RTL2C001-Overview of Buying Process

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Overview of Buying ProcessOverview of Buying Process

Overview of Buying ProcessOverview of Buying Process

Domain AcademyDomain Academy

fewer CLIENTS more ATTENTION

Date: June 17 , 2012Date: June 17 , 2012

Version: 1.2Version: 1.2

Confidential and Proprietary - UST InternalSlide 1


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Table of ContentsTable of Contents

Course Contents

Overview of Buying process

Retail product management process

Assortment MixDifferent types of Buying process

Buying organization roles

Buying National Brand products

Negotiating with Vendors Legal and ethical issues in the buying process

Pricing Concepts

Pricing Strategies

Pricing approaches

Merchandising budget plan

Delivery of the order

Shipment methods

Payment methods

Slide 2 Confidential and Proprietary - UST Internal


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Overview of Buying processOverview of Buying process

The buying process is often considered to be one of a number of tasks

within Retail product management .

Buying process is a process through which the retailers replenish their store.

Replenishment is the process of filling your shelves as soon as the old stock

gets used.

Replenishment process is vital for all kinds of retail or trade businesses


, - - ,

detrimental.

Replenishment process differs from one business to another, depending on

the size and types of business.


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Overview of Buying process (Cont..)Overview of Buying process (Cont..)

Product and market specifics often influence the way the process is

carried out (e.g. seasonal vs staple products).

Relationship between retailers and suppliers can influence buying process,

e.g. length of time doing business.

Retail buyers have had an important role to link between manufacturers

and consumers.

4 Confidential and Proprietary - UST Internal


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To predict and buy what consumers want from their stores for the next

season, retail buyers can get information from

Store records and past experience,

Market representatives or agents,

Competitors,

Magazines,

ecommen a ons,

Trade directories,

Tradeshows,

Films,

and exhibitions. The information is the essential groundwork to be successful in their jobs.



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The most important part of a retail buyers role in a retail company is

satisfying company objectives

by making accurate and timely decisions of merchandise planning and

assortment planning.

because decisions related to the acquisition of merchandise are critical to

the profit potential of a retail company.

Retail bu ers forecast and select merchandise that the stores customers

want or need all at acceptable prices from vendors. Factors that affects the buying decision

Customer demand (e.g. price, quality and availability)

Market trends

Store policy

Financial budgets.



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Buyers source new merchandise and review existing ones to ensure

products remain competitive.

By fully understanding customer needs, they are able to maximize profits

and provide a commercially viable range of merchandise at competitiveprices.

Once the buying decisions are made the order will be placed to the

appropriate suppliers .



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Supply Chain Between Store and Vendor

Based on the daily movement and

trend the BUYER

places the PURCHASE ORDERS

The Purchase Order is sent to the

Vendor by various means

EDI, Manual etc


Vendor reviews the POs

placed by the Buyers

Vendor sends the items to store

either using the stores transport

or using vendors own transport

Store receives the POs (Items)

that is sent by the Vendor


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Retail product management process(Cont)Retail product management process(Cont)

RPM Process Stage 1

Recognition of Retail Customer Need

Recognition of new product requirements

Tracking existing customers requirements

Information sources available:

Internal sales data

Trade publications Consumer publications, special interest mags.

Suppliers

Market research

Competitor analysis



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RPM Process Stage 2

Write Specification Of Product to Satisfy Need

Convert recognised need into product opportunity

Blend a set of features to benefit customers

Formal specification of product features and/or approval of prototype

NB: This stage often starts the process, with a suggestion (sometime

rom supp er o owe y pro uc mar e eva ua on



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RPM Process Stage 3

Search For a Supplier

Find a supplier that is able to make and deliver product

Assess different suppliers for suitability based on value (e.g. product

quality, short lead time) for price

NB There may be a restricted choice, especially if buyer wants a




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RPM Process Stage 4 and Stage 5

Specify Order

quantity detailed, e.g. by size, variety, colour

in terms of how, when and where delivered

Evaluate Performance


. . , .

Of supplier e.g. on time, delivery accuracy

Includes qualitative measures e.g. customer feedback



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What is Assortment Mix?

Assortment Mix is the Breadth and depth of the product carried by the

retailers.

The retailer defines the merchandise strategy and allocates a Purchasebudget for procuring the assortment mix defined.

At this stage the retailer would like to get into SKU level planning in terms

of the number of units to rocure in order to match the forecasted sales.

Assortment MixAssortment Mix

Planned numbers at the SKU level need to match the numbers defined ata category level.

Examples: - During the holidays, our retail store increases its merchandise

mix so customers can find more gift giving ideas.



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Considerations In Deciding Ordering QuantityConsiderations In Deciding Ordering Quantity

Considerations in Determining How Much to Order

Basic Stock Plan

Present Inventory

Merchandise on Order

Sales Forecast

Rate of Sales of SKU (Velocity)

Seasonality



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Stock Levels :- This is the quantity of goods kept in stock.

Basic Stock List

Indicates the Desired Inventory Level for Each SKU

Amount of Stock Desired

Stock LevelsStock Levels


Cost of CarryingInventory

Lost Sale Due

to Stock out


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When to place an order?When to place an order?

Order Point

The point at which inventory available should not go below or else we will

run out of stock before the next order arrives.

The order point depends on the expected level of sales, the time requiredto obtain new stock, and the amount of safety stock that is desired.

Assume Lead time = 3 weeks, review time = 1 week, demand = 100 units

er week Buffer stock = 50 units

Order point = demand (lead time + review time) + buffer stock

Order point = 100 (3+1) + 50 = 450

We will order something when order point gets below 450 units.



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ForecastingForecasting

Unlike the domestic consumers, businesses cannot afford to wait till the

entire stock goes out, because it usually takes quite some time before the

suppliers can deliver the required goods.

Therefore, the businesses need to develop a replenishment process bytaking into consideration the demand and lead-time, and making an order

accordingly.



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Forecasting (Cont ..)Forecasting (Cont ..)

Sales Forecasting is the process of estimating what a company's

future sales are likely to be based on sales records as well as market

research.

The purpose of sales forecasting is to provide information that you can useto make intelligent business decisions.

Information used for sales forecasting must be well organized and may

include information on the competition and statistics that affect the

businesses' customer base. Companies conduct sales forecasting in hopes of identifying patterns so

that revenue and cash flow can be maximized.

Managers must think about changes in customer sales or other changes

that could affect forecasting figures. They must be competitive whenassessing the competition.



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Forecasting (Cont..)Forecasting (Cont..)

Lead time forecasting

Theres always some waiting-period between the buyer placing an order

and the merchandise reaching its place. This delay between the order and

the receipt is known as the lead-time. Lead time forecasting has nearly as much impact on the replenishment

process as demand forecasting.

Lead time refers to the number of da s between order lacement and

receipt, including the time it takes to enter the receipt into the system,place it on the shelf, or otherwise make it available for sale.

It is important to have an idea of the lead-time so that you can place the

order in advance.

As replenishment focuses on acquiring product to support anticipatedneed, the lead time forecast is the key to understanding how long ahead

of that future need orders should be placed.



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Buying organization rolesBuying organization roles

Buying Center

Buying centre (also known as a decision making unit or DMU) is a group of

employees, family members, or members of any type of organization

responsible for finalizing major decisions, usually involving a purchase.

In a business setting, major purchases typically require input from various

parts of the organization, including finance, accounting, purchasing,

information technology management, and senior management.

g y tec n ca purc ases, suc as n ormat on systems or pro uct on

equipment, also require the expertise of technical specialists.

In some cases the buying centre is an informal ad hoc group, but in other

cases, it is a formally sanctioned group with specific mandates, criteria,

and procedures.

The employees that constitute the buying centre will vary depending onthe item being purchased.



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Buying organization roles(Cont)Buying organization roles(Cont)

People responsible for buying decisions in an organization:

The Buying Director

Represents all or, in a large retailer, a key part of the buying organisation.

Not all but some buying directors will be part of main board of directors

Lead, and set overall aims for, product management teams

Involved in strategic planning decisions such as

changing major suppliers, introduction or deletion of product

categories, major promotional campaigns, adoption of systems and

management approaches

Corresponds with General Merchandise Manager or VP.



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The Merchandise Manager

Oversee a division of the retailer or a number of departments.

Ensures co-ordination and consistency across departments.

May carry director status in a large organisation.

They may be supported by buying controllers who oversee small

numbers of inter-related departments.



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Retail buyer

Traditionally the figurehead of a product department

May have shared responsibility with a merchandiser

A retail buyer is responsible for planning and selecting a range of products

to sell in retail outlets.

The buyer must consider the following factors when making purchasing

Customer demand (e.g. price, quality and availability);

Market trends;

Store policy;

Financial budgets.

Concerned with qualitative side of buying

Awareness of consumer trends,

Knowledge of product features,

Knowledge of supply market



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Buying organization roles(Buying organization roles(CondCond))

The Merchandiser

Concerned with quantitative side of buying

Estimating sales

Planning deliveries

Distributing products to stores

Responsible for financial management of department.

Sales analysis

Budget planning

Profit margin analysis

Implementation of price reductions



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The Category Manager

Combined buying and merchandising role used in consumer-led product

management.

Leads a cross-functional team (category team). Involved in the performance of a group of products from product idea and

introduction through production, supply, store distribution, promotion,

sales and after sales.

More common in grocery / FMCG retailing. The Buying Committee

A group of people from different parts of the retail buying organisation

who meet to discuss and sanction buying plans.

Combines experience, expertise and different points of view.

Decisions are sanctioned and therefore supported by whole organisation

rather than individuals.

Time consuming and consensus may be difficult to achieve - buying

opportunities lost.Slide 27 Confidential and Proprietary - UST Internal


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Buying National Brand productsBuying National Brand products

What are National Brand Products?

Brand name used by a manufacturer whenever that product is sold.

For example, Del Monte is a national brand for food products.

In contrast, many marketers offer products under a variety of brand namescalled private labels, unique to each distributor or retailer.

National brand marketing requires greater advertising expenditure on the

-

brands. If consumer preference for the national brand is strong, then pricing can

be high enough to support the additional advertising and provide the

desired profit margin.

National brands are often perceived to be of higher quality and cantherefore demand a premium price.

Many national brands are now experiencing a loss of market share to

private label brands as a result of the narrowing quality gap.



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Buying National Brand products(Cont..)Buying National Brand products(Cont..)

Buying decision for staple merchandise

Less Frequent

Continuous replenishment

National Band Buying Process

Meet with vendors

Discuss performance of vendors merchandise during the previous

season

Review the vendors offering for the coming season

May place orders for the coming season

Some times they do not buy at market, but review merchandise, return to

their offices to discuss with the buying team before negotiating with the

vendors



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Buying Private Brand ProductsBuying Private Brand Products

What are Private Brand Products?

Private label goods are products sold by retail stores that are also

produced by the same retail store.

For example, Ralphs supermarket will sell Tropicana orange juice and rightnext to it will sell its own brand of orange juice.

Private label products are always less expensive than brand name

roducts because the need to be able to com ete with the bi brands.

They save money by not having to spend money on distribution channelsand advertising since they have their own.



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Buying Private Brand Products (cont)Buying Private Brand Products (cont)

Private Labels Growing Popularity

In the past, private label brands have been seen as inferior to brand name

products.

More recently however, private label brands are growing in popularitymost likely due to the economy and growing trust in private labels.

Buying Private Label.

consumer trust They are less expensive compared to national brand and are almost

identical

Their quality is same as of national brand



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Negotiating with VendorsNegotiating with Vendors

Bargaining is an age-old practice that is still common in the marketplace in

many countries today.

In the United States, most consumers want to avoid the haggle and will

simply accept the price on the tag. It is the successful retailer that has learned how to play the game of give

and take with their suppliers.

The bu ers can use the followin ti s to ne otiate with vendors to receive

the best pricing and terms on products. Be Prepared

Always Tell the Truth

Show Your Potential

Ask About Incentives Mention the Competition

Find a Fair Compromise

Think Long Term



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Negotiating with Vendors (Cont..)Negotiating with Vendors (Cont..)

Take Your Time

Get It in Writing

Practice Makes Perfect



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Legal and ethical issues in the buying processLegal and ethical issues in the buying process

Purchase Terms and Conditions

Resale Price Maintenance

Commercial Bribery

Charge backs

Buybacks

Counterfeit Merchandise

Gray Markets and Diverted Merchandise

Exclusive Dealing Agreements

Tying Contract


L l d thi l i i th b iL l d thi l i i th b i


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(Cont..)(Cont..)

Purchase Terms and Conditions

Restricts the prices and terms that vendors can offer to retailers.

Forbid vendors from offering different terms and conditions to different

retailers for the same merchandise and quantity. Different prices can be offered if

The costs of manufacturing, selling, and delivery are different.

e re a ers are prov ng eren unc ons e.g., s r u on, s ore

service, etc.)


L l d thi l i i th b iL l d thi l i i th b i


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(Cont..)(Cont..)

Resale Price Maintenance (RPM)

It is a practice whereby a manufacturer and its distributors agree that the

distributors will sell the manufacturer's product at certain prices .

If a reseller refuses to maintain prices, either openly or covertly , themanufacturer may stop doing business with it.

Reduces free riding of discount stores.


Le al and ethical iss es in the b in processLe al and ethical iss es in the b in process


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(Cont..)(Cont..)

Commercial Bribery

A vendor or its agent offers to give or pay a retail buyer something of

value to influence purchasing decisions.

A fine line between the social courtesy of a free lunch and an elaboratefree vacation.

Some retailers with a zero tolerance policy.

.

Chargeback

A practice used by retailers in which they deduct money from the amount

they owe a vendor without getting vendor approval.

Two Reasons:

Merchandise isnt selling.

Vendor mistakes.




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(Cont..)(Cont..)

Buybacks

The act of re buying something that one previously sold.

Used to get products into retail stores.

Two scenarios:

Retailer allows a vendor to create space for its goods by buying back

a competitors inventory and removing it from a retailers system.

e a er orces a ven or o uy ac s ow-mov ng merc an se.

Counterfeit Merchandise

Goods made and sold without the permission of the owner of a

trademark, a copyright, or a patented invention that

is legally protected in the country where it is

marketed.

Major problem is counterfeiting intellectual

property.




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(Cont..)(Cont..)

Gray-Market and Diverted Merchandise

Gray- Market Merchandise (parallel imports) possesses a valid U.S.

registered trademark and is made by a foreign manufacturer but is

imported into the United States without permission of the U.S. trademarkowner.

Not Counterfeit.

Is le al.

Diverted Merchandise is similar to gray-market merchandise except there

need not be distribution across international boundaries.

Gray-Market and Diverted Merchandise Taking Sides Discount stores argue customers benefit because it lowers prices.

Traditional retailers claim important service after sale will be unavailable

May hurt the trademarks image.




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(Cont..)(Cont..)

Exclusive Dealing Agreements

Occur when a manufacturer or wholesaler restricts a retailer into carrying

only its products and nothing from competing vendors

Example: Safeway Coca-Cola Illegal when they restrict competition

Tying Contracts

n agreemen a requ res e re a er o a e a pro uc oesn

necessarily desire (the tied product) to ensure that it can buy a product itdoes desire (the tying product)

Illegal when they lessen competition.

Ok to protect goodwill and quality reputation of vendor .



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Pricing ConceptsPricing Concepts

What is Price?

Price is that which is given up in an exchange to acquire a good or service.

Importance of Price to Marketing Managers

Revenue :- The price charged to customers multiplied by the number ofunits sold.

Revenue = Unit Price * No of Units Sold

evenue pays or every ac v y

Profit:- Revenue minus expenses

Marketers must select a price that is not too high or not too low, a price

that equals the perceived value to target consumers.



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Pricing Concepts (Cont)Pricing Concepts (Cont)

Trends Influencing Price Setting

TrendsTrendsTrendsTrends

High rate of

new product introduction

High rate of

new product introduction

Increased availability of

bargain-priced dealer and

Increased availability of

bargain-priced dealer and

in thein theMarketMarketin thein theMarketMarket

Price cutting as a strategy tomaintain or regain

market share

Price cutting as a strategy tomaintain or regain

market share

More efficient and betterinformed buyersMore efficient and betterinformed buyers



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Pricing StrategiesPricing Strategies

The Cost Determinant of Price

Types of CostsTypes of Costs

Deviate with changesin level of output

Var a eVar a e

CostsCostsFixed CostsFixed Costs

Do not deviateas level of output changes



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Pricing Strategies (Cont)Pricing Strategies (Cont)

Key stoning

Markup pricing

MethodsMethods

Target-Return

Pricing

Break-Even

Pricing

ro t ax m zat on

Pricing

Set PricesSet Prices


( )( )


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Markup

Pricing

The cost of buying the product from the producer plus

amounts for

profit and for expenses not

otherwise accounted for.

Key stoningThe practice of marking up prices

by 100%, or doubling the cost.


Profit

Maximization

A method of setting prices that occurs when marginal

revenue

equals marginal cost.

Marginal Revenue

The extra revenue associated with selling an extra unit of

output, orthe change in total revenue with a

one-unit change in output.

i i i ( )i i i ( )


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BreakBreak--Even PricingEven Pricing

cece

4,0004,000

Total RevenueTotal Revenue

Total CostsTotal Costs

BreakBreak--even pointeven point

QuantityQuantity

Pri

Pri

2,0002,000

00 1,0001,000 2,0002,000 3,0003,000 4,0004,000 5,0005,000 6,0006,000

Fixed costsFixed costs


P i i S i (C )P i i S i (C )


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BreakBreak--Even PricingEven Pricing

Break-Even

Quantity=

Total Fixed Costs

Fixed cost Contribution

Fixed cost

Contribution= Price -- Avg. Variable Cost



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Pricing approachesPricing approaches

There are three main approaches a business takes to setting price:

Cost-based pricing: price is determined by adding a profit element on top

of the cost of making the product.

Customer-based pricing: where prices are determined by what a firmbelieves customers will be prepared to pay

Competitor-based pricing: where competitor prices are the main

influence on the rice set


( )( )


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Pricing approaches (Cont..)Pricing approaches (Cont..)

Cost based pricing

This involves setting a price by adding a fixed amount or percentage to the

cost of making or buying the product.

In some ways this is quite an old-fashioned and somewhat discreditedpricing strategy, although it is still widely used.

After all, customers are not too bothered what it cost to make the product

the are interested in what value the roduct rovides them.

Cost-plus (or mark-up) pricing is widely used in retailing, where theretailer wants to know with some certainty what the gross profit margin of

each sale will be.

The main advantage of cost-based pricing is that selling prices are

relatively easy to calculate.

The main disadvantage is that cost-plus pricing may lead to products that

are priced un-competitively.


P i i h (C )P i i h (C )


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Customer-based pricing

Penetration Pricing

Penetration pricing is the pricing technique of setting a relatively low

initial entry price, usually lower than the intended established price, toattract new customers.

The strategy aims to encourage customers to switch to the new

roduct because of the lower rice.

Pricing approaches (Cont)Pricing approaches (Cont)

The aim of penetration pricing is usually to increase market share of aproduct, providing the opportunity to increase price once this

objective has been achieved.

Used to support the launch of a new product

And it works best when a product enters a market with relatively littleproduct differentiation and where demand is price elastic so a lower

price than rival products is a competitive weapon.


P i i h (C t )P i i h (C t )


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Price Skimming

Skimming involves setting a high price before other competitors come

into the market.

This is often used for the launch of a new product which faces little orno competition usually due to some technological features.

Such products are often bought by early adopters who are prepared

to a a hi her rice to have the latest or best roduct in the market.

Good examples of price skimming include innovative electronicproducts, such as the Apple iPad and Sony PlayStation 3.

Price skimming as a strategy cannot last for long, as competitors soon

launch rival products which put pressure on the price (e.g. the launch

of rival products to the iPhone or iPod).


P i i h (C t )P i i h (C t )


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Loss Leaders

The use of loss leaders is a method of sales promotion.

A loss leader is a product priced below cost-price in order to attract

consumers into a shop or online store. The purpose of making a product a loss leader is to encourage

customers to make further purchases of profitable goods while they

are in the sho .


Pricing is a key competitive weapon and a very flexible part of themarketing mix.

If a business undercuts its competitors on price, new customers may

be attracted and existing customers may become more loyal. So, using

a loss leader can help drive customer loyalty.

One risk of using a loss leader is that customers may take the

opportunity to bulk-buy.

Using a loss leader is essentially a short-term pricing tactic for any one

product.


Pricing approaches (Cont )Pricing approaches (Cont )


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Predatory Pricing

With predatory pricing, prices are deliberately set very low by a

dominant competitor in the market in order to restrict or prevent

competition.

The price set might even be free, or lead to losses by the predator.

Whatever the approach, predatory pricing is illegal under competition

law.


Psychological Pricing Sometimes prices are set at what seem to be unusual price points.

For example, why are DVDs priced at 12.99 or 14.99?

The answer is the perceived price barriers that customers may have.

They will buy something for 9.99, but think that 10 is a little toomuch. So a price that is one pence lower can make the difference

between closing the sale, or not.

The aim of psychological pricing is to make the customer believe the

product is cheaper than it really.Confidential and Proprietary - UST InternalSlide 53

Pricing approaches (Cont )Pricing approaches (Cont )


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Competitor-based pricing

If there is strong competition in a market, customers are faced with a

wide choice of who to buy from.

They may buy from the cheapest provider or perhaps from the onewhich offers the best customer service.

Most firms in a competitive market do not have sufficient power to be

able to set rices above their com etitors.


They tend to use going-rate pricing i.e. setting a price that is in linewith the prices charged by direct competitors.

In effect such businesses are price-takers they must accept the

going market price as determined by the forces of demand and supply.

An advantage of using competitive pricing is that selling prices shouldbe line with rivals, so price should not be a competitive disadvantage.

The main problem is that the business needs some other way to

attract customers.


Merchandising budget planMerchandising budget plan


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Merchandising budget planMerchandising budget plan

Plan for the financial aspects of a merchandise category

Specifies how much money can be spent each month to achieve the

sales, margin, inventory turnover, and GMROI objectives.

Not a complete buying plan--doesnt indicate what specific SKUs tobuy or in what quantities.

Six Month Merchandise Plan for Womens Casual SlacksSix Month Merchandise Plan for Womens Casual Slacks


Delivery of the orderDelivery of the order


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Delivery of the orderDelivery of the order

Delivery time

Time period between product completion and customer receipt of the

item.

The estimated delivery time is based on the seller's handling time, theshipping service selected, and when the seller receives cleared payment.

Place

order Leave the warehouse A arrive at

store

Total time to receive the order


Processing time Shipping time

Delivery of the order(Cont..)Delivery of the order(Cont..)


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Processing time

The time taken to prepare the item to ship.

Shipping time

The time for the order to travel from the warehouse to reach thedestination.

Total Delivery Time = Processing Time + Shipping Time


The following deadlines are of importance for delivery processing: You must start picking and packing activities on the material availability

deadline. This deadline must be selected early enough in advance so that

the goods are ready by the given loading deadline.

The transportation scheduling deadline is the date on which you muststart to organize the transportation of the goods. This deadline must be

selected early enough to ensure that the means of transport is available

by the loading deadline.



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The loading deadline is the date on which the goods must be available for

loading and on which all vehicles that are required to ship these goods

must be ready for loading. After the time required for loading the goods

(loading time) has expired, goods issue can be carried out.

The goods issue deadline is the date on which the goods leave the

company in order to arrive punctually at the customer location.

The delivery deadline is the date on which the goods are to arrive at the

customer location. The difference between the goods issue deadline and

the delivery deadline is calculated from the transit time required for theroute between the delivering plant and the customer.




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Delivery scheduling

All activities that must be carried out before the goods can be delivered to

the customer are taken into account during delivery scheduling.

This includes loading, picking, and packing.

Delivery scheduling determines the material availability deadline and the

loading deadline.

All deadlines that are used for preparing and carrying out thetransportation of goods are taken into account during transportation

scheduling.

This includes the transit time and the transportation lead time that you

need for ordering a foreign forwarding agent or for arranging a truck from

the your company's truck fleet.


Shipment MethodsShipment Methods


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pp

Once the ordered items are ready, it needs to be transported from the

vendor to the store/warehouse.

When shipping freight, its important to choose the appropriate mode of

transportation to ensure your products arrive on time and at the right

cost.

The transportation can be done using the vendors transport system or the

stores transport system or through a third party.

Different modes of transportation like road, rail, water and air can be used

for the effective management of merchandise.


Shipment Methods (Cont..)Shipment Methods (Cont..)


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p ( )p ( )

Shipping by truck

It is one of the most basic and historical means of transportation from

one place to another.

Trucks and carriers typically are used for carrying or delivering freight.

Road transportation incurs a relatively lower cost than other logistic forms

and has a widely recognizable and flexible route.

,

other possible means of transportation, and it offers a limited capacity. Road transport is most often used for relatively inexpensive, non-

perishable items or for shorter distances.




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p ( )p ( )

Shipping by rail

Shipping via rail is another popular option, especially when transporting

over large distances or when shipping bulk goods.

Dominant solution for bulk quantities of freight, but as they lack theflexibility of road transport and incur an additional transshipment cost,

this logistics method has become a little less popular in recent times.

However usin rail trans ort can be less ex ensive if frei ht is lar e and

heavy and the pickup point as well as the delivery point is near the rail

head.




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pp

Shipping by sea

It uses ships and large commercial vessels that carry billions of tons of

cargo every year.

Sea, lake or river transport is particularly effective for significantly largequantities of goods that are non-perishable in nature and for cities or

states that have water access.

Moreover trans ort via water is considerabl less ex ensive than other

logistics methods, which makes it one of the most widely used choices of

transport for merchandise.




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Shipping by air

Shipping by air is the best option for time-sensitive exports.

Merchandise is carried in cargo holds within passenger airlines and/or via

aircraft designed to carry freight alone. Although air transport is more expensive than all other means of

transportation, it is undeniably most time-efficient.

.


Payment methodsPayment methods


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There are four main methods for paying suppliers for the goods ordered

from them:

Advance payment. The supplier only ships goods once they have received

your payment.

Letters of credit. Your bank guarantees to pay when presented with a set

of specified export documents by the supplier - the bank guarantee

increases the cost of this method.

Documentary collection. When goods are shipped, the supplier sends the

export documents to your bank. You will need these documents to clear

your goods through customs, but will only given them when payment has

been made.

Open account trading. The supplier ships goods to you directly, and asks

for payment within an agreed period.



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RTL2C001-Overview of Buying Process

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