Answer to Question 1
Traditional Basic Input Costs This is the primary price of the product or materials as paid by the firm. It is the traditional price buyers seek through bidding, through negotiating, or in requests for quotes.
Direct Transaction Costs These are the costs of detecting, transmitting the need for, and processing the material flow in order to acquire the goods. The use of blanket or systems contracting can also reduce transaction costs. These include direct ordering by users to suppliers, single consolidated billing, and user inspection and checking.
Supplier Relational Costs These are the costs of creating and maintaining a relationship with a supplier. They include travel, supplier education, and the establishment of planning and operational links between purchasing and the supplier's order-entry operation, as well as other links, including those related to traffic, engineering, research, and product development in both firms.
Landed Costs The inbound transportation flow includes two key cost elements: the actual transportation cost and the sales/FOB terms. There are four different transportation options with inbound movements supplier-selected for-hire carrier or private carrier and buyer-selected for-hire carrier or private carrier.
Quality Costs/Factors Quality pertains to the conformance of goods to a desired specification. It includes the cost of conformance, nonconformance, appraisal, and ultimate use costs.
Answer to Question 2
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