Real-Life Math
Math is a big part of a purchasing manager's duties. Lynne Yates, a certified purchasing professional (CPP), says every order, every purchase, and every decision is based on math. A CPP has to figure out costs, work on budgets and compare criteria before purchasing anything.
And these budgets are often quite large. In one project Jason Robinson worked on, "I spent, by myself, $1.7 million. That's a lot of money! Especially when it's somebody else's money."
As a CPP, you receive a request from the research department for 15 new lab stools.
Supplier A says that if you purchase 10 stools, the price will be $280 per stool. If you purchase 15 stools, the cost per stool will be $270 and if you purchase 20 stools it will cost you $260 per stool.
Supplier B informs you that they only sell in amounts of 50 or more. An order of 50 lab stools will cost $13,000.
After looking over your files you decide that you could use all 50 of the lab stools over the next year. However, you have no place to store them when they are not in use, so you decide to check into how much it would cost to store the extra ones for 1 year. After phoning the nearest storage warehouse you learn that it would cost $100 per month to store the stools.
Now you have to decide where to buy the stools.
Who offers a better deal per stool, Supplier A or Supplier B?