1. MGT 575 Summer 2008 Purchasing

2. MGT 575 Summer 2008 Steps in the Purchasing Process Accurate description of desired commodity or service Selection of possible sources of supply 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

3. MGT 575 Summer 2008 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

4. MGT 575 Summer 2008 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

5. MGT 575 Summer 2008 Negotiation as a Method of Price Determination Framework for planning and preparing for negotiation Ground rules for successful negotiation

6. MGT 575 Summer 2008 Best Buy The best buy is the best combination of technical and procurement factors. Technical Factors Useful life Materials of construction Design Procurement Factors Price Delivery Lead time Source: Leenders & Fearon

7. MGT 575 Summer 2008 Stockless Purchasing or Systems Contracting

8. MGT 575 Summer 2008 Legal Aspects of Purchasing Four Factors of a Valid Contract Competent parties Legal subject matter or purpose An offer and an acceptance Consideration

9. MGT 575 Summer 2008 Legal Aspects of Purchasing Warranties Express warranty Implied warranty of merchantability Implied warranty of fitness for a particular purpose Warranty of title

10. MGT 575 Summer 2008 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

11. MGT 575 Summer 2008 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

12. MGT 575 Summer 2008 The Purchase Agreement for Services Short term/Long term Standard/Custom contract Fixed price Unit price Cost plus % fee Cost plus fixed fee Incentive

13. MGT 575 Summer 2008 Service Contract Administration Follow-Up Postservice Quality Control and Supplier Evaluation Payment Records and Other Aspects of Contract Administration

14. MGT 575 Summer 2008 Opportunities for Joint Purchasing