Answer to Question #178511 in Economics for Faith

Question

Wade works for an environmental awareness charity .

He has been asked to procure the following :

. Polo shirts with the charity 's logo on. The new director thinks it will present a positive image if the all staff dear corporate workwear rather than their own clothes , as is currently the case . He wants each member of staff to be given five polo shirts. There are 20 member of staff .

. Order 5000 more copies of a promotional leaflet they have previously had printed.

. Source designers to develop a new promotional leaflet.

He needs to produce cost and estimate for each need and write a business case where relevant .

Question1

What type of business need each of the Procurements?

2 which of the needs above is likely to take wade the longest time to deal with? Why is that?

3 what are the steps required when undertaking a purchase price cost analysis?.

Thank you

Answer 1

1. Polo shirts are needed by the sewing business, printing of advertising projects - by printing houses. That is, these two processes are of interest to representatives of the manufacturing sector. But before putting these products into production, you must first contact the representatives of the advertising agency (non-manufacturing sector) in order to develop the appropriate layouts.

2. Most of the time will be taken by sewing shirts, since it is necessary to cut shirts of different sizes, that is, for cutting it is necessary to reinstall equipment that is designed for cutting large batches of the same size.

3. A number of principles apply when analyzing the purchase price.

 

Principle 21 We analyze the purchase prices of a new supplier for a similar range of other existing suppliers, determining the minimum purchase price among them.

Principle 2. We derive the percentage of the difference for each position of a potential new supplier from the minimum price of existing suppliers.

Principle 3. We assign the statuses to each position: "Win more than 20%", "Win from 10% to 20%", "Win from 5% to 10%" ……. “Loss is more than 20%”.

Principle 4. Calculate for each position of the analysis the amount of winning in the purchase for a new supplier, if we place an order for him. For example, the minimum purchase price of existing suppliers is $ 10, and the purchase price of a potential supplier is $ 9. The benefit of working with a new supplier at a new purchase price is $ 1. ($ 10 - $ 9). If you toss up the next order quantity for each item and multiply it by the purchase price benefit difference, you get the total benefit for the new order.

Principle 5. After calculating the percentage of the difference in purchase prices, assigning statuses for each item and determining the amount of winning in purchases, you have the opportunity to generate a consolidated analysis of the purchase price data. For what? Firstly, if you are analyzing price lists with hundreds and thousands of positions, it will help you understand the general situation with regard to the assortment being analyzed. Often, analyzing the price list of thousands of items, purchasing managers and their managers try to draw conclusions about the attractiveness of the prices of a new supplier for 10 selected items. As you can imagine, this method is very erroneous and simply cannot be used when analyzing thousands of assortments. Secondly, usually the decision on the attractiveness of the supplier's purchase prices is coordinated with the head of the department. The most effective way to display the general situation on the analyzed price list is a consolidated analysis of purchase price data.