1. commercial enterprises government units non-profit organizations 2 › manufacturers ›...
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› Manufacturers› Construction› Service firms› Transportation › Professional› Resellers
Includes
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I. Industrial Distributers
II. Value Added Resellers
III. Original Equipment Manufacturers
(OEM)
IV. Users and End Users
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Provide 4 types of utility:
o Form, Time, Place, PossessionForm, Time, Place, Possession
Assortment of Products from many
manufacturers based on segment needs
Serve smaller customers where direct
representation is not efficient4
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More than just a distributor
Provides unique, complete offering
from many sources
Creates a value network at the user
level
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Purchase products and incorporate
those products into their products
Usually the largest-volume users of
goods and services
Ex: Intel is an OEM to many computer
manufacturers.
Goodyear is an OEM to the auto
industry.
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A manufacturer that purchases goods or
services for consumption or incorporation
into its own products
Identity of the purchased product becomes
lost
Ex: When Goodyear purchases steel for Ex: When Goodyear purchases steel for
fabrication of steel belts for tires, Goodyear fabrication of steel belts for tires, Goodyear
is the steel manufacturer’s end useris the steel manufacturer’s end user
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Consumer grouping consists of:
o HospitalsHospitals
o ChurchesChurches (Mosques) (Mosques)
o CollegesColleges
o Nursing HomesNursing Homes
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Raw Materials Producer
Compete in price sensitive markets
Seek Value Added positions
Product loses identity once
incorporated into customer’s product
Dominated by a few very large
producers
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Component Parts and Manufactured Materials Producers
Parts retain their same form when incorporated
Retain identity when incorporated into consumer’s product
Differentiated by value added
EX:EX: Seagate Disc Drives in Hewlett Seagate Disc Drives in Hewlett Packard ComputersPackard Computers
Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall 11
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Capital Goods Manufacturer
Consists of large purchases with high
risk to customer
Many parts of customer organization
involved in decision
Customers expect installation,
equipment and accessories1212
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Accessory Equipment Suppliers
Equipment that works with another offering
Accessories can be added to a bundle
opportunity by a channel intermediary
Produced by an independent supplier
Add value by complying with industry
standards for primary offering
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Communities of interested parties who
are not direct participants in a market
as customers, channel members,
suppliers or competitors.
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Financial Publics Independent Press Public Interest Groups Internal Publics
o All may have interests because of All may have interests because of economic or societal effects of economic or societal effects of activitiesactivities
o Often may be considered stakeholders Often may be considered stakeholders in the buying centerin the buying center
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Influence Value Creatio
n
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Exhibit 2-5: The Product Life Cycle (PLC)
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Exhibit 2-6: The Technology Adoption Life Cycle Exhibit 2-6: The Technology Adoption Life Cycle (TALC)(TALC)
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Address the needs of business customers of all types. May have to juggle different, clashing objectives.
Purchasing
Goals
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Factors that drive total cost.
Acquiring and managing costs.
Quality, reliability over the life cycle.
Value of product to firm/customers.
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1st Point, each firm has a unique portfolio.
2nd Point, more attention on purchases having the greatest
impact on revenue generation or the greatest risk to
performance.
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Sales (000$) 12,000
Direct Materials 5,000
Direct Labor 3,000
Gross Profit 4,000
Selling & Administration cost
1,500
Net Profit 2,500
Sales (000$) 12,000
Direct Materials 6,000
Direct Labor 3,000
Gross Profit 3,000
Selling & Administration cost
1,500
Net Profit 1,500
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All supply management activities have potential for cost reduction and hence increased profit.
If the firm’s sales remained the same, a reduction of $1,000 of material cost, would result in $1,000 increase in net profit:
The ratio is 1:1.
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Compliance- requires government contractors maintain affirmative action programs.
Set-aside- a percentage of contract set aside for small minority businesses.
Minority-subcontracting- may require major contractors to subcontract a certain percentage of contract to minority firms.
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1. Fixed-price contracts
• A price is agreed to before contract is awarded and payment is made at conclusion of work.
• Provides for the greatest profit potential.
• Poses greater risks.
2. Cost-reimbursement contracts
• Reimbursement for allowable costs may be allowed; sometimes “cost-plus” contracts allow costs and certain percentage of profit.
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1. Formal Advertising—the government solicits bids
from suppliers, and usually the lowest bidder is
awarded the contract.
2. Negotiated Contract—used to purchase products or
services that are not differentiated on price alone,
competition is common.
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Schools, health care organizations, non-profit
agencies.
Similar to government buyers--political considerations
and laws.
Similar to commercial buyers--often managed like
corporations--broad range of purchase requirements.
Group purchasing quite common.