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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