116 CHAPTER6ANALYZINGBUSINESSMARKETS ANDBUYERBEHAVIOR
divisions and buying them centrally to gain more purchasing clout. Individual
divisions can buy from other sources if they can get a better deal, but centralized
purchasing usually produces substantial savings. For the business marketer, this
means dealing with fewer and higher-level buyers, and using a national account
sales group to deal with large corporate buyers.
➤ Decentralized purchasing of small-ticket items. More companies are decentralizing
selected purchasing operations by empowering employees to purchase small-ticket
items such as special binders and coffee makers. This has come about through the
availability of corporate purchasing cards issued by credit-card firms. Companies
distribute the cards to supervisors, clerks, and secretaries; the cards incorporate
codes that set credit limits and restrict usage. National Semiconductor’s purchasing
chief says these cards have cut processing costs from $30 an order to a few cents.
“Now buyers and suppliers can spend less time on paperwork, so purchasing
departments have more time for building partnerships.”^16
➤ Internet purchasing.By 2003, business-to-business buying on the Internet is projected
to reach $1 trillion per year (compared with a projected $108 billion for consumer
buying).^17 The move to Internet purchasing has dramatic and far-reaching
implications. Companies are not only posting their own Web pages to sell to
business buyers, they are establishing Intranets for internal communication and
extranets to link with regular suppliers and distributors. So far, most businesses are
using extranets to buy MRO supplies. However, a growing number, such as General
Electric, are preparing to buy nearly all supplies on-line to shave transaction and
personnel costs, reduce time between order and delivery, and consolidate
purchasing. In fact, GE Information Services is a leader in helping GE internal
business units and outside companies use the Internet to buy from and sell to other
businesses; its Trading Process Network lets companies buy raw materials,
components, and just about anything else with a few clicks of the mouse. Internet
purchasing can help forge closer relations between partners and buyers, and it
levels the playing field between large and small suppliers. At the same time, it can
potentially erode supplier-buyer loyalty and open the door to possible security
disasters.^18
➤ Long-term contracts.Business buyers are increasingly initiating or accepting long-term
contracts with reliable suppliers. For example, General Motors wants to buy from
fewer suppliers who are willing to locate close to its plants and produce high-quality
components. In addition, business marketers are setting up electronic data
interchange (EDI) systems so their customers such as hospitals and bookstores can
enter and transmit purchase orders electronically.
➤ Purchasing-performance evaluation and buyers’ professional development.Many companies
have set up incentive systems to reward purchasing managers for good buying
performance, in much the same way that sales personnel receive bonuses for good
selling performance. These systems are leading purchasing managers to increase
their pressure on sellers for the best terms.
➤ Lean production.Many manufacturers have moved toward lean production, which
enables them to produce a more high-quality product at lower cost, in less time,
using less labor. Lean production incorporates just-in-time (JIT) production, stricter
quality control, frequent and reliable supply delivery, suppliers locating closer to
customers, computerized purchasing, stable production schedules made available to
suppliers, and single sourcing with early supplier involvement. JIT II, the next level
of customer-supplier partnerships, focuses on reducing the costs and time involved
in day-to-day purchasing transactions by locating one or more supplier employees at