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In the case of the piano manufacturer, the raw materials are a significant part of what creates value for the organization, since the quality of the raw materials determines the quality of the final product. In the case of the house-washing service, the materials needed are consumables and while they are necessary, they are not critical in creating value for the organization. These differences mean that purchasing is more important to the piano manufacturer than to the house-washing service. A difference in purchasing will also occur because the quality of the raw materials is significant for the piano manufacturer. Schermerhorn (1989, p. 498) notes that "quality comes from defect prevention, not defect correction." For the piano manufacturer, purchasing would be likely to involve demanding a certain quality from suppliers, with this a means of ensuring the quality of the final product.
The final difference between the two organizations is the significance...
For the house-washing service, consumables needed would be a small cost in comparison to the income. For the piano manufacturer, raw materials would be a significant cost, with the profit of the organization partly dependent on the cost of the raw materials. This would cause the piano manufacturer to approach purchasing with a greater emphasis on controlling and managing costs, while the house-washing service would be less cost-focused.
These two examples have effectively shown how the purchasing process differs based on the amount of product being purchased, the significance of the product to the organization, and the significance of the cost to the organization.
References
Porter, M. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New York: The Free Press.
Schermerhorn, J.R. (1989). Management for Productivity. New York: John Wiley & Sons.
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