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› Manufacturers› Construction› Service firms› Transportation › Professional› Resellers

Includes

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

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

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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

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

Factors that drive total cost.

Acquiring and managing costs.

Quality, reliability over the life cycle.

Value of product to firm/customers.

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.

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.

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.

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.

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.

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.