Question

1. Some people may argue that a formal purchasing policy may not be necessary, especially for small companies whose purchasing activities are relatively simple. So, is it really important to have a purchasing policy, or it is needed only for big companies whose purchasing is complicated? Why?

2. Why do companies use the collaborative model and why use it compared with the traditional buyer-seller relationship model? Does it mean that the traditional buyer-seller relationship model is out of date? Can you think any scenario that the buyer-seller relationship model still prevails?

Answer 1

Purchasing policy has its value and importance and it is important irrespective of the size of the company. It is needed by both small and big companies that are looking to neither have low stocks nor would like to overstock. Purchasing policies highly depend on the prevalent and specific market conditions.

Companies favor the collaborative model because it helps in having a competitive advantage and cost of production can be improved by increasing the goods sold. Whereas, the traditional model of buyer and seller is not used much because it is more of a unilateral relationship with the majority of the emphasis on the buyer.

The traditional buyer-seller relationship model exists in the retail sector where the customers are the buyers and the sellers are the retailers.