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Quality Criteria Many firms recognize that the quality and reliability of their products are as important to their customers as price. Firms expect their suppliers to support their efforts to provide quality products. A recent review of research in the health-care industry indicates that suppliers are evaluated on both the quality of their service and the quality of their products because both impact the quality that the health-care provider can deliver to its patients. 17 Salespeople often need to describe how their firms will support the customer's quality objectives. To satisfy customer quality needs, salespeople need to know what organizational buyers are looking for. Quality criteria can include such objective measures as the number of defects per thousand products, the amount of time a machine operates before needing service, or the number of items a system can process in a given period of time. Some buyers also utilize subjective measures, such as if a piece of office furniture looks sturdy or if the vendor has great ratings on the Web. Either way, the salesperson has to identify what criteria will be used to determine quality. Service Criteria Organizational buyers want more than products that are low cost, that perform reliably, and that are aesthetically pleas- ing. They also want suppliers that will work with them to solve their problems. One primary reason firms are interested in developing long-term relationships with suppliers is so they can learn about each other's needs and capabilities and use this information to enhance their products' performance. Service-level agreements (SLAs) are standards for minimum service delivery for specific objective measures of how the vendor will perform services, and are written into a contract. 18 These are especially critical early in a relationship because SLAs guide both buyer and seller in making sure the appropriate level of service is delivered. Value analysis is an example of a program in which suppliers and customers work together to reduce costs and still provide the required level of performance. 19 Representatives from the supplier and the purchasing department and technical experts from engineering, production, or quality control usually form a team to undertake the analysis. The team begins by examining the product's function. Then members brainstorm to see whether changes can be made in the design, materials, construction, or production process to reduce the product's costs but keep its performance high. Some questions addressed in this phase are the following: Exhibit 3.5 Life-Cycle Costing Product A Product B Initial cost $35,000 $30,000 Life of machine 10 years 10 years Power consumption per year 150 MWh * 180 MWh Power cost at $30/MWh $45,000 $54,000 Estimated operating and maintenance cost over 10 years $25,000 $30,000 Life-cycle cost $105,000 $114,000 Note: A more thorough analysis would calculate the net present value of the cash flow associated with each product's purchase and use. * MWh = megawatt-hour • Can a part in the product be eliminated? • If the part is not standard, can a standard (and presumably less-expensive) part be used? • Does the part have greater performance than this application needs? • Are unnecessary machining or fine finishes specified? CHAPTER 3: Buying Behavior and the Buying Process 75

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