RETAILING 3

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Presented by: Mrasi A

What does a Buyer do?
 Buyers are primarily responsible for the planning, selecting and buying of merchandise for retail
establishments.
 Duties include market research, competitor analysis, product evaluations and testing, monitoring
purchase orders and creating reports for the management team.
 The retail buyer is more than just a purchaser: before decisions can be made over which products
to stock in-store, the buyer engages in research and analysis of consumer trends and behaviours.
After putting together a buying strategy, decisions must be made on budgets, time-scales and
where to source products intended for stores. Successful buyers must have excellent
mathematical skill, a creative approach to problem solving and be able to drive a hard bargain
with suppliers
Buyer Objectives
 Cost and Price Objectives
 Delivery Objectives
 Quality
 Market research and analysis
 Administration
 Negotiations
 Qualifications and Skill Improvement
 LEARNING OBJECTIVES
After you have studied this chapter, you should be able to
•Describe the nature of the buying function
•Explain the importance of buying role
•List the differences between supply management, logistics management and
supply chain management
Unravelling the terminology confusion
 Purchasing, procurement and sourcing
 Buying - refers to a functional group in the organisational structure and also to a functional
activity of buying materials, goods and services
 Procurement - represents purchasing in the wider and more modern concept of supply chain
management
 Sourcing - the process of identifying, conducting negotiations with and forming supply
agreements with suppliers of goods and services
 strategic sourcing process is broader and more comprehensive than the procurement process
Balancing lower cost and increased sales
Balancing lower cost and increased sales
Factors contributing to lower total cost
 The following factors contribute to lower
total cost:
 Lower inventory cost
 Price of products and services
 Quality cost
 Innovations may mean lower input costs
Factors influencing increased sales
Supply management can contribute to this
outcome through any of the following steps
(examples):
• Improved customer lead time
• Flexibility
• Improved quality
• Innovation
LEVELS OF BUYING
An example of different buying levels
Types of purchasing situations

 New task situation

 Modified rebuy situation

 Straight rebuy
Most popular organisational Buying
structures:
 Centralized
 Decentralized
 Hybrid or combination
 Cross-functional teams
Centralised buying structure

Centralized buying and supply

organizational structure

The authority for the purchasing

and supply function is vested in
one person or dedicated team.
Advantages of a centralized organizational structure

 Materials and products are standardized

 Negotiating power is increased and volume discounts are made possible
 Staff are afforded the opportunity of becoming experts
 Control is improved
 Administrative costs are reduced
 Supplier relations are enhanced
 Information systems integration is facilitated
 Duplication of efforts is eliminated
Disadvantages of a centralized organizational structure

 Slow response time to regional plants

 Resentment from geographically dispersed business unit management
 Tendency to bypass the central buying office
 Less integration with user departments
 Top heavy staff structure
 Lack of insight into the requirements of dispersed plant units
Decentralized buying structure

Decentralized purchasing and

supply organizational structure
Purchasing by different
departments, branches or plants,
while each of them enjoys an
important measure of autonomy on
decision-making regarding the
purchasing and supply function.
Advantages of a decentralized organizational structure
 Better relations between decentralized purchasing and other functions
 Good service delivery to regional plants
 Faster reaction to user departments in emergencies
 Goodwill generated by support of local suppliers
 Greater autonomy for profit centers.
 Interdivisional competition for improved purchasing performance
Disadvantages of a decentralised organisational structure
 Loss of economies of scale
 Confusion among suppliers when dealing with many offices
 Duplication of staff and facilities
 Difficulties in control over the function
 Greater likelihood of communications breakdown
 Focus on local units and under-emphasis on strategic issues
HYBRID/COMBINATION ORGANIZATIONAL
STRUCTURE

Common requirements
are purchased centrally,
while individual
requirements are
purchased on a
decentralized basis
Integration with other functions

 Certain buyers purchase from certain suppliers only

 Certain buyers purchase certain commodities only
 Certain buyers perform certain tasks only such as negotiations in multifunctional
teams
Cross-functional teams

 Comprises of expert personnel from different functional areas within the organization.
 May be created on a part-time basis to achieve a specific goal or outcome
 Pre-requisites for successful cross-functional teams
 Executive sponsorship
 Effective team leaders
 Qualified team members
Advantages

 Different perspectives, inputs and expertise of team members

 Responsiveness to user needs
 Increased acceptance by users of the products
 Understanding by other functions of the range of trade-offs considered in making a
final purchase
 Reduced time to solve problems or complete an assigned task as a result of synergy
 Increased innovation because of informal organizational structures
 Joint agreement and ownership of decisions among the members
 Enhanced communication between functions and with top management
 Overcoming organizational resistance
Challenges

• Additional investment in scarce resources may be necessary

• Role conflicts may emerge
• Overload for key members may develop
• Continuity cannot be guaranteed
• Senior management may not recognize individual contributions