Integrated Buying

Integrated buying model and strategic sourcing plan

Nowadays the integrated buying model is used by the buyer in making buying decisions. Factors that affect decisions made in the integrated buying model are the cost per unit, quality level, and lead time. As each company tries to achieve their competitive advantage, the goals of a purchasing decision may vary. For example, most purchasing decisions require buying the right material at an acceptable cost and quality level within a reasonable lead time.   The decision maker must consider multiples goals. As a result, the buyer is faced with several constraints. Budgetary constraints and quality level constraints can cause issues with making the best buying decision. Companies may have limited resources, budgets may not be high enough to cover costs, or the storage size may limit the amount a product can be purchased. Nonetheless, the buyer must achieve the multiples goals within the constraints. 

The cost per unit, quantity discount schedule, and price/cost analysis are considered when making buying decisions based on cost. The cost per unit is influenced by the volume or amount purchased, the quality level desired, and the desired lead time. A company’s strategy may to purchase in bulk to buy at a discount which can drive the material costs down. A buyer must also consider the quality level in terms of the defect rate which leads to the purchase price being higher. This is known as a premium where the higher quality level which usually means preventing defects causes a premium charge. The premium price is paid by the buyer if the buyer wants to procure the material at a less than normal lead time. 

How to achieve integrated buying model

The purchasing function must be integrated into the firm’s overall strategic plan, which is requires a complete understanding of corporate strategies and marketing plans set by the company. Beside that , An extensive evaluation / study of current suppliers, how performance is...