Purchasing and Financing 2024

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Option B Beta Leather produces B quality leather. They deliver the quantity as requested; their delivery time is normally 2 weeks, but it can also take up to 4 weeks. There are no delivery costs. They offer 50kg bags at R225 a bag. They give no cash discount, but if you order more than 1 500 kg you get a R50 refund. Option C Gamma Leather offers B quality leather in 100 kg bags at R470 a bag, but one can purchase less. The delivery cost is R100, but that will be refunded it more than 750 kg is purchased. They give a 2% cash discount and delivers between 2 and 5 days. Step 1: Identify the Criteria against which you are going to measure the suppliers. Quality - B grade leather required. Quantity - 500kg is needed initially. - 100kg is needed on five occasions after that Delivery Time - The initial quantity must be delivered within two weeks. - The rest must be delivered on short notice Price - The price must be competitive. - All price components must be considered. Step 2: Measure the suppliers against the Criteria and award a percentage mark in each case. Quality o Alpha provides grade “A” quality, while you require only grade “B”. They exceed your requirements and will score 100% for Quality. o Beta provides the “B” grade quality that you require; therefore, they will also score 100% for Quality. o Gamma also provides the required “B” grade and will also score 100% for Quality. Quantity o Alpha can deliver the initial 500 kg as required. They can not deliver less than 250 kg at a time. They will score about 75% for Quantity. o Beta delivers as requested and will therefore score 100% for Quantity. o Gamma will be able to meet your quantity requirements and will also score 100% Delivery Time o Alpha guarantees delivery within two days and will score 100% for Delivery Time. o Beta should just be able to deliver the initial 500 kg in time, but will not be able to deliver anything on short notice. They will score no more than 40% for Delivery Time. o Gamma will be able to meet the initial requirement and can deliver on short notice to a degree but can not guarantee it. They will score about 75% for Delivery Time 6
Price Before one can measure the suppliers against “Price” the total cost for each supplier will have to be calculated. Alpha R5/kg for 1000kg R5000-00 - 5% discount for cash - R250-00 + 3 Deliveries at R50 +R150-00 R4900-00 Beta R250/50kg for 1000kg R5000-00 - No discount for 1000kg - R 0-00 + No delivery cost +R 0-00 R5000-00 Gamma R470/100kg for 1000kg R4700-00 - 2% discount for cash - R 94-00 + Delivery Cost (refunded) +R 0-00 R4606-00 o Alpha will score about 90% for Price. o Beta will score about 85% for Price. o Gamma will score 100% for Price. Step 3: Weigh the Criteria A ranking of the criteria must be done and then a weight must be allocated to the different factors, which are consistent with the priorities. The total sum that can be allocated is 1 i.e. 100% In this case the following weighting would be good: Time (0.4), Price (0.3), Quality (0.2) and Quantity (0.1) Step 4: Complete the Decision Matrix Weight Alpha Points Weighted Results Beta Points Weighted Results Bombastic Points Weighted Results Quality 0.2 100% 20.0% 100% 20.0% 100% 20.0% Quantity 0.1 75% 7.5% 100% 10.0% 100% 10.0% Time 0.4 100% 40.0% 40% 16.0% 75% 30.0% Price 0.3 90% 27.0% 85% 25.5% 100% 30.0% TOTALS 1 94.5% 71.5% 90.0% Thus, Alpha will be chosen as it scored the highest weighted percentage. 4. PURCHASING COSTS 7
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