While organisational buying is best viewed as a decision process, the steps that make up the process differ across companies and products. Steps needed in a new task or modified re-buy decision may not be necessary in straight re-buy decisions.
Over a period of time, each organisation evolves its own procedures for making purchase decisions. However, we can develop steps for generalization of decision process, for better understanding of organisational decision process as shown in figure.
1. Recognising an organisational need
Organisational purchasing starts with the identification of demand for products and services. While there are different kinds of needs, most needs arise out of situations related to the operation of the business.
Need recognition is not always as complicated or involved as it is in new task and modified re-buy decisions. It becomes a routine, particularly in a straight re-buy situation.
2. Determining product specifications
Subsequent to identification of the responsibility centre, the purchase manager also specifies exact product and service descriptions for procurement.
It is also necessary to estimate the exact quantity required and the period in which these quantities need to be delivered. An estimate of other associate services required for the purchase of specified goods and services is also necessary.
3. Identifying suppliers
If there are many suppliers on the list, a screening procedure that bases its decisions on certain predefined criteria is needed. The information gathered enables the organisational buyer to quickly look for suppliers who can meet minimum requirements.
These requirements might be delivery time, capacity to meet the buyer’s quantity needs, and breadth of the product line.
4. Information search and supplier evaluation
A buying centre may have to evaluate several product types for a particular use before suppliers can be selected. If products are complicated, technically trained people sort through the alternatives to recommend those that meet previously developed product specifications.
5. Negotiation of purchase orders
An organisational buyer may negotiate a contractual agreement with a supplier. An agreement of this kind can cover a single purchase of a product or repurchase of the product over a period of time. Contracts are commonly used in straight re-buy situations.
6. Evaluation of supplier performance
Organisational buyers usually want to know how well suppliers comply with the purchase agreement. Thus, an important part of organisational purchasing is evaluation of suppliers after purchase.
This task is typically assigned to the purchasing department. The criteria used for supplier selection become the performance standards for this evaluation.