Session 5

UNIT 31: E-BUSINESS OPERATIONS

Learning Outcomes 1.3 Differentiate between different types of company purchase

1.4 Explore the distinctive features of business purchase transactions

Topics
Review of Last session Group Report Lecture

Different

company purchases

Risks

REVIEW OF LAST SESSION

Activity

Experience the whole cycle of both the b2c and b2b transactions via research of related materials Submit via Email Links of your research

Test of Baseline Knowledge -Review

Identify the different E-business purchases? MRO items strategic materials capital equipment purchases What are E-business Risks? Buyers point Suppliers point

CRITERIA 1-3

DIFFERENTIATE BETWEEN DIFFERENT TYPES OF PURCHASE

Different Types of Corporate Purchases:

MRO items (maintenance, repair and operating supplies); Strategic materials (often these items are specially made and single sourced) and

Capital equipment purchases

Background

Purchasing and procurement is used to denote the function of and the responsibility for procuring materials, supplies, and services. Recently, "supply management" has increasingly come to describe this process as it pertains to a professional capacity Buyers, Supply Managers or Agents

History

Prior to 1900 no distinction in purchasing in companies/ only railroad industry have purchasing departments 1915- Association of Purchasers were established 1917 Degree in Purchasing was established 1933 first Purchasing Book 1960 1970 establishment of Purchasing Dept 1980 JIT systems

Factors in Purchasing

availability of materials, (storing or JIT) absolute monetary volume of purchases, (savings) percent of product cost represented by materials, (40% rule) and the types of materials purchased (Quality vs. Price)

ROLE OF PURCHASING

Resale or Transformation. Strategic or Transactional Direct or Indirect

Purchasing Functions (in a nutshell)

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 mutually beneficial relationships with the most desirable suppliers.

MRO items (Indirect)

Used to support and maintain the production process and its infrastructure. Usually consumed as a result of the production process but are not directly a part of the finished product. involves repetitive purchases, from the same vendor, probably through a blanket purchase order.

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 considered part of MRO goods inventory.

Strategic materials (Direct)

involves purchase of materials that are crucial to the support of the firm's distinctive competence. could include raw material and components normally used in the production process Critical in the operations of a company

Capital equipment

Capital equipment is defined as nonexpendable equipment with a system acquisition cost of $5,000 or more and a life expectancy of at least two (2) years.

Capital equipment
Financial commitment - the purchase price of the equipment and the cost to service and repair it. Lease, Buy, or Make High Level of Approval

Capital equipment Considerations

Defining Whats Needed Requesting Bids RFQ and RFB Purchase Contract Delivery FOB Destination/ Origin Quality Assurance Post-Delivery Inspections Accounting for costs

Criteria 1-4

EXPLORE THE DISTINCTIVE FEATURES OF BUSINESS PURCHASE TRANSACTIONS

Distinctive Features
implications of business transactions; risk to buyer; risk to supplier

Implications of business transactions

Value for money Lead-times and Payment terms

Risk to buyer (E-Purchase)

(1) Performance risk (2) Financial risk (3) Psychological (4) Time risk

Risk to seller (E-selling) Non-payment Credit Card contestability Non-delivery scams Hacking Fraud

End of Session
See you next meeting