Perspectives on Organizational Buying Chapter 2

Commercial Enterprises “Manufacturers, construction companies, service firms, transportation companies, selected professional groups, and resellers.”

Commercial Enterprises Unique Characteristics –Distribution by size –Geographical concentration 50% of US manufacturers in 8 states Implications –Classifying commercial enterprises NAICS –The purchasing organization Department –Goals

Commercial Enterprises Strategic Procurement –Understanding Total Cost –Levels Level 1: Leveraged Buy (Buy for Less) –Centralize buying Level 2: Linked Buy (Buy Better) –Streamline Level 3: Value Buy (Consumer Better) –Value Analysis –Complexity management –Supplier involvement Level 4: Integrated Sell (Sell Better) –Segmenting puchase categories

E-Procurement Ramifications of technology Top software What can it do? –Online negotiations –Collaboration tools –Knowledge management –Analytical tools –Aberdeen study

E-Procurement Direct & Indirect Goods –$1.4 trillion on indirect goods Electronic Requisitioning –Secure personal log-in –Browse authorize supplier catalog –Requisition/Order creation –Approval routing –Order submission/fulfillment –Order tracking and receipt Reverse auctions

Government $1.7 trillion annually Understanding government contracts –More rules and regulations –Compliance program –Set-aside program –Minority subcontracting program

Government Payment –Fixed-price contracts –Cost-reimbursement contracts –Incentive contracts Defense –Defense Logistics Agency –General Services Agency $18 billion Nondefense –Several companies –Federal Supply Schedule Program

Government Federal Buying –President signs or accountant –Potential supplier- 30 days Formal advertising Negotiated contract buying

Institutions ExamplesFactors –Agents –Targeted strategy What to demonstrate –Group purchasing