- Upgrade purchasing à Today competitive pressure have led many companies to transform their old-fashioned
“purchasing departments,” with an emphasis on buying at the lowest cost, to “procurement departments,” with a
mission to seek the best value from fewer and better suppliers.
- Centralized purchasing à gives the company more purchasing influence, which can produce substantial saving. For
the business market, this means dealing with fewer high-level. Instead of using regional sales force to sell to a large
buyer’s separate plants, today seller may use, national account sales force.
- Businesses around the world has adopted several innovative manufacturing concepts, such as just-in-time
production (JIT), value analysis, total quality management, and flexible manufacturing. Just-in-time means that
production materials arrive at the customers factory exactly when needed for production, rather than being stored by
the customer until used. It calls for close coordination between the production schedule of supplier and customer so
that neither must carry much inventory.
The Business Buying process
1. Problem Recognition: The first stage of the business buying process in which someone in the company recognizes
a problem or need that can e met by acquiring a good or service.
- The buyer may get some new ideas at a trade show, see an ad, or receive a call from a salesperson who offers a
better product or a lower price.
- Table 6-2 Major Stages of the business buying process in relation to major buying situations.
2. General Need Description: The stage in the business process in which the company describes the general
characteristics and quantity of a needed item.
- For complex items the buyer may have to work with others-engineers, users, consultants-to define the item. The
team may want to rank the importance of reliability, durability, price and other attributes desired in the item.
3. Product Specification: The stage of the business buying process in which the buying organization decides on and
specifies the best technical product characteristics for a needed item.
- Value analysis: An approach t cost reduction in which components are studied carefully to determine if they can be
redesigned, standardized, or made by less costly methods of production.
4. Supplier Search: The stage of the business buying process in which the buyer tries to find the best vendor.
- The buyer can compile a small list of qualified suppliers by reviewing trade directories, doing a computer search,
or phoning other companies for recommendations. The newer the buying task, and the more complex and costly the
item, the greater the amount of time the buyer will spend searching for suppliers.
5. Proposal Solicitation: The stage of the business buying process in which the buyer invites qualified suppliers to
submit proposals. In response some suppliers send catalogue, salesperson. However when the item is complex or
expensive the buyer will usually require detailed written proposals or formal presentation from each potential
6. Supplier Selection: The stage of the business buying process in which the buyer reviews proposals and selects a
supplier or suppliers. - The member of the buying centre now reviews the proposal and select supplier or suppliers.
- Another important factor includes repair and servicing capabilities, technical aid, and advice, geographic location,
performance history and reputation.
- Many buyers prefer multiple sources of suppliers to avoid being totally dependent on one supplier and to allow
comparisons of prices and performance of several suppliers over time.
7. Order-Routine Specifications: the stage in the business buying process in which the buyer writes the final order
with the chosen supplier(s), listing the technical, quantity needed, expected time of delivery, return policies, and
8. Performance Review: The stage of the business buying process in which the buyer rates its satisfaction with
suppliers, deciding whether to continue, modify, or drop them.
- The buyer reviews supplier’s performance. The buyer may contact users and ask them to rate their satisfaction.
Institutional and Government Markets