Manufacturing (production)

People responsible for purchasing may be called purchasing managers, industrial buyers, or procurement managers

Master production schedule – includes an analysis of when to make the purchases in factory so supplies are available to meet production schedule

Buying Process (cont.) What is a bill of materials? The total of all

materials needed to make a product

As a buyer you would be in charge of this for a factory

Wholesalers Purchase goods from a manufacturer/producer

and then resell them typically to retailers Levis Manufacturing – Wholesaler – JcPenneys

(retailer) Wholesaler stores jeans then when retailer

needs them they send them what they need (saves manufacturer storage and time by not having to deal with 100’s of retailers who sell their products)

Retailers Buy the products from manufacturer or

wholesaler and resell them in stores to the customer– Abercrombie– Wal-Mart– Kroger

Purchasing Items for a business

1. Do research and gather data on who has best merchandise for the price.

2. Open to buy – the amount of money left over for buying goods after all purchases are received and on-orders have been considered.

P – (goods received + goods ordered) = OTB

3. How do you select buyers?

Based on production capabilities – do they have the ability to fill your order, are not sweatshops, and have a good reputation

Past experiences – Products have been on-time, returns are low, have good quality

Selecting buyers (continued)

Special buying arrangements – – Consignment buying: Goods are paid for

after they are purchased by final customer

– Memorandum buying – supplier will take back any unsold goods by a certain date

Special Services – UPC Codes on products, boxes have bar codes, good return policy

Centralized Buying Buying for all branches in a chain

store operation– All buyers buy for a department or part of a

department Examples: JcPenneys has buyers for different

departments for all of their stores– Shoe department buyers– Women’s clothing buyers– Men’s clothing buyers– Houseware buyers

Decentralized Buying When local store managers or their

designated buyers are authorized to make special purchases for their individual store– Example: Wal-Mart selling SHS, PC, and

SWHS merchandise (only targeted in this area)

– Selling fish heads in Japan in Wal-Mart

Resident Buyers Are retailer’s representatives in a

central market– Examples would be:

Buyers Market in Atlanta, Georgia (largest in USA)

New York City’s Garment District – apparel Paris – fashion and jewelry market

Buyers for Government Markets

Government units – buyers for government markets

Government markets make up one of the largest single markets for retail goods and services– Examples of gov. units are: Federal Aviation

Administration– Department of Sanitation– Public Library

Institution buyers Buy for non-profit organizations such

as:– Schools – Colleges– Hospitals– Churches

Stock Handling (process)

Merchandise ordered by a store is:

Received (Dock area – where orders are received)

Checked Marked with selling price before its

transferred to sales area.

Receiving merchandise

Merchandise received is recorded in a receiving record or log

Receiving record – describes the goods received by a business

Checking merchandise Process

Blind Check method – write description, QTY, and record on a blank form – compare with invoice (used when merchandise needs to go out on the sales floor and the invoice has not been received)

Direct check method – merchandise is checked directly against the invoice

Checking merchandise Spot check method – random check of

items in a shipment (canned goods, paper products, pharmaceuticals)

Quality check method – inspect workmanship and characteristics of merchandise (high quality items, jewelry, cars)

Marking Merchandise Source marking – the seller or

manufacturer marks the price before delivering the merchandise to the retailer

Pre-retailing, pricing info. is marked in advance on purchase order

Transferring merchandise

Once merchandise is received, checked and marked – it is transferred to different departments within the business

Types of Inventory Keeping track of merchandise on a

continual basis is perpetual inventory– Through computers (inventory taken out of

stock when scanned) Doing a physical count of merchandise

is called physical inventory– People physically count all inventory in

store (what missing is inventory shrinkage)

Storage of products Cold Storage – where you have to

keep products cold such as fruits, vegetables, and frozen products

Commodity Storage – Used primarily for agricultural products such as tobacco and grains

Bulk Storage – keep products in bulk form such as oil and chemicals

Types of Warehouses Private warehouse – built to meet the

needs of the owner (building a warehouse for your store’s inventory)

Public warehouse – offers storage to individuals or companies (rent a space in a warehouse to store your business items)

Types of warehouses (cont.)

Distribution centers – designed to speed deliveries to a retail store (Wal-Mart Distribution Center in London)

Bonded Warehouse – either public or private store products that require payment of a federal tax.– Save money because only pay taxes

when products are taken out of warehouse

Distribution The path that a product takes from

producer or manufacturer to final user. Rack jobbers – manage inventory and

merchandising for retailers ex. Pepsi Direct distribution – no intermediaries Indirect distribution – involves 1 or

more intermediaries (wholesaler, agent, etc.)

Manufacturer/Producer Makes the product – TTAI, Sharpe

Houseboats

Wholesaler

Buys the product(s) from the manufacturer and stores it then resells to retailer

Retailer Sells products to the customer: Wal-

Mart, Kroger, Walgreens

Agent Do not own the goods they sell – just

bring a buyer and seller together– Real estate– Stock broker– Travel agent

Types of distribution Exclusive distribution – protected territories for

distribution for a product Honda dealership, McDonalds, etc.

Selective distribution – a limited number of outlets can sell the product (maintain an image) – Ralph Lauren, Liz Claiborne, etc.

Intensive distribution – using all suitable outlets to sell a product (supermarkets, drugstores, retailers, etc.)– Detergent, cat food, food products