Purchasing: The activity that decides which suppliers to use, negotiates
contracts, and determines whether to buy local.
A starting point for selecting suppliers is to perform a total cost analysis. There
are four key costs to consider:
1. Material cost : Annual material costs = pD
2. Freight costs
3. Inventory costs: Cycle inventory = Q/2, Pipeline inventory = dL, Annual
inventory costs = (Q/2 + dL)H
4. Administrative costs.
The total costs for a supplier is the sum of these costs:
Total annual Cost = pD + Freight costs + (Q/2 + dL)H + administrative costs.
Green purchasing: The process of identifying, assessing, and managing the
flow of environmental waste and finding ways to reduce i tand minimize its
impact on the environment.
Early supplier involvement: A program that includes suppliers in the design
phase of a service or product.
Presourcing: A level of supplier involvement in which suppliers are selected
early in a product’s concept development stage and are give significant, if not
total, responsibility for het design of certain components or systems in the
product.
Value analysis: A systematic effort to reduce the cost or improve the
performance of services or products, either purchased or produced
Competitive orientation: A supplier relation that views negotiations between
buyer and seller as a zero-sum game: Whatever one side loses the other side
gains, and short term advantages are prized over long-term commitments
Cooperative orientation: A supplier relation in which the buyer and seller are
partners, each helping the other as much as possible
Sole sourcing: The awarding of a contract for a service or item to only one
supplier
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contracts, and determines whether to buy local.
A starting point for selecting suppliers is to perform a total cost analysis. There
are four key costs to consider:
1. Material cost : Annual material costs = pD
2. Freight costs
3. Inventory costs: Cycle inventory = Q/2, Pipeline inventory = dL, Annual
inventory costs = (Q/2 + dL)H
4. Administrative costs.
The total costs for a supplier is the sum of these costs:
Total annual Cost = pD + Freight costs + (Q/2 + dL)H + administrative costs.
Green purchasing: The process of identifying, assessing, and managing the
flow of environmental waste and finding ways to reduce i tand minimize its
impact on the environment.
Early supplier involvement: A program that includes suppliers in the design
phase of a service or product.
Presourcing: A level of supplier involvement in which suppliers are selected
early in a product’s concept development stage and are give significant, if not
total, responsibility for het design of certain components or systems in the
product.
Value analysis: A systematic effort to reduce the cost or improve the
performance of services or products, either purchased or produced
Competitive orientation: A supplier relation that views negotiations between
buyer and seller as a zero-sum game: Whatever one side loses the other side
gains, and short term advantages are prized over long-term commitments
Cooperative orientation: A supplier relation in which the buyer and seller are
partners, each helping the other as much as possible
Sole sourcing: The awarding of a contract for a service or item to only one
supplier
1
, 2
