TON

IG HT
7 th No Biz with
vemb
e r 2 01 Liz
6

= More profit (less loss)

Buying Better = More organised life

= Pro-active (less re-active)
Business Process Flow

Savings

tsh
Sell

The
Mak
Plan Business
Process e

Buy
 Business flow
Mak
Plan Buy Sell
e
• The exact specification
• The best place
• The best price
• Best buying Unit
• Best Transport costs
• Relationship trusted
• Reliable source
• Consistent quality
• Best terms
• Best internal processes
• Best timing
• Most suitable equipment
• Most suitable staff

Best Value
Use Buying Skills
3
You need to LIKE Buying WELL
 24
Sold
week 4

Buying activity
Making depends on Selling depends on
Selling activity

24
Made
week 5
Good Raw Material
Management

Good Production
Order System

Good Stock
Management

= a PULL
SYSTEM
 Good Raw Gro
Kan und
Material b an n u t
car
Management d

Use of raw material triggers replacement RAW MATERIALS

200
Good Production Kan kg P
b an B
Order System ca r
d

Each sale triggers PRODUCTION

A sale
Good Stock
Management
Pull System - advantages

• Don’t over produce

• Manage cash better

• Need less space

• Expenses and income connected
• Reduce poor quality

• Reduces waste
• Increases efficiencies for work on progress

• Creates transparency
 How to make a PULL system
1. Set your Minimum stock holding Trigger point
– Per every product you sell
– Per every raw material you hold

2. Set your product Maximum stock level –(per product)

– Per every product you sell
– Per every raw material you hold

3. Mark your stock store place with the minimum position

4. Mark your stock store place with maximum position

5. When you reach the low point, react and purchase next buying
cycle- up to maximum point
 Pull System – How to make a pull system
6. Your buying unit should be close to the gap
between your minimum and maximum points

Max10 7. Make sure your lead time to get raw

materials is factored into your minimum
trigger point replenishment, so sales are not
stopped.

buying unit =5

Min 4
Import Supply chain

Small
retailer

Large retailer
Small
retailer
Wholesaler Large
Arusha retailer
wholesaler Large
Wholesaler
Dar retailer
African mwanza
Importer Wholesaler
Import Iringa
Agent Wholesaler
Mbaya
Buyer, distributor

Producer
 OVERSEAS Supply chain Gets 1 apple
1 m.ton = 1,000 kg= $600 metric ton Gets $52.44 1,000tsh
$30.00 46c
2254 x10kg ctns per container Crtn You
=22.54 tons -$600X22.54=$13,524 cont price Gets
Gets $20.00 26c
$13,524/2254= $6.00 crtn $26,500
$6.00 carton (23X5=114 apples ctn) Crtn
Container 17c
$6.00/114=$0.052per apple $11.75 Small
Gets retailer
crtn/10c
$24,000 Street
Container Large retailer seller
Gets
$18,500 $0.093
Small
Container Wholesaler Large
Gets retailer
$0.072 Arusha retailer
$16,000
Gets Container wholesaler Large
Wholesaler
=$0.062 Dar retailer
$600 East Africa Mwanza
M.Ton Importer Wholesaler
=$0.052 Foreign Iringa
Agent Wholesaler
Mbaya
Buyer, agent
Apples Export packer

Grower
 Do you have a SHELF LIFE CONSTRAINT?

2
Material Stock SHELF LIFE
Shelf Life Use per
# days, weeks Day/week
Item Purchased Months, years /Month Minimum stock Maximum stock Special handing? Risk?
Diamond Plastic Nabraska
Pipe condition
Pipe Journey ?
1. Oil production
2. Onto truck
3. Truck to depot
4. Crane large truck
5. Truck to Plastic plant
6. Off load Plastic plant
7. Make plastic, Make pipe
8. Label and brand
9. Pack container
10. Container to wharf
11. Truck to exporter
12. Crane onto Ship
13. Ship to Panama Red sea
14. Transfer and ship to Dar
15. Crane off ship
16. Truck to Al Jazeera
17. Truck to w.sale w.house
18. Truck to large shop
19. Truck to small shop
20. We buy

Arrival Pipe condition

OVERSEAS Supply chain Price 5 hose
10 hoses 25,000tsh
Price 20,000tsh
1,000 Hoses Twende
16,500tsh
Price
1 hose pipe Retail 25,000tsh 10 Boxes
Price 12,500tsh Small
6 Pallets retailer
Price 11,000tsh
Small
Container Large retailer seller
10,000tsh
Small
Wholesaler Large retailer
Price Arusha retailer

Price Large
wholesaler Wholesaler
retailer
Dar Mwanza
Price E. African
Importer Wholesaler
Iringa
Overseas Wholesaler
Agent Mbeya
Buyer

Maker
 Buying unit Buying unit Buying unit Buying unit Buying unit Buying unit
40,000 hoses 15,000 2,000 50 hoses 10 1
Income Income Income Income Income
20,000,000 15,000,000 6,000,000 175,000 70,000
(500tsh per H) (1,000tsh H) (3,000tsh H) 1 hose
525,000
25,000tsh
Price Suzie
Price Price Price Price
10,000tsh 10,500tsh 14,500tsh
11,500tsh 18,000tsh
5 hoses
25,000tsh
each
Not Twende
Wholesaler Large Small
East African Wholesaler retailer
Dar Arusha retailer
Distributer 1 hose
25,000tsh
Ted

1 hose
Note -Income per hose pipe depends 25,000tsh
on volume of business Freddy
 Business priority
Buying unit Big District Distributor
15,000
Hoses

Turn product into cash

Volume is the key=turnover
Transaction number worthwhile – forklift
Minimum order 2,000 hoses
 Business Priority
Buying unit Local Distributor
2,000
Hoses
Turn product into cash
Volume is the key=turnover
Relationship – loyalty
Market share – all area
Transaction number worthwhile – trolley
Minimum order 25 hoses
 Import vs Local - Caution
Efficient volume – globally competative

Manufacturer → Trader → Wholesaler → Retailer → Consumer

Material + Making Cost + Handling Cost + Handling Cost ＋ Handling+ Service Final consumer
20 + 15 35+ 5 40 + 20 60　＋ 40 100
Inefficient volume – methods?

Materials maker → Trader → Local maker → Retailer → Consumer

Materials Cost + Handling Cost + making Cost ＋ Handling+ Service Final consumer
20 20 + 5 25 + 45 70 + 40 110
 Adding VALUE to a SUPPLY chain =

SKILL TIME SKILL TIME SKILL

TIME

Farmer Butcher Chef Public

Raise Butchers Make Enjoys
Chickens, flesh Chicken curry value from
Sell live Sell fresh Sell dinners all in chain
Egg Added value Added value Added value Dinner
300 =grow from =make usable =make edible 3,000
tsh egg protein protein tsh

fertilized egg --- chicken dinner = VALUE

What Choices you have - Supply access
Groups Benefits Negatives
Producers a) Source knowledge a) Very Large buying units
b) Cheapest price (Value) b) Contracts to buy consistently
c) Freshest c) Place not accessible
d) Brand reliable ? d) Limited choice

Wholesalers, a) Next best knowledge a) Large buying units

organisations b) Next best value b) Consistent buying needed
c) Next best freshness c) May be not accessible
d) Maybe closer to you
e) Choice/ variety

Importers/ a) Access to unusual items a) Very Large buying units

Agents b) Access to better quality b) Offer mixed quality
c) Cheap prices c) Want contracts and quick terms
d) Reliable stock? d) Little product skill
e) Brand switches

Shops/ a) Very accessible a) May run out

retailers b) Flexible any time b) Highest price
Markets c) Any buying unit c) No product skill
d) Limited choice/quality
e) Brand switches
Target Places to buy on the Supply chain

Who adds value for you?

What do you Value?

1. Maker quality? (taste, style, etc)

2. Features?
3. Shelf life?
4. The location/convenience?
5. Buying unit size?
6. Price?
7. Stock Consistency?
 ate r i al s
List your M
Planning Buying unit from who

• Get your own Product knowledge -research, research research

• Timing/Season analysis – record, review
• Research – research research, all the time
• Financial calculations - what can you afford to keep in stock?
• Cash flow – what can you afford in what time cycle
• Consistency - who can you rely on for your materials?
• Value - What do you value?
 Best price – for you
Better than your competitor
What is “Better than your competitor”?

Your competitor sells against you in the market place

You compete for sales

Answer
You negotiate very good value,
- e.g. good price, good payment terms, good buy unit
Better value than your competitor is getting
- eg, fresher, sweeter, riper, bigger, less contaminated, better brand
Suits your business
- e.g, convenient, style, business like minded, speed, service
You have found a good supplier that your competitors have not

You have advantages in your business ( over competitors)

-e.g, you have lower costs, more attractive product, maybe brand power
Negotiating - suppliers

• Make your target buying Price list, per best buying unit

• Take your best price list - don’t buy unless lower price

• Ask for lower prices - negotiate-e.g lower price if you buy more-please

• Negotiate for good payment terms

• Check use-by dates. Refuse if near end date

• Check what is presented is what you asked for

• Check for damage before you pay

• Add up the prices yourself or check their sums

• Check the receipt matches the stock

 Order Cycle - Frequency Costs

TAXI
Do you hire taxi
for delivery?
FARE $?
How
much
Do you use you Every Buying trip ?
BUY
$? does it How often do you go?
own car? FUEL
COST
YOU?
Does your supplier Higher
prices? $? $
deliver to you?
Is the Supplier really the best?
Do not follow the crowd or your nose

• Value outweighs Transport costs -if not close to you?

• Free delivery but higher prices ??

• Good quality - not damaged, in use by date?

• Value- competitive prices - Cheaper than most other wholesalers?

• Can accept negotiation – do they repay your loyalty?

• Return accepted- bad stock?

• A good range of products?

Setting Good Triggers -examples
Peanut butter making Small jars 200grm
Sales –ave per week 600
Stock –Finished jars -Min 900 You decide e.g Sales wk + 50%
Stock – finished jars - Max 1200 You decide e.g. Sales wk X 2
Stock - shelf life stable fact 2 months
Lead time to make Finished jar todays fact 1 day Use these
facts to
Stock production capacity todays fact 500 decide
Other factor- power outage todays fact 2days /week Trigger points
Lead time empty jars 6 weeks
Stock empty jars- Min 8X600= 4,800
Stock empty jar- Max 10,000
Ideal buying unit Jars 4,000 – 5,000 Ground nuts Yield 1
Lead time Ground Nuts 3 days sack =18,750gms
Stock Ground nuts - Min 7 sacks
Stock Ground nuts - Max 21 sacks 1 sack- 93- 200grm jars
Use ave 7 sacks a week
Buying unit Ground nuts 10-20 sacks
Using Triggers -example
Peanut butter making Small jars 200grm
Sales –ave per week 600
Stock –Finished jars -Min 900
Stock – finished jars - Max 1200
Stock - shelf life stable fact 2 months
Lead time to make Finished jar todays fact 1 day
Stock production capacity todays fact 500
Other factor- power outage todays fact 2days /week

Production
1. Schedule staff to fit the expected sales rate, e. 2 days a week on this product
2. If sales slow reduce output, respond daily
3. Keep stock within these figures, by changing daily production plan
4. Keep sales history posted on wall for all to see, update more than weekly
Best price
• Know all suppliers prices for everything
- Keep a file and update often

• Shop around and research prices

• Calculate, check, calculate and calculate- the best deals -use your phone

• Say "NO" when it’s the wrong price (not the best)

• Be prepared to put in effort – BE SMART

• Carry
• Wait
• Search
• Ask
• Buy alternatives – value
• Phone all options on the day you plan to buy- get best price
 SMART BUYING

Small Purchase Bulk Purchase

6 tins retail Carton 48 tins
Paint 180kg Paint 180kg

Price $160
Price $33.00

Cost = $5.50 per tin Cost = $3.34 per tin

Sell 30/week at $6.50 Sell 30/week at $6.50 Difference

=$30 income =$94.80 income $64 a week

X In one year a
difference of
$3,072
 DECREASE COSTS – Smart Buying

Find the best Prices – use your phone and energy

Make good supplier relationships

Never stop looking for better supply –ring a lot

Plan and buy when conditions are good- don’t

be forced to buy
DECREASE COSTS - Efficiency and control

• Work hard–employ hard workers

Not lazy ones

• Reduce Transport Costs – be smart

Reduce trips, walk, combine trips

• Count every shilligi and save every shillingi