PURCHASING STRATEGY

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Purchasing Strategy deals with obtaining the raw materials, parts and suppliers needed to perform the operations functions. The basic purchasing choices are

  • Multiple Sourcing – is superior to other purchasing approaches because

(a) It forces suppliers to compete for the business of an important buyer, thus reducing purchasing costs and

(b) If one supplier could not deliver, another usually could, thus guaranteeing that parts and supplied would always be on hand when needed.

  • Sole Sourcing – relies on only one supplier for a particular part. It is the only manageable way to obtain high superior quality. It can simplify the purchasing company’s production process by using JIT rather than keeping inventories. It reduces transaction costs and builds quality by having purchaser and supplier work together as partners rather than as adversaries.
  • Parallel Sourcing – Two suppliers are the sole suppliers of two different parts, but they are also backup suppliers for each other’s parts. If one vendor cannot supply all of its part on time, the other vendor would be able to make up the difference.
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