April 23, 2019
Office Supply Purchases
Response to the purchase of office supply from an alternate vendor.
Question 1: Purchase a piece of office equipment at the local office supply store. Received a flyer from the store across town has the same office equipment for $1,024.99. Approved $1,050.95 for the purchase at the local supply store. Should we drive across town to purchase the item from the alternate vendor?
Jim, I have a few concerns about the alternate vendor. The question is, should we drive across town to purchase the item from the alternate vendor? There are other issues with buying from an alternate vendor like quality and risk. We are taking on lots of risk for very little saving. (Clemen and Reilly 2014) Substitutability axiom refers to a decision maker who is indifferent between any original uncertain event that includes outcome A and an uncertain substation for A the is judged to be equal. The current supplier has already been approved and a purchase order issued. The alternate supplier has not been vetted by the company and therefore pose a risk and create uncertainty. As a risk mitigation for future purchases I would suggest a standard acquisition procedure.
First, the company should get three bids from vetted suppliers. For example, the manager should research three suppliers and compare price, warranty serviceability and availability. Second, finance should issue a purchase order to acquire the office equipment. Lastly the equipment will be inducted into the companies’ inventory and start the life cycle of the equipment. This will mitigate the risk of buying defective and inferior equipment also, alleviate any uncertainty.
Question 2: Purchase office equipment at the local office supply store. Received an e-mail that a store across town that has the item for $9.95. He was planning on spending $19.95 for it. Would we agree to buy it from the store across town?
Jim, in the instance the same axiom applies. Substitutability axiom refers to a decision maker who is indifferent between any original uncertain event that includes outcome A and an uncertain substation for A the is judged to be an equal. Just like question one somewhat. In this question there is a $10 savings but the supplier is an alternate to the first supplier. Like in the first question the equipment acquisition procedure should be the same. This item does not put the company at risk. My response is to avoid this risk. The reason I say to avoid this risk is because unless this other vendor is going to become a primary supplier it is wise to stick with the supplier. The current supplier is has been vetted by the company. It is uncertain if the two items are the same. In addition, this alternate supplier might not be able to fulfil all the future needs of the company. It un-necessary to risk something happening to the driver in route to the other supplier plus, the additional cost in manhours to get the equipment from the other supplier.
Would your answers change if all these stores were online stores? Why?
Form a business prospective, my answer would not change. Purchasing equipment for the company should have a standard operating procedure. The procedure I mentioned should apply to both questions. It would be acceptable if one of the three bids are from an online supplier. Benfits of online purchaseses that apply to this question are enviormental, conveience, easy comparison, and better price. (Fuller, D. 2016) The main advantage of online shopping is that it enables reduce your monthly expenses. What cant happen is every time the company buys equipment the go to different suppliers. The company has purchasing power when it buys for a dedicated supplier. That purchasing power is lost when purchases are made from a different supplier each time.
Clemen, R. and Reilly, T. (2014). Making hard decisions with DecisionTools. 3rd ed. Mason, Ohio: South-Western, Cengage Learning, pg. 573.
Fuller, D. (2016, September). Advantages Of Shopping Online. In Aim Proximity Shopping. Retrieved April 28, 2019, from http://www.aimproximity.co.nz/advantages-of-shopping-online/
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