The New Looking of Industrial Buying
Industrial buying has been subjected to research for over a half-century.
Instead of treating the act of buying as a spontaneous event, researchers viewed it as a series of patterns explained by the nature of actors, demands, and relationships.
Such a new looking provides a relationship-centric context of industrial buying instead of superficial product characteristics shaping the entire process.
Buygrid Framework: An Introduction to Industrial Buying Theory
The Buygrid Framework (1967) classical procurement theory analyzes the industrial (B2B) buying behavior and business processes.
It presents industrial buying not as a single event but as an organizational decision-making process where multiple individuals decide on a purchase.
The framework comprises a matrix of "buyclasses" and "buy phases."
Buy phases
Buy phases pretty much remind the steps of the source-to-contract cycle:
- identification of needs,
- establish specifications,
- Search for alternatives,
- establish contact,
- set purchase and usage criteria,
- evaluate alternative buying actions,
- determine budget availability,
- evaluate specific alternatives,
- negotiate with suppliers,
- buy,
- use,
- conduct a post-purchase evaluation.
Buyclasses
Buyclasses apply to the object of buying and represent its typical attributes and our individual behavior.
New Tasks
The first-time buyer seeks a wide variety of information to explore alternative purchasing solutions to their organizational task.The new supplier selection will be based on POC or prototypes, where the technical evaluation will prevail over the price.
Modified Rebuy
A buyer wants to replace or amend a product used in the organization. The decision-making may involve plans to modify the product specifications, prices, terms, or vendors to enhance the product quality or reduce cost.The competition is limited, as this scenario usually applies to modifications of an existing product. Therefore, negotiations will be the most suitable mode of supplier selection.
Straight Rebuy
The buyer routinely reorders a product with no modifications.We assume these are commoditized products or services with high competition and low urgency, as a supplier(s) already exist. So, there's no limitation to the competitive sourcing process.
The criticism of the Buygrid model
Despite the endurance of the Buygrid model, it's been criticized for an overly simplified view of industrial buying scenarios.Indeed, even in the Straight Rebuy situation, the commercial conditions, sales, and buying channels could differ.
Similarly, it's hard to assume completely new buying conditions every time a buyer approaches the New Task.
The increasing organizational interdependence in industrial buying
Industrial buying is influenced by megatrends (Industry 4.0, globalization, disrupting value chains, etc.) and new forms of collaboration between business partners. Firms became part of wider networks of organizations brought together to be more profitable and competitive and create value for customers.These interdependencies challenge traditional ways organizations purchase products, services, and solutions to enhance competitive advantage and customer satisfaction.
Relationship-based view of industrial buying scenarios
The following research paper presents three B2B buying situations by varying relationships between buyer and seller, the locus and nature of the buying decisions and their implementation, and other purchase-related factors.
The relationship-based view of industrial buying assumes three scenarios:
- Routinized exchange relationships for consistent and predictable demand with more interdependence between parties. These routine activities leverage integrated automated systems, enabling supply chain visibility. Examples: framework agreements, Vendor-Managed Inventories.
- Organic buying relationships require ongoing human involvement, interpersonal interactions, and continuous adjustments between buyer and seller firms. Examples: "as-a-service" offering, collaborative product development, CPFR (Collaborative Planning, Forecasting, and Replenishment.)
- Transactional buying operations mean one-time agreements that impose neither obligation nor expectation on buyers and vendors to collaborate in the future. Examples: spot buying and e-auctions.
The future of procurement is in relationships.
The proposed view of relationship-based industrial buying behavior may look fresh and innovative or simplified and unproductive.
Nevertheless, as in our earlier post on supplier segmentation, buyer-supplier relationships evolve amid ever-increasing supply chain risks and constraints in the modern industrial world.
It makes sense to optimize our legacy procurement toolkits through relationship-based upgrades.
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