1. Section 23.2 The Purchasing Function
Marketing Essentials
n Chapter 23 Purchasing
Section The Purchasing Function

2. The Purchasing Function
SECTION 23.2
The Purchasing Function
What You'll Learn
The three types of purchase situations
The criteria for selecting suppliers
The factors involved in negotiating terms of a sale
The various Internet purchasing methods

3. The Purchasing Function
SECTION 23.2
The Purchasing Function
Why It's Important
Knowing the details of the purchasing function will give you a better idea of what is involved in the overall job description. It is especially important to recognize the impact of the Internet on the purchasing function. You can expect changes in job descriptions for buyers in the near future due to the significant increase in online purchasing.

4. The Purchasing Function
SECTION 23.2
The Purchasing Function
Key Terms
want slips
resident buying offices
consignment buying
memorandum buying
reverse auction

5. The Purchasing Function
SECTION 23.2
The Purchasing Function
The Buying Process
Planning purchases is the preliminary step in the buying process. The buying process involves several types of purchasing situations, selecting suppliers, negotiating terms, and sometimes using the Internet.

6. The Purchasing Function
SECTION 23.2
The Purchasing Function
Types of Purchase Situations
There are three types of purchase situations:
new-task purchase
modified rebuy
straight rebuy

7. The Purchasing Function
SECTION 23.2
The Purchasing Function
New Task Purchase
A new-task purchase is a purchase that is made for the first time. This can be the most complicated purchase. It could be anything from a special item that a customer has requested and a store doesn’t carry to complex manufacturing equipment to be used to automate production.

8. The Purchasing Function
SECTION 23.2
The Purchasing Function
Want Slip
Salespeople often prepare want slips and give them to the buyer for their department. Why are want slips so valuable to a buyer? What other information might a buyer need before making a new-task purchase?
Item Required ___________ Brand Name __________
Size ________ Style __________ Quantity _________
Item Description _______________________________
____________________________________________
Your Name ___________________________________
Address _____________________________________
(Street) (City) (State) (Zip Code)
Telephone ( ) ______________________________
EMPLOYEE: PLEASE FORWARD IMMEDIATELY TO YOUR SUPERVISOR.
Employee Signature ____________________________
Store No. _______ Dept. No. _______ Date ________

9. The Purchasing Function
SECTION 23.2
The Purchasing Function
Modified Rebuy
In a modified-rebuy situation, the buyer has had experience buying the good or service, but some aspect of the purchase changes, such as purchasing from a new vendor. A buyer usually gets proposals from several vendors before making a buying decision.

10. The Purchasing Function
SECTION 23.2
The Purchasing Function
Straight Rebuy
In a straight-rebuy situation, the buyer routinely orders the goods and services purchased from the same vendor(s) as in the past. Staple goods such as office supplies fall into the straight-rebuy category for wholesale and retail buyers.

11. The Purchasing Function
SECTION 23.2
The Purchasing Function
Selecting Suppliers
The criteria for selecting suppliers fall into a few key categories:
production capabilities
past experience
product and buying arrangements
special services

12. The Purchasing Function
SECTION 23.2
The Purchasing Function
Production Capabilities
When dealing with a source for the first time, buyers may request specific information about the source's production capabilities. They may visit the production facility, get references, and ensure the facility is not a sweatshop. A sweatshop is a factory characterized by poor working conditions and negligent treatment of employees.

13. The Purchasing Function
SECTION 23.2
The Purchasing Function
Past Experiences
Many buyers maintain resource files that document past experiences with vendors, with basic information such as products carried, prices, and delivery and dating terms, to evaluations of products, delivery performance, and customer service.

14. The Purchasing Function
SECTION 23.2
The Purchasing Function
Special Buying Arrangements
Two special types of sales and return policies are called consignment buying and memorandum buying.
In consignment buying, goods are paid for only after they are purchased by the customer.
Memorandum buying occurs when the supplier agrees to take back any unsold goods by a certain date.

15. The Purchasing Function
SECTION 23.2
The Purchasing Function
Special Services
Businesses today demand more services from their suppliers than just the basic return policy. One common demand is placement of Universal Product Codes (UPCs) on goods, which makes it easier for businesses to track products.

16. The Purchasing Function
SECTION 23.2
The Purchasing Function
Negotiating Terms
To evaluate suppliers, buyers must negotiate their prices, dating terms, delivery arrangements, and discounts. One common discount is dating terms, discounts for paying a bill before the due date. Buyers can negotiate for bigger discounts or a longer deadline for payment.

17. The Purchasing Function
SECTION 23.2
The Purchasing Function
Internet Purchasing
Business-to-business electronic commerce has revolutionized the purchasing function for businesses in the industrial and reseller markets. Electronic exchanges allow registered users to buy and sell goods online, often within specific industries.
Slide 1 of 2

18. The Purchasing Function
SECTION 23.2
The Purchasing Function
Internet Purchasing
Online auction companies register parties interested in selling an item or a service. Usually a seller sets an asking price and buyers try to outbid each other. This type of auction is available through the online exchanges of many industries.
In a reverse auction, companies post what they want to buy and suppliers bid for the contract.
Slide 2 of 2

19. Reviewing Key Terms and Concepts
ASSESSMENT
23.2
Reviewing Key Terms and Concepts
1. List the three types of purchase situations.
2. What four things can buyers do to stay abreast of industry trends?
3. Name four criteria buyers use in selecting supply sources.
4. What is the difference between consignment and memorandum buying?
5. What are electronic exchanges and in what types of industries are they found?

20. ASSESSMENT Thinking Critically 23.2
How do you see the job description of a buyer or procurement manager changing with the advent of Internet purchasing?

21. Graphic Organizer 23.2 Criteria for Selecting Suppliers Selecting A
Production Capabilities
Selecting A
Supplier
Past Experiences
Special Buying Arrangements
Special Services

22. Marketing Essentials
End of Section 23.2