Points in running Economic action

PRICE

Relation of Cost to Price

Each supply managers believe suppliers should establish a fair price. A fair price is the lowest price to ensure a sustainable supply of good quality where and whenever needed.
The price is fair for the seller on an item may be higher than the fair price for items other substitution: Second chances "fair price" buyers as far as care, and the buyer may pay the price both at the same time.

Meaning of Cost

Kos is defined only direct labor and material costs, and depressed business conditions, the seller will probably only cover the amount rather than not sell them all. Or boarding may mean direct labor and material costs with contributions overhead. If the cost of some items into the overhead, whether this will be the ultimate cost to the actual interest rate, or is charged at an average interest rate? The average interest rate may be far from the actual interest rate.

There are two classifications of costs, namely direct and indirect.
Direct costs are usually defined as something specific and accurate attached to units of production, ie, direct materials, such as 10 pounds of steel, or direct labor ¸ like 30 minutes when people are on a machine or assembly lines.
Indirect costs are an inside operation of the production plant or process, but normally can not be linked directly to the various production units.
Classification of costs into variable category, semivariabel, and still is common in the practice of accounting and analysis required for various price / cost relationship meaningful. Most direct costs are variable costs because they change directly and proportionately units produced.
Semivariabel costs may change with the number of units produced but partially variable and partially fixed. Fixed costs generally there regardless of the number of units produced.

How Supplier Establish Price
There are two traditional methods ie the cost approach and the market approach.
The Cost Approach. Cost approach to pricing stated the price was supposed to be a certain amount via direct costs, following a small contribution to cover indirect costs and overhead and left a certain margin for profit.
The Market Approach. Approach implies that market prices are determined by market and may not be directly related to the cost.
Type of Purchase
Analysis of supplier costs are by no means simply based on price determination. What other meaning can be used? Much depends on the type of product purchased. There are seven general classes:
Raw Material. This group includes the commonly called sensitive commodities, such as copper, wheat and crude oil, but also steel, cement, and others.
Special items. This group includes items and special materials for the product line organization and custom orders.
Standard production items. This group includes several items such as bolts and nuts, some form of commercial steel, valves, and pipes, which stabilized prices and quotas based on "price list with some discount".
Items of small value. This group includes items of little comparative value of the expenditures of the various efforts to check prices prior to purchase.
Capital goods. Item purchase is counted as capital asset and expense through depreciation, rather than a burden through the time of purchase or use.
Services. This category is very broad and includes various types of services, bleak advertising, auditing, consulting, architectural design, legal, insurance, etc..
Resale. This category is divided into two groups, namely (a) Items that are formed in the production of in-house but have now outsourced to suppliers and taken to refine. (B) Items sold in the retail sector, such as the clothing line sold in department stores.
The Use of Quotations and Competitive Bidding

Quotations are usually protects when the size of the proposed commitment exceeds the minimum dollar amount, for example, $ 1,000.

The first step is to choose a supplier that allows anyone to claim from quotation is to apply these, in fact, to do the filtering of sources for supply. It is assumed that the bidder must (1) meet the qualifications to make the item in question in accordance with the buyer's specifications and approval to deliver the critical time, (2) sufficiently reliable to warrant serious as a supplier agreement, (3) fairly well in ensuring price competitive, but (4) does not exceed required.

Bidding Firm

The reason for the friendly treatment of the information that the offering price is related to a problem in practice where all sellers have faces, names, that "firm bid". Many companies have rules to notify the supplier that the original proposal had been completed and revisions are not allowed in the shared state.

Determination of Most Advantageous Bid

Typically, analysis sheet used to prepare a bid offer from all suppliers and examine each offer, or offers seen electronically in real time during the auction online.
However, there are some cases where the lowest bidder may not receive the order. Information received by the buyer to offer to request may indicate that firms with low bids are not reliable. Even the lowest bid might be higher than what buyers believe.

Collusive Bidding

Buyers also may reject all offers if it indicates that suppliers colluded with each other. In some cases, the rules to catch a sting difficult to determine, but there is a miraculous possibilities. Possible legal action but rarely viable because of the burden, delay, and uncertainty of outcome. Another possibility is to find a new source of supply between the inside and outside areas where buyers can purchase custom materials or services.




The Problem of identical Prices

Some situations require using the price of identical or parallel when:
Price signaling motifs identical historical price behavior.
It proves the communication between sellers and buyers related to price.
It is a standardization of "artificial" of the product.
Showed the identical price to the buyer penewaran in complexity, kedetailan, or new specifications.
Deviation from uniform pricing becomes widespread industry problem-the subject of the meeting and organized the sanctions.
Provision for Price Changes

Actual regulations for various options including price changes. Options include guarantee agains price decline, price protection clause, escalator clause, etc..

Forward Buying and Commodities

Initial purchase (forward buying) is a commitment to buy in anticipation of future needs through the current lead time. Thus, organizations may purchase in advance in anticipation of shortages, strikes, or price increases.

Forward Buying vs. Speculation

All forward buying involve some risk. In the forward buying, purchasing is limited to the known needs of the moment and to estimate the need carefully to period based on experience.
Speculation seek to profit from price movements. At the time the price rises, the quantity is exceeded for a commitment to anticipate the needs of the so-called speculation. At the time the price drops, speculation consists of the purchase withhold or reduce the quantity of purchases under the safe limit, and take the risk when there are endless supplies orders with high prices, if the anticipated price declines are not materialistic.

Control of Forward Buying

Safety should be made to ensure that the commitments will be maintained in the commodity limits. Some of the construction by the company checking only illustrated: (1) forward buying should be limited to the hidden that can be used in production on one of the leather or leather where demand is stable. (2) daily conference between the president, treasure, sales manager, and hide buyer. (3) Order for future delivery of leather varies in several measurements in agreement with the need to protect the hide holding company. (4) further checks provided by the operating budget. (5) Checking last consists of the use of an adequate and reliable information, statistical and otherwise, based on prices and market trends.