Principles of Buying

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“In the long-term, the success of any organization depends on its ability to create and maintain a customer.” Do you agree? What does this have to do with purchasing and supply management?

Yes, I agree that the success of any organization depends on its ability to create and maintain a customer. No matter where the supply function is located on the organizational chart; each member of the supply organization has the opportunity to improve relations with internal customers and suppliers. By doing this there is a potential for a greater contribution to the organizational objectives. Buyers work with suppliers daily and create trusting relationships. These relationships can produce valuable contacts and deeper connections between the organization and supplier. Creating long-term contracts with suppliers allows the organization to increase productivity by reducing the number of contracting actions required. The purpose of supply chain management is to improve trust and collaboration among suppliers which creates improved inventory visibility and improved inventory velocity.

Relate the objectives of supply to (1) a company producing automobiles, (2) a large fast-food restaurant chain, and (3) a financial institution.

The objectives of supply include: improving the organization’s competitive position, providing an uninterrupted flow of materials, supplies, and services required to operate the organization, keeping inventory investment and loss at a minimum, maintaining and improving quality, finding or developing best-in-class suppliers, standardizing, where possible, the items bought and the processes used to procure them, purchasing required items and services at lowest total cost of ownership, achieving harmonious, productive internal relationships, and accomplish supply objectives at the lowest possible operating costs.

For a company producing automobiles, maintaining and improving their competitive position would be...
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