Classmates Responses

5100

· Ernest DQ #1:   For the buyer, the total procurement price is more than just the basic purchase price.  There are other elements to consider.  Name these elements, and discuss the primary considerations of each.

The total procurement price is based on three elements. These factors are the product price, transaction cost and transportation cost. When procuring a product, the immediate thought would be the cost of the item is the most important facet in determining the total cost for the procurement action. The product cost will only accounts for the value of the product. This line of thought does not take into account the additional aspect of the procurement process. Transaction cost or “ the cost of doing business� also affect the total cost of procurement. These cost will reflect the fees derived from administrative actions necessary to advance the procurement process. After the deal is struck and the product is purchased, the buyer will need to consider and determine the method to transport the product to it final destination. This cost can very base on the mode of transportation, the distance of travel and size, weight and dimensions of the product.  

Merrifield consulting firm used a modified process to determine total cost of procurement When a firm buys items that are not instantly consumed there are two main categories of procurement costs – buying and holding; they in turn can be subdivided into the following checklist:

     BUYING COSTS         HOLDING COSTS

1. Price                        7. Storage space cost

2. Shopping time          8. Financing of inventory

3. Paperwork                9. Control

4. Expediting              10. Shrinkage

5. Mistakes                11. Taxes, Insurance (Misc.)

6. Internal Handling to       final consumption point

This checklist suggests that when buying something there are six separate costs that may be incurred to get physical goods to their final storage-usage point. Price (#1) is the only instantly measurable element of the 11. To get a good price requires comparative shopping and negotiating time(#2) which is expensive if purchasing department overhead is included in the hourly rate of its personnel. For every purchase, paperwork(3#) is generated. If the goods arrive at the wrong time, place or specs, then the costs of expediting and mistake-curing(#4,5) are incurred; “mistakes” should also include the downtime costs of other deprived departments. Goods are often delivered to a general receiving area instead of the final consumption-storage point; this requires internal handling and paperwork costs(#6).

DQ# 2:   Define and discuss the four basic types of e-commerce business models used in procurement and sourcing.

Four basic types of e-commerce business models used in procurement and sourcing are sell-side system, electronic marketplace, buy-side system, and online trading community. Sell-side system: Online businesses selling to individual companies or consumers. This model is useful as the seller is able to minimize its storage cost by altering its logistics footprint to reflect customer. An Electronic marketplace is a seller-operated service that consists of a number of electronic catalogs from suppliers within a market. The electronic marketplace provides a one-stop sourcing site for buyers who can examine the offerings of multiple suppliers at one Internet location. This type of market encourages competition and benefits the buyer as they are able to find the best value for them. Buy-side system is a buyer-controlled e-procurement or e-commerce service that is housed on the buyer’s system and is administered by the buyer.  Online trading community is a system maintained by a third-party technology supplier where multiple buyers and multiple sellers in a given market can conduct business. The difference between the online trading community and the electronic marketplace is that the electronic marketplace is focused on providing information about sellers, whereas the online community permits the buyers and sellers to conduct business transactions. Online sites like EBay are vital in spreading the reach of buyers and sellers, increasing market competition and the buying power of customer.

References:

Coyle, John J.; Langley, John C.; Novack, Robert A.; Gibson, Brian J. (2013) Supply chain management a logistics perspective 10e. Boston, Massachusetts: Cengage Learning

“PURCHASE WITH THE TOTAL PROCUREMENT COST (TPC) MODEL.”Merrifield Consulting Group, www.merrifield.com/articles/4_3.asp

· Corey.DQ #1:   For the buyer, the total procurement price is more than just the basic purchase price.  There are other elements to consider.  Name these elements, and discuss the primary considerations of each.

 Total Procurement price is made up of traditional basic imput costs, direct transatction costs, supplier relational costs, landing costs, quality costs/factors, and operations logistics costs.

-Traditional basic input costs are costs associated with the primary price a firm pays for products or materials

-Direct Transaction Costs are the costs of detecting, transmitting the need for, and processing the material flow in order to acquire the goods

-Supplier relational costs are the costs of creating and maintaining a relationshiop with a supplier

-Landed costs are transportation flow closts that inclue sales and FOB terms

-Quality Costs/factors pertain to the conformance of goods to a desired specification

-Operation Logistics Cost are made up of four separate costs, receiving costs, lot-size costs, production costs, and logistics costs

DQ# 2:   Define and discuss the four basic types of e-commerce business models used in procurement and sourcing.

 The four basic types of e-commerce business models used in procurement and sourcing are Sell-side Systems, electronic market place, buy-side system, and online trading community.

-Sell-side systems are online businesses selling to individual companies or consumers an example is a business like e-bay which sells items through the internet to individual consumers

-Electronic marketplace is a seller-operated service that consists of a number of electronic catalogs from suppliers within a market. The electronic marketplace provides a one stop sourcing site for buyers who can examine the offerings of multiple suppliers at one internet location. Amazon is a great example of this especially when students are looking for the best deal on text books

-Buy-side system is a buyer-controlled e-procurement or e-commerce service that is housed on the buyer’s system and is administered by the buyer, who typically pre-approves the suppliers who have access to the system, and the process of the supplier’s productions and services that have been pre-negotiated. These systems permit tracking and controlling procurements spending and help to reduce unauthorized purchases. However the cost of buy-side systems is frequently high due to the cost of developing and administrating the system with a large number of suppliers.

-Online trading community is a system maintained by a third party technology supplier where multiple buyers and multiple sellers in a given market can conduct business. The difference between online trading community and the electronic marketplace is that the electronic marketplace is focused on providing information about sellers, whereas the online community permits the buyers and sellers to conduct business transactions. An example of this is Craigslist.

References

Coyle, J.J., Langley, C.J., Novack, R.A., & Gibson, B.J. (2017). Supply Chain Management: A Logistics Perspective. (10th ed.). Boston, MA: Cengage Learning