fearon

negotiation as a method of price determination
Negotiation as a Method of Price Determination
  • Framework for planning and preparing for negotiation
  • Ground rules for successful negotiation

MGT 560

best buy
Best Buy

The best buy is the best combination of technical and procurement factors.

  • Procurement Factors
  • Price
  • Delivery
  • Lead time
  • Technical Factors
  • Useful life
  • Materials of construction
  • Design

Source: Leenders & Fearon

MGT 560

legal aspects of purchasing
Legal Aspects of Purchasing

Four Factors of a Valid Contract

  • Competent parties
  • Legal subject matter or purpose
  • An offer and an acceptance
  • Consideration

MGT 560

legal aspects of purchasing9
Legal Aspects of Purchasing

Warranties

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

MGT 560

acquisition of capital assets
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 560

acquisition of services
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 560

the purchase agreement for services
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 560

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

MGT 560

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