Answer to Question 1
The just-in-time (JIT) purchasing system allows the purchaser to make a long-term commitment with a vendor. Frequent product deliveries, often just the amount required for the next day, are used. Close cooperation between purchaser and vendor is needed. Potential advantages include a reduced need for on-site storage, improved vendor relationships, less need for numerous vendors, and reduced spoilage. There are also fewer theft problems, and less money is tied up in inventory.
In a vendor-managed inventory system, the vendor retains ownership of products in inventory until they are issued. This can result in better service and improved cash flow.
Answer to Question 2
There are different purchasing methods, and selecting a particular method depends on the size and type of an organization and the intended use of a product. For example, the competitive bidding method is the most appropriate method for small independent operations. On the other hand, chains prefer the cost-plus purchasing method. The commissary method works best for franchised chains, whereas for perishable items such as dairy and fresh seafood, operations use the standing order method.
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