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UNIT 31: E-BUSINESSOPERATIONS
Session 5
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Learning Outcomes
1.3 Differentiate betweendifferent types of company
purchase
1.4 Explore the distinctivefeatures of business purchase
transactions
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Topics
Review of Last session
Group Report
Lecture
Different company purchases Risks
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REVIEW OF LASTSESSION
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Activity
Experience the whole cycle of both the b2cand b2b transactions via research of relatedmaterials
Submit via Email Links of your research
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Test of Baseline Knowledge -Review
Identify the different E-business purchases?
MRO items
strategic materials
capital equipment purchases
What are E-business Risks?
Buyer’s point
Suppliers point
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DIFFERENTIATEBETWEEN DIFFERENT
TYPES OF PURCHASE
CRITERIA 1-3
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Different Types of Corporate Purchases :
MRO items (maintenance, repair andoperating supplies);
Strategic materials (often these items arespecially made and single sourced) and
Capital equipment purchases
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Background
Purchasing and procurement is used to denotethe function of and the responsibility forprocuring materials, supplies, and services.
Recently, "supply management" hasincreasingly come to describe this process asit pertains to a professional capacity
Buyers, Supply Managers or Agents
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History
Prior to 1900 – no distinction in purchasing incompanies/ only railroad industry havepurchasing departments
1915- Association of Purchasers wereestablished
1917 – Degree in Purchasing was established
1933 –
first Purchasing Book 1960 – 1970 – establishment of Purchasing
Dept
1980 –
JIT systems
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Factors in Purchasing
availability of materials, (storing or JIT)
absolute monetary volume of purchases,(savings)
percent of product cost represented bymaterials, (40% rule) and
the types of materials purchased (Quality vs.
Price)
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ROLE OF PURCHASING
Resale or Transformation.
Strategic or Transactional
Direct or Indirect
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Purchasing Functions (in anutshell)
determining the organization's requirements,(what to buy)
selecting an optimal source of supply, (where
to buy) ensuring a fair and reasonable price (how
much to pay), and
establishing and maintaining mutuallybeneficial relationships with the most desirablesuppliers.
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MRO items (Indirect)
Used to support and maintain theproduction process and its infrastructure.
Usually consumed as a result of theproduction process but are not directly apart of the finished product.
involves repetitive purchases, from thesame vendor, probably through a blanketpurchase order.
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MRO items (Indirect)
Examples of MRO goods include oils, lubricants,coolants, janitorial supplies, uniforms, gloves,packing material, tools, nuts, bolts, screws, shim
stock, and key stock. Even office supplies such as staples, pens and
pencils, copier paper, and toner are consideredpart of MRO goods inventory.
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Strategic materials (Direct)
involves purchase of materials that are crucialto the support of the firm's distinctivecompetence.
could include raw material and componentsnormally used in the production process
Critical in the operations of a company
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Capital equipment
Capital equipment is defined as non-expendable equipment with a systemacquisition cost of $5,000 or more and a
life expectancy of at least two (2) years.
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Capital equipment
Financial commitment - the purchase priceof the equipment and the cost to serviceand repair it.
Lease, Buy, or Make
High Level of Approval
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Capital equipment -Considerations
Defining What’s Needed
Requesting Bids – RFQ and RFB
Purchase Contract Delivery – FOB Destination/ Origin
Quality Assurance
Post-Delivery Inspections Accounting for costs
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EXPLORE THE
DISTINCTIVEFEATURES OFBUSINESS PURCHASETRANSACTIONS
Criteria 1-4
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Distinctive Features
implications of business transactions;
risk to buyer;
risk to supplier
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Implications of businesstransactions
Value for money
Lead-times and
Payment terms
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Risk to buyer (E-Purchase)
(1) Performance risk
(2) Financial risk
(3) Psychological (4) Time risk
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Risk to seller (E-selling)
Non-payment
Credit Card contestability
Non-delivery scams
Hacking
Fraud
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See you next meeting
End of Session