purchasing & sales

The exercise was created 26.05.2023 by juliajosefsson. Anzahl Fragen: 108.




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  • distributive negotiations Win-lose negotiations. There is a fixed pie to be divided between the negotiating parties. The negotiator tries to get a bigger piece of the pie than the counterpart. This is not fruitful in a situation where the parties strive for a long-term relationship with a consequence we associate this kind of negotiation to short term relationship.
  • integrative negotiations win-win negotiations. There is no fixed pie to be divided, the negotiators can try to expand the pie and is a good strategy to use when you strive for a long relationship. This scenario is less likely in intercultural negotiations
  • preparations, greetings, introduction, argumentation, compromise, closure, realization the 7 negotiation process phases
  • best alternative to a negotiated agreement BATNA
  • advice for negotiations listen, avoid ultimatums, keep calm, try to have your counterpart give the first bid, never give more than your need, present demands in writings, never lie
  • preparations phase in negotiations, you should gather information and the more information the better, knowledge is power. You should set an objective like BATNA, the worst acceptable outcome, a reasonable/fair outcome, the best possible outcome
  • greetings phase in negotiations, you should get to know the counterpart to create trust. be interested and don't underestimate this part. the lengths of this part depends, in seden it is a couple of minutes
  • introduction phase in negotiations the host starts to make a summary of the backdrop and tries to establish a foundation for cooperation. the agenda is presented and it is an advantage to control the agenda. start with a question that you all can agree upon and thereby create a good atmosphere. if you want to get the process started, be quiet and see what happens
  • argumentation phase in negotiations, arguments to achieve a better deal is presented. negotiators should try to be balanced and have an open discussion with respect to the counterpart
  • compromise phase in negotiontions concessions (eftergifter) are often made here. advice is to never accept demands one by one. only agree to a complete and final offer in this phase
  • closure phase in negotiations, you close the deal in a way that makes both parties feel like a winner. summarize the discussion and write down in a protocol what is green upon
  • realization phase in negotiations, it is important to build a relationship and it it here that it is started. a successful phase lay the foundation for the next negotiations
  • purchasing all activities for which the company receives an invoice from an outside party
  • procurement all activities that are required to get the product from the supplier to its final destination, based on total cost of ownership thinking
  • total quality management the longer the time you use the produce the cost can be high because then the total cost is low when the commercial life cycle is longer. Ex. buy a shirt for 1000 instead of 100, the cost is much higher but the quality is higher as well so the total quality management is low
  • sourcing finding, selecting, contracting, managing the best possible source of supply on a worldwide basis
  • supply management all activities that are required to manage supplier relationships in such a way that their activities are aligned with the company's overall business strategies and interests
  • supply chain management the management of all activities, information, knowledge, and financial resources associated with he flow and transformation of goods and services up from the raw materials suppliers, component suppliers and other suppliers in such a way that the expectations of the end user of the company are being met or surpassed
  • value chain all stakeholders belonging to the same value chain are challenged to improve the buying company's value proposition to its final end-customer
  • decision-making units, DMU all individuals and groups which participate in the procurement decision-making process, who share some common goals and the risks arising from the decisions
  • define specification, select supplier, contract agreement, ordering, expediting, evaluation linear procurement process steps
  • new task situation completely new product from an unknown supplier, high uncertainty regarding outcome. are used for ex. computers, buildings, production equipment
  • modified rebuy new product from known supplier or existing product from new supplier, moderate uncertainty regarding outcome. Used for electronic components, office furniture
  • straight rebuy known product from known supplier, low uncertainty regarding outcome, used for ex. gas, water, office supply
  • personal selling person to person communication with a prospect. it is the process of developing relationships, discovering needs, matching products with needs and communicating benefits. it is a process that adds value
  • simple sales someone making a routine purchase, the consumer are already interested in a product and it is up to the sales person to convince them that it is the right time to buy. Ex. in a mall when a person goes in to buy clothes
  • complex sales require several processes and methodologies to work. The salesperson will take on a more consultative role, making the prospect see that your product is the best solution for what he or she needs. longer sales cycle, longer relationships, increased risk for mistakes, uncertainty is decreased by a longer relationship and trust
  • the approach, needs discovery, presentation, negotiation of buyer concern, the close stages of a sales call
  • situational, problem, implication, needs/payoff questions SPIN-technique
  • situation questions are generally about the customers organization. the amount of these questions should be held to a minimum. should be seen to signalize to the customer that you as a salesperson have done your homework about the organization
  • problem questions you get the customer to talk about their problems, difficulties and dissatisfactions. get the customer to realize what problems they might have and that they are affecting them
  • implication questions you should get the customer to discuss the effect of the problem and develop the seriousness of the problem. these are the most powerful set of questions and should be used to induce pain and make the buyer more anxious for a solution that will take their pain away
  • needs/payoff questions from these questions the buyer tells you about their explicit needs and the benefits of your solutions offer rather than forcing you to explain the benefits. the buyer states that the benefits has greater impact on their business and makes you sound less pushy
  • access strategies strategies to reach the real decision maker quickly and effectively in a situation where the ir no real purchasing channel. you start and at interest center which leads you to dissatisfaction center which takes you to the power center where the decision makers are
  • event management the process of creatively applying the necessary professional skills in organizing a focused event for a target audience to achieve the desired obejectives
  • offshoring relates to the commissioning of work to a provider in a low-cost country. in many cases this is concerned with IT services or textile production
  • strategic, transition, operational phase three phases of outsourcing
  • partial outsourcing only for a part of an integrated function. the co-ordination of the function and activities still lies with the buyer. here, the major problem is to determine the responsibility between the parties involved
  • turnkey outsourcing applies when the responsibility for the election of the entire function/or activities lies with the external provider. this includes not only the execution of the activities but also the co-ordination of these activities
  • strategic phase in outsourcing the first part is about why, what and who. it is the most important part of the process, motivates for outsourcing, which activities or functions and qualifications of the supplier
  • transition phase the second stage of outsourcing, how to outsource, contract negotiation and project execution, you need to have trust then you don't need long complex contracts
  • operational phase the third and final part of outsourcing, how to control the outsourcing process, managing relationships, contract management
  • technical risk an outsourcing risk related to the extent to which the supplier can provide the desired functionality and performance
  • commercial risk an outsourcing risk related to the uncertainty regarding the price we will pay and the cost we will incur when having outsourced out activities to the supplier
  • contractual risk an outsourcing risk that does the contract describe the performance that is expected from the supplier in sufficient details
  • performance risk an outsourcing risk related to the change that the supplier is incapable of doing the job for which they were hired
  • the leverage effect a company who produces a product that is produced by others as well which leads to competitive bidding between suppliers on who will produce the products
  • strategic suppliers the A-part or 80% of the value. You should invest m much time here, should focus on the impact of financial result. 80/20 rule, 80% of the financial value comes from 20% of the suppliers. many tent to spend much time on things that are connected to low value and less time on things that are connected to more value which is NOT GOOD
  • bottleneck few suppliers who produce low value products, ex. the producers who produce the test of julmust. for these suppliers you should buy up a large volume because it is low in value you don't tie up much capital
  • a-part product thew most important, the 80% of the financial value
  • b-part product can have a high value but not as large as the a-part product. could have quite high impact but it will be lower than a-part
  • c-part product have low value but they are needed to produce the other parts, have low impact
  • input specification focus on resources and capabilities of the suppliers
  • throughput specification focus on supplier processes needed to produce the service
  • output specification focus on functionality or the performance of the service
  • outcome specification focus on the economic value for the customer to be generated by the service
  • define specification te requirements are determined and the company is faced with he "make-or-buy" decision. it must determine which products or activities will be performed by the company and which product or activities that will be contracted out
  • select supplier conduct supply market research, the company selects a supplier who should produce its products. it is one of the most important steps in the procurement process. starts with summarizing the pre qualification requirements, and determine who meets these requirements
  • contract agreement after the supplier has been selected a contract will be drawn up, dependingg on the industry the contract may refer to specific additional terms and conditions. usually involves prices and terms of delivery, terms of payment, penalty clauses and warranty conditions
  • ordering after the terms and conditions of the contract have been agreed and recorded the order can be placed and in some cases the contract is the purchase order
  • expediting expediting demands a lot of the buyers attention and is often conducted on the basis of an overdue list which records all deliveries who are late. example of a routine status check where the buyer contacts the suppliers a few days before the delivery with the request to confirm their delivery date again in order to prevent unpleasant surprises
  • evaluation the buyers role continue after the products has been delivered and paid for. warranty clams and penalty clauses need to be settled. supplier and project evaluations need to be finalized and filed. you should evaluate the supplier and the process of procurement for the future.
  • materials requirement planning, MRP starts in the sales department with drawing a sales plan, provides an estimate of the volume to be sold. the input and manufacturing planning and control system
  • just in time management, JIT you schedule the purchasing to ensure that products are being produced only when they are needed, and materials are ordered to arrive just before they are required for production. Goes hand in hand with zero defects where smaller batches make it necessary to detect quality. It is only worth it to have inventory when the customer is willing to pay extra to get their products fast.
  • advantages of JIT suppliers can plan their production, administrative savings, constant communication on quality and cost improvement, investment policies since JIT contracts are signed for a long period of time
  • disadvantages of JIT may result in a pyramid-shaped structure with strong hierarchy, it takes time and money to deliver at zero defects or produce zero defects, you can get very dependent on a single manufacturer.
  • co-ordination problems lack of well-defined specifications and lack of standardization we can only allow complexity when the customer is willing to pay extra
  • quality management making sure that the requirements are met and being able to demonstrate this objective. you should relate quality to the cost we have and not the durability. quality is decided based on the intendent use
  • quality assurance concerns keeping up the methods and procedures of quality management
  • supplier assessment the 5ps of procurement. most assessments remains at the two top ties: price and product but now processes are included more and more
  • price, product, processes, people, purpose 5 Ps of procu
  • supplier relations management, SRM about building strong and deep relations with the supplier to improve their performance capability to benefit both organizations. when they are used this is an extremely effective procurement instrument
  • different kinds of supplier key suppliers, preferred suppliers, approved suppliers, potential suppliers/non-approved
  • open innovation companies are willing to share information when they know that they will benefit from this. other companies can then build on the idea that are released and develop it so that you then can use these developments. Example: bluetooth
  • closed innovation implies that companies try to develop new products and processes based on the idea that the company itself has the best possible knowledge and resources for developing innovations
  • tripple bottom line poeple, planet, profit --> are used for sustainability and to fond solutions without harming the needs of future generations
  • you need to be profitable, you need to obey the law, be ethical, be a good world citizen the pyramid of corporate social responsibility
  • centralized purchasing all departments of a company with a wide geographical distribution can make purchases through a common purchasing organization. Aids to find the best deals with local vendors for the corresponding location of the company department. Avoids duplicity of orders and promotes benefits arising from the high-volume bulk discounts, lower transportation, and inventory management, improved vendor relationships
  • decentralized purchasing all cost centers has direct responsibility, you get a stronger customer orientation towards internal users as well as direct communication with the suppliers. Negative aspects are that you get no economies of scale, no common attitude towards suppliers, different centers may have different terms and you get fragmented marketing information
  • hybrid purchasing mixing the benefits from both centralized and decentralized purchasing
  • meetings, incentive, conferences, exhibitions/events the MICE-model
  • financial impact and supply risk Kralijic's purchasing portfolio quadrant are based upon:
  • risk management, supplier optimization, green purchasing what are the three strategic procurement strategies
  • risk management, supplier optimization, green purchasing what are the three procurement strategies
  • price, quality, reliability, communication, financial stability, capacity, payment terms what are the 7 factors of supplier evaluation
  • key account the category of business accounts that a supplier company manages, which generate substantial profits for the supplier company through years of repeat business. They are predominantly served bu some sort of team of supplier personnel. These teams are both small and large have become a central element of sales strategy for accounts of all sizes.
  • key account management the process of planning and managing a mutually beneficial partnership between an organization and its most important customers. They are significant to an organization's sustainable, long-term growth and require a substantial investment of both time and resources
  • feutures, advantages, benefits What does the acronym FAB stands which helps businesses understand why consumers buy their product and to align their sales and marketing tactics
  • supplier evaluation, supplier certification, evaluation of performance, rewards, promise of future benefits, training of suppliers staff factors of supplier development
  • price/costs, product/quality, logistics/delivery sustainability, organization, supplier relationship dimensions the performance dimensions
  • purchasing price/cost dimension this dimension refers to the relationship between standard and actual prices for materials and services. A distinct differentiation is made between price/cost control and price/cost reduction. Where price/cost control is the monitoring and evaluation of prices, price increases, budgeting, and price inflation reports
  • product/quality dimension this dimension refers to procurement’s responsibility to ensure that the products/services are delivered by suppliers meet the specifications and requirements. Measures includes rejects rates on incoming goods, number of approved/certified suppliers, number of man hours spend by procurement on innovation projects, number of engineering hours spend by suppliers and the projects overall lead time
  • logistics/delivery dimension this dimension refers to procurement’s role to contribute to an effective incoming flow of purchased materials/services. Includes: control of the timely and accurate handling of materials requisition, control of timely deliver by suppliers, control of quantities delivered.
  • organization dimension this dimension includes the major resources that are used to achieve goals and objectives of the procurement function: procurement staff, procurement management, procurement processes, tools, and templates, and procurement systems
  • supplier relationship dimension this dimension is a part of key account and includes the major external resources that are used to achieve to goals and objectives of the procurement organization  supplier relationships Monitor operational relationship with suppliers, supplier price vs targeted price, supplier quantity, supplier delivery reliability, supplier invoice processing quality. Strategic supplier relationship is measured by monitoring the buying company’s position vs other suppliers, monitoring the quality of relationship with key suppliers
  • key account management long-term relationship is a relationship that last more than 10 years. We invest in the relationship, so it is hard for someone else to come in and copy this contract. The company and their suppliers work on solving problems and working together, with a direct contract with real people
  • E-auctions allows suppliers to bid against each other for the contract in the digital real-time bidding platform, price is made by bringing supply and demand together in a transparent way with competitive bidding. Uses RFP and RFP
  • request for proposal RFP, offert
  • RFQ you know exactly what kind of good you want so you send a request for quantity, they can send you and offer of exactly what you want. By using e-auctions you can send thse requests and contact more suppliers at the same time  more time efficient.
  • E-sourcing are a digital tool that can help you streamline, simplify, and improve both day-to- day and strategic sourcing activities.
  • advantages of decentralization it is easy to see who is responsible for the losses/profits, stronger customer orientation towards internal users, les bureaucratic procurement procedures, less need for internal coordination, direct communication with supplier
  • disadvantages of decentralization lack of economies of scale, no uniform attitude towards suppliers/consumers, scattered supply market research (a lot of people knows a little but non knows all), probably different commercial conditions across business units.
  • decentralized purchasing the procurement manager is responsible for that site is responsible for all purchasing. Ex. When you work on a construction site one person is responsible for all purchasing for that site. Can be good since that person has the best knowledge but also bad since prices will vary depending on the size of the site. Another example is Systembolaget where the store manager is responsible for and get to choose what products that store will sell.
  • centralized purchasing a central procurement department is responsible for all procurement decision. The more standardized a product is the better for this procurement strategy. Ex. Claes Ohlsson offers all their product in all their stores. Almost all construction sites are centralized now but some parts are decentralized since all sites have unique to just that client which leads to a combination.
  • hybrid purchasing combining common material requirements among two or more operating units with the objective to reduce overall material costs. This structure is more profitable for larger companies
  • bowtie model You have a major client where you are in contact with a number of different people with different levels of seniority and roles in the decision making unit. Here the relationship with the client is through one person which have the overall responsibility for managing and developing the relationship. This person becomes a vita challenge through which all communications flow and this allows control and co-ordination. The risks are that if anything happens to this person you are at risk for losing that relationship and the others in the firm have less involvement and responsibility and you are not growing future leaders.
  • diamond model many people in your firm form close relationships with their peers in the clients organization. There is still a key person overseeing, coordinating, and managing the relationship from both your firm’s perspective and one doing the same from the clients organization. This relationship is stronger, and it is not reliant or at risk if one of those key people moves as well as it allows junior people to move up the organization.
  • category management framework you should not treat all your suppliers the same. This is how you should handle your suppliers and are based on Kraljic and his portfolio model. You should use the leverage effect to make a lot of money by letting supplier bid against each other, reverse auctions. This also involves key account building because you should form relationships with your most important, high costs of strategic products.

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