Purchasing MGT 560 Steps in the Purchasing

Purchasing MGT 560

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 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 • • • 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 Source: Leenders & Fearon MGT 560

Negotiation as a Method of Price Determination • Framework for planning and preparing for negotiation • Ground rules for successful negotiation MGT 560

Best Buy The best buy is the best combination of technical and procurement factors. Technical Factors • Useful life • Materials of construction • Design Source: Leenders & Fearon MGT 560 Procurement Factors • Price • Delivery • Lead time

Stockless Purchasing or Systems Contracting MGT 560

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 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 • 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 • • • 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 Short term/Long term Standard/Custom contract • Fixed price • Unit price • Cost plus % fee • Cost plus fixed fee • Incentive MGT 560

Service Contract Administration Follow-Up • Postservice Quality Control and Supplier Evaluation • Payment • Records and Other Aspects of Contract Administration • MGT 560

Opportunities for Joint Purchasing MGT 560