REFLECTION PAPER 6

Module 5: Sources of Supply

In order to have the product in the retail store, retailers need to know where to

get the supply. After determining what and how much products should be stored in the

retail store, the retailer could then decide whether to buy or make the product

depending on the cost and availability of production. Of course if they have the

resources that can produce the product and it's less costly, then they can make it

instead of buying.

Sourcing is the act of finding, evaluating and engaging with the suppliers of the

product. Suppliers can either be manufacturers who make their own products or

wholesalers who buy goods from another suppliers and sell it to retailers.

Resident buying office makes it easier for retailers to buy products since they are

like a representative of the retailers. It's like a bridge between the retailers and the

suppliers. It is classified into four, the independently owned office or the so called 'paid

office' is owned by a private entity ,the co-operatively owned office which is owned by

the member stores, the individually owned office which hires people as the resident

buyer on different areas and lastly, the merchandise broker or commission office who

are usually hired by the manufacturers to sell their products and were paid by the

manufacturers through commissions.

There are different phases in Sourcing. First, identifying the sources of supply

wherein you need to decide as to where are you going to buy the products, may it be in

the domestic market or the international market. Second, contacting and evaluating the
sources of supply. After knowing the sources, you can evaluate it to know whether it

suits the needs of the store. It can be a vendor initiated contract wherein the vendors is

the one who initiated the transaction or the retailer initiated contract wherein it's the

retailer who initiated the transaction. Third, negotiating with vendors, this is where you

negotiate the way of delivery, the price and all the details on how to get the product from

the suppliers to the retail store. Discounts can be negotiated when talking about the

prize and there are different types of discounts that the buyers can avail. The trade

discount that manufacturers grant to retailers or wholesalers, chain discount wherein

discounts are given sequentially, quantity discount which depends on the quantity of

your purchase, seasonal discounts which is given to retailers who avail the product in

advance of the normal buying season and cash discounts which is for credits and is

given if you pay within the given time or the discount period. Fourth, placing the

purchase order wherein the contract is made based on the negotiation made. Fifth,

establishing vendor relations wherein retailers view their suppliers as partners to build a

long beneficial relationship with the suppliers. Lastly, analyzing vendor performance

which can help you in deciding whether you're going to stick with that vendor or find

another supplier. The vendor's performance will greatly affect the productivity of the

retail store so pay attention.

MKT104 -Uu