purchasing strategy final[1]

8/8/2019 Purchasing Strategy Final[1]

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MMK::BMS Purchasing Strategy

WE STUDENTS OF SYBMS A THANK PROFESSOR KHILNANIWE STUDENTS OF SYBMS A THANK PROFESSOR KHILNANI

FOR GIVING US THE OPPORTUNITY TO MAKE A PROJECTFOR GIVING US THE OPPORTUNITY TO MAKE A PROJECT

ON PURCHASING STRATEGYON PURCHASING STRATEGY

COMPILED BY

RAHAT ADENWALLA 1

SAMINA VIRANI 59

Materials Management 1

Material Management


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INTRODUCTION TO MATERIALS MANAGEMENT AND ITS EVOLUTION

Material is the central item and activity of any organization. Organizations exist for

material, works for material and due to material. The main purpose of any organization is to

make profit, this profit or loss is generated due to material. Every organization deals withmaterial whatever be the business.

As early as the nineteenth century, purchasing which is a division of logistics, was regarded

as an independent and important function by many of the US railway organizations. Since the

beginning of the twentieth century there were several movements in the evolution of

purchasing or materials management functions, as depicted below:

CLERICAL WORLD WAR 2 MANAGERIAL EMPHASIS STRATEGY (Pre- 1939) (1940-49) (1950-70) (1970--)

Evolution of Material Management over time

In the 1990s it became clear that organizations must have an efficient and effective

purchasing and materials function if they were to compete successfully in the domestic and

international markets. The future will see a gradual shift from the predominantly defensive

strategies to aggressive ones in order to remain competitive. Organizations will take an

imaginative approach for achieving their materials management objectives to satisfy long

term and short term goals.

PURCHASING STRATEGY

WHAT IS PURCHASING????

The term purchasing doesnt just mean buying it is much more than buying. The

buyer must find out the description and details of the materials needed, send

enquires and obtain quotations from reliable suppliers negotiate the price and

terms and conditions of the supply, place the order, and follow up with the supplier

to ensure the timely delivery of the goods. Moreover he has to keep the supplier

happy by a prompt payment of the bills. Thus the function of the purchasingincludes a lot of activities.

The objective of purchasing function is to supply materials of the right

quality at the right time. To ensure this, purchases have to be made from the right

sources and at the right time. A small shopkeeper may be able to obtain, for

himself all the goods he requires but if his shop becomes departmental store he

will obviously not be able to manage procurement



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PICTURE OF PURCHASING

.

TYPES OF PURCHASING:

FORWARD BUYING

It is nothing but committing an organization into the future. The buyer commits to

buy at a future date a contracted quantity at a contracted price. Whatever may bethe ruling market price then the trader makes such moves with a speculative

interest with an idea that the actual prices will rise in the future and hence he will

be able to make profits. He seeks to protect his organization from any future

shortages or undue increases in price. He is interested in having an uninterrupted

supply of materials.

The various factors that have to be taken into account for forward buying are the

availability of the item, financial constraints, and the economic order quantity, the

minimum quantity for obtaining, discounts, and shelf life of items etc. forwardbuying practices are usually meant within the commodity markets.

Eg: agricultural produces like cotton, oil seeds and grains and prime metals like

aluminum, iron and steel are usually traded in forward markets.



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intervals, if they are justifiable by their largeness. Contacts with wholesale

markets or even at times with manufacturers direct can only be utilized when they

entail large scale buying.

Economy of central purchases results from the benefits like economy in storage

costs when at the same time storage facilities are also centralized for convenienceof work. Economy in transport cost, material handling cost is other important

considerations to justify its adoption.

SUBCONTRACT

It is type of buying if supplier is not able to supply the full amount of goods so he

buys it from some other manufacturer and produces it with help of some another

producer on the bases of a contract is known as subcontracting. This also applies if

the manufacturer himself cannot manufacture the given quantity of goods soproduces them on contract bases then also it is known as subcontracting.

HAND TO MOUTH BUYING

It is buying in small quantities, one cant every time approach the manufacturer

for small orders as he has also consider geographical factors, i.e. if it is too far it

will be costly. It is convenient to buy the goods from nearest dealer or show room.

It is normal buying which we do it on day to day bases.

CONTRACT SYSTEMS

In this system the seller effectively becomes the material planner for the buyer.

It is a long term contract between the buyer and the seller and provides for the

automatic replenishment of the consumed departments stocks by the seller. The

buyer has to be careful in the choice of the contractor because the agreement is

usually for a long duration. The continuance of the contract will depend up on the

compliance of the seller top the contractual obligations and his maintaining the

quality requirements.

SEASONAL BUYING

If the buyer purchases at regular intervals to meet the requirement of the

factory he will sometimes pay a high or low price, but in a long range, the overall

cost will be equal to market price. Such a conservative policy is inevitable, if the

factory has no facility for storing in access of requirements and the buyer chooses



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not buy forward. The buyer has to balance the probability of the price falling in

the near future, against the cost of buying now and storing it for later use.

TENDER BUYING

Tender system is adopted top procure materials at most competitive raters and to

eliminate chances of undue favor to any supplier. This system is normally adopted

in government departments and public sector undertakings as they will have to

choose the best suppliers with out any bias. Quotations are called from different

sellers, once the quotations are received and the tenders are opened publicly, a

comparative statement is made and the tender is awarded to lowest tender

meeting the technical specifications.

PURCHASING POLICIES

Policies relating to supply relationships:

Our policy should be to be selective about the types of relationships we

establish with suppliers, but in all cases to treat them with professional

respect and to hold our dealing with them as confidential to the parties

concerned.

We should aim to actively promote an image rather than let one form by

default. We wish to be seen as fair, tough, totally professional and

demonstrably operating according to the highest standards of business

practice.

Internal policies:

Our policy should be to support internal suppliers to the fullest extent and

to develop product and service quality to the same high standards as those

available in the external market. Employees may not use the companys name

or purchase leverage to obtain materials or services at preferential rates

for their personal use, or for use by other parties in whom the buyer has an

interest.

Sourcing policies:

e.g.: Only those suppliers who satisfy the requirements of the companys

supplier appraisal process and are able to meet their contractual obligations

to the company in full should be used. Buyers should actively source from

the world market where practical, taking into account corporate guidelines

and statutory regulations.



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Under sourcing policies are six principles or six policies of purchasing:

RIGHT QUALITY

In the context of right quality specifications play a crucial role. Specification isdefined as the concise statement of a state of requirements to be satisfied by a

product a material or process, indicating wherever appropriate the procedure by

means of which it may be determined whether the given requirements are

satisfied. We have to specify the material technically, because we should know

what exactly the item is. Consider the case of rice this can be raw, par-boiled,

boiled, old, new, basmati, kichidi with white stones, or any other of numerous

varieties that are available.

An important factor we have to take care of while specifying is to avoidboth over-specification and under-specification than actually needed for them, as

these strategies lead to increased costs.

Development of new sources of supply:

Large industrial undertakings generally underwrite new and local sources of

supply and by giving large and long-range contracts are often able to develop new

sources of supply. This method of developing new sources in newly developing

industrial areas is increasing because of rapid development of technology, cost-

saving through reduced transportation costs and a policy of decentralized

production.

Standardization:

Rightly it has been said that principal of scientific management control lies

in planning standardization. Standards formulated at the national and the company

level generally defines the quality clearly and often prescribes the means to

evaluate the specified quality. When standardization at the national level is fairly

developed and a large number of standards have been formulated by a national

body or bodies, these standards lead to the specification of quality, reduction in

sizes and varieties, inter-changeability of parts and products and efficient

utilization of materials.

Vendor Rating:

An important factor contributing towards better buyer-seller relations is

proper objective evaluation of the registered suppliers periodically. The four

stages involved in the process of supplier evaluation are discussed below:



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(a) In the survey stage, all possible sources are explored and the capabilities are

evaluated on the basis of prima facie information given by the vendor, or through

advertisements, catalogues and other reports. This process leads to the list of

vendors, who have to be investigated further before registration

(b) In the enquiry stage a detailed analysis is made after getting maximum possibleinformation through a standard enquiry form containing a large number of

questions.

(c) these vendors who pass the critical enquiry stage are visited to assess their

financial capabilities, technical capacities, labor motivation, credibility with the

customers the satisfactory vendors are then registered and negotiations are

conducted on quality delivery price service and other contractual obligations.

(d) The final stage is termed as the experience stage where the actual

performance of the vendor on quality delivery price service and other parameters

over a period of time is assessed in order to carry on further business with him.

RIGHT TIME

Lead time is also influenced by fluctuations in usage rates and safety stock levels

can be established to cushion the effects of fluctuations. Similarly the

consumption or demand also fluctuates from month to month. Statistical measures

such as standard deviation are used to obtain the reserve stock, which is computed

on the basis of maximum rate of consumption in the past, to cater to the

consumption in fluctuations. The next step is to compute the stocks that have to

be maintained, under normal consumption rate and normal average lead time. This

is called buffer stock. A combination of reserve stock, safety stock and buffer

stock is obtained as the reorder point and this can be translated into time scale as

the right time of placing an order. In order to reduce the inventory the concept

of JIT or material arriving just in time, has been introduced in several

organizations.

In case of regularly used or recurring items, right time means the

duration when the stock reaches the reorder point. The order is placed and till it

is recouped, the responsibility for adhering to this time is shared both by stock

control and purchase section. Purchase section has to avoid delays in finalizing the

orders, will indicate the delivery date on the purchase orders and see that the

materials do arrive according to the delivery date by efficient follow-up.

Arrange delivery much earlier than the required delivery time, or after

production hold-up is not efficient procurement. The former means overstocking



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and blocking of working capital, while the latter implies loss of production. In case

of special requirements, i.e. materials required for special jobs, the purchase

section should allow for a reasonable time and ensure adequate follow-up to

procure the item. A third factor is the delivery of item from stores to production.

Any undue delay in effecting delivery or issues adversely affects the objectives ofpurchase management. Avoiding the delays initially the controllable administrative

delays- the buyer can arrive at the real right-time, particularly for the high value

items, resulting in savings in working capital of the organizations.

RIGHT TERM

Term should be acceptable to both, the supplier and the buyer.

Neither the buyer nor the supplier should put forward any terms and

conditions which are out of the reach of either of them `The specifications given to vendor should be proper and not

imaginary

There should be a proper contract signed between the buyer and

supplier.

The contract should carry all the terms and conditions agreed by

both, the buyer and supplier.

The term should be renewed periodically so as to none of the parties

can gain the extra benefit of market fluctuations.

The terms and conditions should be changed from time to time so as

to build a long term relationship.

Win Win negotiation: The principle that says that the value can be

expanded and both parties gain this value through the negotiation

process. This is discussed as a preferred process of negotiation as

opposed to win-lose (one party wins and the other party loses) or lose-

lose negotiations (where both parties lose).

Warranties: Warranties ensure that the buyer can legally rely on a

supplier to provide the item needed to do the job.

a. Transportation terms and risk of loss: Depending on the terms of

sale the carrier is either the agent of the buyer or the seller. If the

terms are fob origin the title to goods pass to the buyer when the

goods are loaded on the carrier vehicle. If terms are fob destination

the title to the goods pass to the buyer when the goods are delivered

to the buyer.



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b. Damages:The concept of damages in the UCC is based on the remedy

of a party being made whole. Generally damages are considered to be

in monetary form. The remedy then is for the party that has been

wronged to be paid for the amount of the damages so that party does

not suffer the financial impact.

RIGHT PRICE

Thus the lowest price need not necessarily be the best price, but the lowest

responsible price is the right price. It is indeed very difficult to estimate this and

the aim of any purchasing executive should be to determine the right price that

adheres to the quality, quantity, trade credits, and regularity of supply, reliability

and after sales service. Obviously, the basis for deciding on the right price willdepend upon the type of material, market conditions, availabilities, supply, demand

and socio-politico-economic aspects. Since the basic aim of purchasing is to pay

reasonably low prices for the best values obtainable after considering negotiation

and corporate commitments, determination of right price becomes important.

RIGHT PLACE:

Geographical location of the supply affects the cost of transportation and lead-

time, which certainly occupies a prominent place while evaluating a supplier. A

vendor located at a relatively far-off place compared to a local stockist or short

distance supplier is much more difficult to tackle and follow up even in this age of

advanced communicating world.

Choice of Method of Transport:

The choice of the mode of transport is indeed complex and depends upon

the type of material, rate charges, distances to be covered, volume, safety,

handling charges, time available loading charges unloading charges, taxes etc. The

usual modes of transport are railways Lorries air cargo, inland waterways, and

international shipping parcel post and courier services. Value of the commodity is

the first factor which largely influences the costs of transportation. Costly items

require careful handling and carry greater liability on the part of transport agency

and this is based on the principle of compensation to transport agency for care and

handling and air traffic is preferable in such cases.



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The Learning Curve:The learning curve concept is developed in connection with new products.

That the cost of production per unit of a new item decreases as additional units of

that product are manufactured is the basis of it. Because the supplier becomes

more skilled, as the worker repeats an operation and improves his speed andefficiency this causes him to reduce the labor and supervision costs.

Price Negotiation:

Price is the major consideration during most negotiations. The buyer cannot

afford to force the seller to always reduce his price below his profitable limits.

He must not forget that the seller also exists in business, so that he may obtain a

reasonable return on his investment. If the buyer persists in price reduction then

the solutions that are possible are detrimental to his interests. Price negotiations

will have various dimensions, other than the intrinsic cost consideration, factorssuch as rates of trade discounts, quantity discounts taxes freight insurance rates

assured future supply, etc., to be finalized during the negotiations.

RIGHT QUANTITY

EOQ:

At this right quantity, we note that carrying and ordering chargers are equal. This

is called economic ordering quantity. In manufacturing parlance, it is known as

economic lot size, with set up cost replacing the ordering cost. This set up is the

cost incurred due to jobs changes, resetting setting jigs, fixtures, cleaning, etc.

The inventory charges will continue to be the same as manufacturing department

produces the goods which will be stocked for some duration.

Forecasting the consumption of vast variety of items: one should forecast the

demand for all his products so that he can maintain a buffer stock level for his

production. He should plan his purchases according to the production plan.

Advance or delayed purchases based on needs/ circumstances: the purchaser

should delay his purchases if he speculates decline in the price in the future and

should buy in advance if the price is expected to rise in the near future.

RIGHT SOURCE

Source selection: The key concepts in source selection are

(a) There should not be so many sources, that the buying company is no longer

perceived by each supplier as an important customer



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purchaser should therefore assess the vendors capabilities on a continuous basis

and provide adequate feedback.

Financial Status of Suppliers:

Unless the supplier has a sound financial he may not be able to meet hiscommitments. Therefore information on his capital structure, organization

structure values of material held, turnover profitability and ability to meet

commitments is very relevant. It may not be advisable to enter into a contract

with suppliers who score low on these counts. Similarly we should know the basis

of ownership, sister concerns and the management styles, for this will affect our

dealings.

BUYERS' MARKET:

A disequilibrium condition in a competitive market that has a surplus, such that

buyers are able to force the price down. Note that a buyers' market does not

mean that a lack of competition among demanders have given buyers market



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control. A buyers' market is a competitive market that simply has a temporary

imbalance between the quantity demanded by the buyers and the quantity supplied

by the sellers. The buyers' market phrase is commonly used (mainly by real world

noneconomic types) to describe a surplus in real estate or housing markets. It's

also commonly used when describing assorted financial markets. You might want toexamine the opposite of a buyers' market, which is a sellers' market. Additional

information on the real estate market can be found in the entry on building cycle

A buyer group is powerful if:

The products it purchases from the industry are standard or

undifferentiated. The buyers are sure that they can always find alternative

suppliers, and may place one off against another.

The product it purchases from the industry from a component of its product

and represent a significant fraction of its cost. The buyers are likely toshop for a favorable price and purchase selectively. Where the product sold

by the industry in question is a small fraction of the buyers cost, buyers are

usually much less sensitive.

It earns low profit, which creates great incentive to lower its purchasing

costs. Highly profitable buyers, however, are generally less price sensitive

(where the price does not represent a large fraction of these costs).

The industrys product is unimportant to the quality of the buyers products

or services. Where the quality of the buyers products is very much

affected by the industrys products, buyers are generally less price

sensitive. Industries in which this situation obtains include oil field

equipment, where a malfunction can lead to large losses, and enclosures for

electronic medical and test instruments where the quality of the enclosure

can influence the users impression about the quality of the equipment

inside.

The industrys product does not save the buyer money. Where the industrys

product or service can pay for itself many times over, buyers are rarely

price sensitive; rather, they are interested in quality. This is true in

services like investment banking and public accounting, where errors in

judgment can e costly and embarrassing.

The buyers pose a credible threat of integrating backwards to make the

industrys product. Sometimes an industry engenders a threat to buyers

that its members may integrate forward.

The industry is not an important customer of the supplier group. If the

industry is an important customer, the suppliers fortunes will be closely tied



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up to the industry, and the supplier will want to protect the industry

through reasonable pricing and assistance in activities like R&D and lobbying

SELLERS' MARKET:

A disequilibrium condition in a competitive market that has a shortage, such that

sellers are able to force the price up. Note that a sellers' market does not meanthat the lack of competition among demanders have given sellers market control. A

sellers' market is a competitive market that is faced with a temporary imbalance

between the quantity supplied by the sellers and the quantity demanded by the

buyers.

A supplier group is powerful if:



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It is dominated by few companies and is more concentrated than the

industry to which it sells;

Its product is unique or at least differentiated or if it has built up

switching costs. Switching costs are fixed costs buyers face in changing

suppliers. These arise because, among other things, a buyers productspecifications tie it to particular suppliers, or it has invested heavily in

specialized ancillary equipment, or in learning how to operate a suppliers

equipment. (as in computer software), or its production lines are connected

to the suppliers manufacturing facilities (as in manufacture of beverage

containers )

It is not obliged to content with other products for sale to the industry.

For instance, the competition between the steel companies and aluminum

companies to sell to the can industry checks the power of each supplier.

It poses a credible threat of integrating forward into the industrysbusiness. This provides a check against the industrys ability to improve the

terms on which it purchases

Strategies in single source market:

Market research through third party: one should find out the price in the

market through the third party or agent, so as the relation between supplier

and purchaser will not spoil. One should be aware of the market price about

the product so that one can always look for alternatives.

Building a strong relation with supplier, i.e.: appreciating the work done by

the supplier. Regular meetings with supplier.

Alternative sources: finding alternative suppliers for the same product, i.e.

there must constant research for minimizing resources.

Having complete knowledge of supplier: Do suppliers compete on quality,

service, price, or other factors? What is the level of Government support

provided to the industry? What are the trends in the supply market (forexample, has product price consistently been reducing)? What is the size of

the total market and relative size of each supplier (market share by revenue

and/or profits)? How the suppliers are geographically distributed?

increase mutual dependency with the supplier: give more business to the

supplier,



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produce the good/service in-house; if it is possible then manufacture the

whole product with in, or manufacture some parts with in, if the parts are

more expensive if bought from outside.

Forward buying; buying price according to contract that so much amount of

product will be supplied at so and so date according to contract. This is

beneficial for supplier if the prices rise in the future and will be beneficial

to purchaser if his company faces any shortage, crisis.

Forming a buying consortium; and/or: this will be helpful as the goods are

bought in bulk, reduce in transport cost, storing cost, handling cost.

Consider substitute goods and services: if the spare parts or componentsused for manufacturing can be substituted i.e. inferior quality of product

can be used instead of the original one and with out affecting the originality

of the product.

JIT one should follow just in time production technique i.e. it is useful as

minimum of inventory is required to be maintained, once the order is placed

then only the raw materials are ordered. This reduces the inventory cost

and handling cost.

Multi source strategies:

What is the level of product differentiation between firms: how do

suppliers differ their products supplied, i.e. technical features, quality, etc:

how well product is presented i.e. packing

Which suppliers are the market leaders and which are market followers: market

leader is one which innovates and bears the expense of developing a new product and market

followers save the expense on innovating hence they charge lesser price compared to marketleaders.

How many suppliers are there in the market and what is each suppliers size

(in terms of number of employees and production capabilities) this is useful

whether the supplier is financially strong of taking bulk orders and whether

he has that much of production capacity to take so many bulk orders.



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Is there any obvious competitive advantage held by a supplier: why should

we go to that supplier, what are the fringe benefits offered such as credit

facilities, discounts, schemes.

Transport should be born by the supplier.

Vendor rating: selecting right vendor is very important, if proper source is

not selected one can cheated even in multi source market. So we should do

vendor rating according to financial ability and the quality of goods supplies

and also the other facilities offered by him.

Analyze the market structure: an Analyzing supply market is a useful technique toassist in the development of purchasing strategies. Information provided through

supply market analysis needs to be incorporated into the departments/agencys

plans for significant purchases for the goods and services, as one component of

the entire decision making process

The application of carefully considered procurement strategies means

departments/agencies can use their procurement resources to effectively meet

their business needs and support the advancement of specific government

priorities.

There are four generic structures by which a supply market can be defined. These

range from the extreme situation where there are many firms each selling an

identical product (perfect competition 12) to a situation where only one supplier

exists that is able to meet the needs of the purchaser (monopoly). Markets in

between these two extremes are referred to as oligopolies or monopolistic

competition. In a developed economy, the majority of markets fit somewhere

within these two categories. The table below provides guidance on the

characteristics of each market structure



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Perfect

Competition

Monopolistic

Competition

Oligopoly Monopoly

Number of

suppliers

Many Many Typically 2-10 One

Product

differentiation

Homogeneous

(identical)

Some product

differentiatio

n

Substantial

product

differentiation

No close

substitutes

Barriers to

entry

None None or very

limited

Substantial

scale and scope

economies

Substantial

Concentration ofmarket power

Zeroconcentration

Low Medium to high Maximum(perfect

concentration

)

Price

determinants

Purely by supply

and demand. No

individual buyer

or seller can

influence market

price

Price as

function of

supply and

demand, and

the ability of a

firm to chargemore due to

product

differentiatio

n

Ability to

influence

market price by

restricting

output

Ability to set

market price

by restricting

output

IMPORTANT FACTORS TO BE CONSIDERED WHILE PURCHASING:

SUPPLIER EVALUATION, SELECTION, AND MEASUREMENT

1. The supplier evaluation and selection process: One prime responsibility

of the purchasing department is to consider various supplier possibilities

and to evaluate the supplier candidate in various categories to determine

if the firm wishes to purchase from that supplier. There are seven



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primary areas in the supplier evaluation and selection process. Those

areas are identified below. See text for further information.

a. Recognize the need for supplier selection

b. Identify key sourcing requirements: What are the key requirements

for the products/services the firm will need to purchase.c. Determine sourcing strategy: What is the best decision for the firm.

d. Identify potential supply sources: Who are likely candidates and what

products do they sell

e. Limit suppliers in pool: Pare the number of candidates to a limited

number the company will consider.

f. Determine the method of supplier evaluation and selection: How will

the evaluation and selection are done?

g. Select supplier: Select the supplier that seems to be the best

alternative.

2. Key supplier evaluation criteria: The buying firm will evaluate the

possible suppliers according to the following criteria. See text for more

information.

a. Management capability

b. Personnel capabilities

c. Cost structure

d. Total quality performance, systems, and philosophy

e. Process and technological capability

f. Environmental regulation and compliance:

g. Financial capability and stability: Production scheduling and control

systems

h. E Commerce capability

i. Supplier sourcing strategies, policies, and techniques

j. Longer term relationship potential

3. Developing and initial supplier evaluation and selection survey:

Purchasing will gather information from a variety of sources to develop

the evaluation survey and then conduct the evaluation to come to the

best decision. See text for more information.

4. Critical Supplier selection issues: Some of the most important criteria

for supplier selection include the following, size relationship, and use of

international suppliers, competitors as suppliers, counter trade

requirements, and social objectives. See text for discussion.



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5. Supplier measurement and evaluation: Even after the supplier is

selected the purchasing department must continually measure the

supplier performance to ensure continued quality performance.

a. Supplier measurement decisions: Key decisions to be made in supplier

measurement include what to measure, (delivery, quality, and cost

reduction), how frequently to measure and report, how the

measurement data will be used by the firm.

b. Types of supplier measurement techniques: The techniques include

categorical system, weighted point system, and a cost based system.

The consumer can easily understand the importance of purchasing efficiency

because of his limited resources. His monthly purchase bill will include items of

food, clothing, fuel, cosmetics and charges for services like transport, electricity,

recreational facilities, etc. A common man will look to fit each and every need in to

his budget. Therefore if he is able to reduce the prices without a reduction in

quality, he will be able to increase his profitability and turnover if he can improve

his purchasing efficiency.

In majority of industries and manufacturing operations, materials and

services bought from outside contribute 60% of the cost of the manufactured

product. The major portion of fixed capital is in plant and machinery and a major

portion of the working capitals is in raw materials, parts and other supplies. All

these items have entered the organization through purchase function, which

thereby effectively controls a major portion of the organizations finances

purchasing strategy final[1]

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