QUESTION ONE $[50]$

Read the extract, and answer the question$/$s that follows:

THE TRADITIONAL PURCHASING PROCESS

The traditional purchasing process involved several steps$$requisition$,$ soliciting bids, purchase

order, shipping advice, invoice, and payment$$that have come to be increasingly regarded as

unacceptably slow, expensive, and labor intensive. Each transaction generated its own paper trail,

and the same process had to be followed whether the item being purchased was a box of paper clips

or a new bulldozer.

In this traditional model, purchasing was seen as essentially a clerical function. It was focused on

getting the right quantity and quality of goods to the right place at the right time at a decent cost. The

typical buyer was a shrewd negotiator whose primary responsibility was to obtain the best possible

price from suppliers and ensure that minimum quality standards were met. Instead of using one

supplier, the purchaser would usually take a divide$-$and$-$conquer approach to purchasing$$buying

small amounts from many suppliers and playing one against the other to gain price concessions.

Purchasing simply was not considered to be a high$-$profile or career fast$-$track position$$when

surveys were taken of organizational stature, purchasing routinely rated in the lowest quartile.

That attitude has changed in recent years, in part because of highly publicized cases wherein

companies have achieved stunning bottom$-$line gains through revamped purchasing processes. In

addition, increased competition on both the domestic and global levels has led many companies to

recognize that purchasing can actually have important strategic functions. As a result, new strategies

are being used in purchasing departments at companies of all sizes.

Analysts observe that in this new purchasing environment, a guideline known as the total cost of

ownership $($TCO$)$ has come to be a paramount concern in purchasing decisions. Instead of buying

the good or service that has the lowest price, the buyer instead weighs a series of additional factors

when determining what the true cost of the good or service is to his or her company. TCO calls for

closer attention to what else should be counted in addition to price. Categories include freight,

warranty requirements, financing costs, tooling requirements, storage$/$inventory costs, disposal

costs, and the like$$but netting out scrap values.

Question:

$1\mathrm{.}1$ Critically examine the managerial activities involved in the purchasing process. $(50)$