industrial buying behaviour

8/7/2019 Industrial Buying Behaviour

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THE NATURE OF INDUSTRIAL

BUYING AND BUYING

BEHAVIOUR



PURCHASING OBJECTIVES

The purchase/materials management

objectives is defined as buying the right items

in the right quantity, at the right price, for delivery at the right time and place



Objectives Of Pur chasing

Delivery/Availability

Product Quality

Lowest Price Services

Supplier Relationship



Delivery/Availability

One of the prime objectives is to ensure that

purchased goods and services are available

or delivered when and where needed



Product quality

The product quality should be consistent with

the specifications and use of the product. It is

important to ensure consistency in productquality to reduce the cost of inspection,

interruptions in production process due to

rejections, and arranging replacements of

rejected material.



Lowest pr ice

They buyers would like to buy at the lowest

price consistent with availability and quality of

the product. The buyers consider price as animportant objective if deliver and quality

objectives are met, because low price is

meaningless, if the product is not delivered

when needed or if the quality of the product isunacceptable.



Ser vices

The industrial buyers need many types of services accompanying the purchase of

goods.

1. Prompt and accurate information from thesuppliers

2. Application or technical assistance

3. Spare parts availability

4. Repairs and maintenance capability

5. Training if required.



Supplier Relationship

To develop a good long-term supplier/vendor

relationship and to develop new sources of

supply.



Per sonal objectives

Higher status

Job security

Salary increments Promotions

Social considerations



Pur chasing Activities

The industrial purchasing activities consist of

various phases of buying-decision making

process.Robinson, Faris and Wind developed eight

phases of buying decision process in

industrial market in 1967, and called the

process Buyphases.



Phases In Buying Decision

Process Recognition of problem or need

Determination of the application

Development of specifications

Search for and qualifications of potential suppliers. Obtaining and analyzing supplier proposals.

Evaluation of proposals and selection of suppliers.

Selection of an order routine.

Performance feedback and post-purchaseevaluation



Recognition of a problem or

need

The recognition of a problem or need mayoriginate within the buying firm or may alsobe recognized by a smart marketer.

When the quality of material supplied byexisting supplier is not satisfactory, or thematerial is not available when required, or themachine supplied by existing supplier breaksdown too often, the buying organizationrecognizes the problem.



Deter mination Of The Char acter istics

And Quantity Of Need Product

Once the problem is recognized within or

outside the buying organization, the next

phase is how to resolve the problem.For technical products-technical product will

suggest the general solutions

For non-technical products-user department or

purchase department may suggest solutions.



Sear ch For And Qualifications

Of Potential Supplier s

In this phase the buying organization searches

for acceptable suppliers or vendors. The

qualifications of acceptable supplies willdepend on

1. The type of buying organisation

2. The buying situation

3. The decision making members.



Obtaining And Analyzing Supplier

Proposals

The buying organization obtains the proposals

by sending enquiries to qualified suppliers.

A supplier proposal can be in the form of formaloffer, quotation, or a formal bid, submitted by

the supplier to the buying organization.



Essentials Of Proposal, Bid,

Quotation Or Offer

It should include:-

1. The product specification

2. Price

3. Delivery period4. Payment terms

5. Taxes and duties applicable

6. Transportation cost

7. Cost of transit insurance

8. Any other relevant cost or free service provided



Evaluation Of Proposals And

Selection Of Supplier s

The buying organization evaluates the

proposals of competing suppliers and selects

one or more suppliers.Further negotiations may continue with

selected suppliers on prices, payment terms,

deliveries, and so on.



Selection Of An Order Routine

The mechanics of exchange of goods and servicesbetween a buyer and a seller is worked out. Thisinclude:-

1. Placement of orders

2. Quantity to be purchased from each supplier

3. Frequency of order placement by buyers anddelivery schedules

4. Levels of inventory needed

5. Follow up of actual delivery to ensure it to be asper delivery schedule

6. The payment terms to be adhered to by the buyer



Per f or mance Feedback And

Post Pur chase Evaluation

A formal or informal review regarding the

performance of each supplier take place.

The user department gives a feedback on

whether the purchased item solved the

problem or not.

If not, the members of the decision making unitreview their earlier decision and decide to

give a chance to the previously rejected

supplier

industrial buying behaviour

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