Organizational Buying

Characteristics of organisational procurement Multiple influencers Technical sophistication Value analysis Well established procedures Longer term and closer relationships. Closer interactions among multiple functions. Supplier proximity considerations.

Buying situations New task Modified rebuy Straight rebuy organisational buying

Buying phases Recognition of a problem Solution determination Determining the needed item Search for and qualification of potential sources Acquisition and analysis of proposals

The Buy grid Framework for Organizational Buying Situations

Buying center The decision making unit Group of individuals who come together to make a particular purchase decision Power base

Buying center roles Primary roles Secondary roles Decision makers Influencers Secondary roles Users Buyers Gatekeepers

Objectives in organisational buying Task oriented Price Services Quality Assurance of supply Reciprocity Non task objectives

How purchasing activities influence buying behavior… Material requirement planning (MRP) Demand management Production management Material management Just-in-time purchasing (JIT) Only one supplier Long term relationships Frequent supplies Precise quantity at precise time Centralized purchasing Buyer technology On-line DSS, on-line order processing etc

Factors influence the size of the buying Centre Characteristics of the firm Purchasing situation Perceived importance of the product

Psychological factors influencing decision making Difference in role orientation Difference in information exposure Perceived risk

Conflict resolution strategies competing collaborating Own concern compromising accommodating avoiding Others concern

Sources of power in conflict resolution Reward power Ability to influence by granting monetary benefits Coercive power Ability to impose punishment Legitimate power Formal authority Personality power Ability to influence with personal charm Expertise power Information or knowledge power

Evaluation of supplier performance The categorical method Weighted point method Cost ratio method

Weighted point method Factor Weight Actual performance Score Quality 40 90% acceptable 40*0.9=36 Delivery 30 90% on schedule 30*0.9=27 Price 20 125% of lowest bidder 100/125=0.8 20*0.8=16 After sales 10 60% on time 10*0.6=6 Total score 85

Cost ratio method

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