BBA ANG 02 - Organisat. Purchasing V3 13-04-08
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Transcript of BBA ANG 02 - Organisat. Purchasing V3 13-04-08
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H. Faucher page 2
Business Purchasing Behavior
Understand who decides on
purchasing, and learn how to
investigate about it Evaluate the balance of power
and initiative between the supplier
and the customer in the BtoB
relationship
Visualize the importance ofunderstanding your customers
strategy
Objectives
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H. Faucher page 3
Business Purchasing Behavior
MALSTON BAKERY:
Whos Leading?
Who Decides
on Purchasing?
Organizational
Buying Strategies
How your Customers
See you
Issues
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H. Faucher page 4
Business Purchasing Behavior
MALSTON BAKERY:
Whos Leading?
Issues
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H. Faucher page 5
Malston BakeryWhos Leading?
1. How to represent the situation graphically?
A systemic Approach
Who are the actors?
2. How to sketch the past on each side
Malston Bakerys side?
Ross Mills side?
3. Where does the new business initiative come from?
Supplier?
Customer?
Reverse Marketing:when the customer shoots first
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H. Faucher page 6
Reverse MarketingProcess
Analysis and Development of Purchasing Strategy
Planning Reverse Marketing Effort
Implementing Action Plan
Evaluating and Controlling Outcome of Relationship
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Reverse MarketingProcess
Analysis and Development of Purchasing Strategy
Planning Reverse Marketing Effort
Implementing Action Plan
Evaluating and Controlling Outcome of Relationship
Analysis of organization and markets
Analysis of suppliers
Reverse marketing strategy
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Reverse MarketingProcess
Analysis and Development of Purchasing Strategy
Planning Reverse Marketing Effort
Implementing Action Plan
Evaluating and Controlling Outcome of Relationship
Formulation of objectives Specification of activities and decision points
Development of internal support
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Reverse MarketingProcess
Analysis and Development of Purchasing Strategy
Planning Reverse Marketing Effort
Implementing Action Plan
Evaluating and Controlling Outcome of Relationship
More supplier analysis
Focused sales effort and mobilization of the project champion
Negotiation and signing the contract
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Reverse MarketingProcess
Analysis and Development of Purchasing Strategy
Planning Reverse Marketing Effort
Implementing Action Plan
Evaluating and Controlling Outcome of Relationship
Control Evaluation
Projections
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Business Purchasing Behavior
MALSTON BAKERY:
Whos Leading?
Who Decides
on Purchasing?
Issues
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Purchasing DecisionsWho decides?
The RECYCLA case
Gerard Top, President of RECYCLA, looks at a stack of proposals recently received from
several truck companies. Among them, TRUCK offer trucks on a lease basis, while three
other dealers, among which LOREX, want RECYCLA to buy their trucks. Top has always
purchased the trucks so far
You are the Sales Rep. of one of the two main truck suppliers.
2. Who plays a role at the customers end?
3. List the roles that the individuals are playing in this informal group
4. Who is most important in the decision process? Why?5. What are the risks from the perspective of each person involved?
6. How to deal with the above information to win the deal?
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Purchasing DecisionsThe RECYCLA Case
Characteristics TRUCK (TR34) LOREX (GX 2000)
Capacity 16 000 liters 20 000 liters
Pumping Speed 200 liters / 10 mn 200 liters / 5 mn
Consumption 36 liters / 100 km 30 liters / 100 km
Maintenance Record ++
Safety --
Contract Leasing Sales
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H. Faucher page 14
Purchasing DecisionsThe RECYCLA Case
1. Observations - Who does what?
2. Action - How to go about it?
Name Position RolePreference
(T/L)
Power
(1 5)Motivation
G. TOP
D. PARC
Action Plan to Whom Say What? Do what?
Action 1
Action 2
Action3
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H. Faucher page 15
The Buying Centeror Decision Making Unit (DMU)
Decision Makers
Users
Gatekeepers
Influencers
Purchasing Agents
Initiators
Controllers
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H. Faucher page 16
The Buying CenterComposition
Decision Makers
Make the final decision
Three
Types of
DMUs
A key individual makes the decisionExample : In small businesses, it is often the boss or the owner
(especially for the large investments)
Authoritarian
Some form of an internal democracy (you dont
always know why the decision was taken)Example : cooperatives, institutions, government bodies
Consensus
An appointed decision maker (often the
commercial buyer) makes the decision, based
on the view of the key influencers of the DMUTypical of the large companies
Consultative
Source : Cheverton, 2004
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H. Faucher page 17
The Buying CenterComposition
Purchasing Agents
Are formally responsible for the negotiation
process
Purchasing function : now highly strategic
Have lost the privilege of last decision makers, but
Are now positioned as experts in supplier markets, purchasing
process managers and co-managers of the total cost of
ownership of value of purchases.
At DANONE, above the BU buyers and the factory buyers, the Category
Sourcing Managers, are worldwide upstream market experts on specific
product families (sweeteners, cocoa, coffee,). They have a strong
prescriptive / influencing power
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H. Faucher page 18
The Buying CenterComposition
Influencers
Everyone who influences the purchasing decision
(either directly or indirectly)
May recommend one or several given supplier(s)
May also influence the evaluation of the needs
Can be from inside or outside the company
The architectof a new building plays the role ofexternal influencerif he/she
recommends architectural elements which only one contractor can deliver(Grande Arche / Bouygues?)
The Marketing Department often plays the role ofinternal influencerfor the
purchase of packaging or advertising services
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H. Faucher page 19
The Buying CenterComposition
Gatekeepers (Negative influencers)
Control information into and out of the
buying group or between members of the group
Act as gatekeepers : The Purchasing Department Assistantwhich prevents the Sales Rep. of
a supplier to get in touch with the user or the decision maker relative to a
new service;
The Technical Executive who, as the first contact for the supplier of a
technical product, controls information before deciding about transmissionto decision makers;
The Quality Executive who obtains agreement from the Management
Committee to request ISO 9000 certification for future suppliers (a non-
certified candidate will not be considered )
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H. Faucher page 20
The Buying CenterComposition
Users
Use the product or service
May contribute to the establishment of the initial Performance
Specification document (example : laboratory equipment)
May be Initiators (identifying the needs)
Their importance widely varies with:
Seniority(executives rather than technical operators)
National culture (strong influence in Scandinavia and in Japan. Weakerinfluence in southern countries and United States)
Company size: large companies generally better integrate users needs in
decisions processes. Small businesses too.
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H. Faucher page 21
The Buying CenterComposition
Other Members
Controllers
Control or establish the purchasing budget
Initiators
Submit the Purchasing Request
Identify the need (often, but not always, users of the product)
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H. Faucher page 22
The Buying CenterVariations with the Purchasing Cycle
ORDER
C
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H. Faucher page 23
The Buying CenterVariations with the Purchasing Cycle
1. INTELLIGENCE
2. NEED IDENTIF.
3. SPECIFICATIONS
4. SOURCING
5. ANALYSIS
6. SELECTION
7. ORDER
8. EVALUATION
Purchasing Cycle
Need recognition
Definition of the characteristics and quantity of item needed
Development of the specs to guide procurement
Search for and qualification of potential sources
Acquisition and analysis of proposals
Evaluation of proposals and selection of suppliers
Selection fo an order routine
Performance feedback and evaluation
Th B i C
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H. Faucher page 24
The Buying CenterVariations with the Purchasing Cycle
The Buygrid Robinson and Faris (1967!)
1. INTELLIGENCE
2. NEED IDENTIF.
3. SPECIFICATIONS
4. SOURCING
5. ANALYSIS
6. SELECTION
7. ORDER
8. EVALUATION
++ +
++ ++ + ++
++ +++ + +++++ ++ + +
+++ ++ ++ +
++ + +++ +
+++
++ + + ++
Buyer Influencer Gatekeeper Decision User
Th B i C t
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H. Faucher page 25Source : Saporta, 1994
Modified
Rebuy
Straight
Rebuy
New
Task
Degree of Novelty:purchasing issuestotally new. No experience,lack of evaluation criteria for the different solutions. "Make or Buy
issue. High risk.
Information Need: High. Requests for experts advices
Customers Attitude: No preconceived ideas. Interest for new ones
Degree of Novelty:issues already known, but modified within(cost reduction scheme) or outside the organization (suddendefection of one of the current suppliers...).
Information Need: moderate. Infos on suppliers and technology
Customers Attitude: reconsider existing situation
Degree of Novelty:weak, almost none. Stabilizedsupplier / customer relationship. Supplier base is not
challenged ( in suppliers)
Information Need:minimal
Customers Attitude:often static (negligent?)
Buying Center
Mkg., Tech.,
Qual., Prod.,
Purch.
Purch., Tech.,
Qual., Prod.
Purch.
The Buying CenterVariations with Purchasing Situations
Th B i C t
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H. Faucher page 26
1. Who?
Who are the actors of the Buying Center?
What are theircultures? theirexperiences?
2. When?
In which buying situation is the customer? Where in its purchasing process / cycle ?
3. How?
How do they evaluate suppliers?
What are the power games among them?
How do they take decision? What are the environmental and/or organizational constraints?
The Buying CenterImplications
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H. Faucher page 27
Business Purchasing Behavior
MALSTON BAKERY:
Whos Leading?
Who Decides
on Purchasing?
Organizational
Buying Strategies
Issues
Th P h i F ti
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H. Faucher page 28
Purchasing Elaborates purchasing policies,
budgets, objectives
Participates to the definition of purchased
products and services with the suppliers
Understands the needs, and builds up expertise
on supplier markets and key suppliers
Inquires, negotiates,
contracts with suppliers
Controls supplier
performance
Deals with complex
contractual conflicts
Action
- Mid- and-Long-Term
- Towards outside the company
The Purchasing FunctionA function that has become highly strategic
Replenishment Deals with the calculation
of needs
Processes the purchasing
requests
Orders, and Follows up on delays
Managesproduct flows
(quantity and quality checks)
Follows up on payment
of Invoices
Deals with conflicts on
quantity and lead times
Action
- Rather short-Term
- Towards inside the company
I C t Sh
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H. Faucher page 29
In your Customers ShoesPurchasing Strategic Levers
Develop Partnerships Strengthen relationship
with suppliers Long-term view
Integrate Suppliers ReengineerSupplier
Processes Mutually increase
efficiency and profitability
Improve Specifications
Standardize, substituteorreengineerthe products
Design-To-Cost Functional Analysis,
Value Analysis
Globalize Sourcing Develop the Supplier Base
worldwide Expand Sourcing internationally Permanently update the Supplier
Base
Evaluate Best Prices
Re-negotiate prices,contracts and agreements
Specify tenders in greater details
Concentrate Volumes Increase the negotiation power
Reduce the number of suppliers
Standardize products
Consolidate needs
Strategic SourcingSix Levers
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H. Faucher page 30
Business Purchasing Behavior
MALSTON BAKERY:
Whos Leading?
Who Decides
on Purchasing?
Organizational
Buying Strategies
How your Customers
See you
Issues
S ti S li M k t
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H. Faucher page 31
Segmenting Supplier MarketsPurchasing Matrices
Objectives for the customerAdapt the purchasing strategy to each purchasing category
Define purchasing categories through pertinent criteria
Determine where to spend the purchasing functions time and
effort
Select the best sort of relationships to develop with suppliers
Identifying key suppliers
Interest for the supplierAdapt the way to address customers needs
Manage own energy and resources to expected returns
Source : Adapted from Cheverton, 2004
H Y C t S Y
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H. Faucher page 32
How Your Customers See YouAnd your supplier response
The case ARWOOD
1. Where to place the different purchases on the purchasing matrix?
2. What would be the service characteristics most likely sought and the risks most likely
feared by ARWOOD in the purchase of each of these products?
3. What should be ARWOODs corresponding preferences for each purchase, regarding the
following dimensions: Ease of transaction, Price, Frequency of customer meetings,Product differentiation, Safety in replenishment ?
4. How should suppliers adapt their own marketing strategies, especially
ARWOOD is a small but well-known furniture making enterprise, whose activity is currently
soaring. In particular, this business is exporting a large part of its production from its workshop
in London, by contracting with transportation services that are adapted to the fragility of its
creations, which allows it to limit the occurrence of customers complaints (/)
H Y C t S Y
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H. Faucher page 33
How Your Customers See YouPurchasing Matrix
Low
High
Low High
Criticity
Relative Spend
H Y C t S Y
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H. Faucher page 34
How Your Customers See YouPurchasing Matrix
Low
High
Low High
Criticity
Relative Spend
Exotic wood sheets Intl transportation
Nails &Screws Industrial wood
Strategic
Security
Strategic
Partner
Tactical
Make Easy
Tactical
Profit
Product Categories
How Your Customers See You
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H. Faucher page 35
How Your Customers See YouPurchasing Matrix
Low
High
Low High
Criticity/Depen
dency
Relative Spend
Strategic Security Strategic Partner
Tactical Make Easy Tactical Profit
Customers Expectations
Fault free security
Consistency
Loyalty
Time and attention
Technology co-devpt
Innovation
e-commerce
Automatic replenisht
Price
Price, and price, and price
Consistency in quality
Volume assurance
Exotic wood sheets International transportation
Nails &Screws Industrial wood
How Your Customers See You
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H. Faucher page 36
How Your Customers See YouPurchasing Matrix
Low
High
Low High
Criticity/Depen
dency
Relative Spend
Strategic Security Strategic Partner
Tactical Make Easy Tactical Profit
Suppliers Response
Consistency, no default
Long-term contract
Consignment stock
Time and attention
Understanding needs
Understanding strategy
Remote ordering syst
Light relationship
Low admin,
Lowest costs in town
Try to differentiate
Show presence
Exotic wood sheets International transportation
Nails &Screws Industrial wood
How Your Customers See You
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H. Faucher page 37
How Your Customers See YouImplications
Act in Conformity with Customers True ExpectationsWhether you like it or not, your customers classify you with
respect to their activities or their strategies
Strategic suppliers are not limited to the North East (+/+) part of
the matrix The customers vision of your offer is perhaps not your own one
(What?... My product? Not a strategic one?)
To become a strategic supplier, first do what is expected from
you, where the customer sees you
Business Purchasing Behavior
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Business Purchasing BehaviorWhat are customers running for?
Purchasing function: same
importance by nature as the
Marketing function
Buying Center: a complex informal
organization.
The decision makers are not
necessarily those you thought about
Where does the customer
stand in its purchasing
cycle? This will impact the
Buying Centers dynamics!
Straight Rebuy, Modified Rebuy, New
Task These Buying Situations affect
the Buying Centers dynamics
(hence, my sales approach)
Where does my product-service
stand in the purchasing matrix of
my customer / prospect? This will
affect my sales tactics!
You think your offer is the
best? Perhaps your
customer does, too But
(perhaps) she just doesnt
care!
Buyers:supply market
specialists (sourcing), and
organizers of the purchasing
process (but not necessarily
decision makers)