Contracts bulk purchasing

The amount of bulk purchase increases if either the spot maiket price inCTeases or the bulk price decreases. Evaluation of bulk contract purchases is illustrated in Example 16-6 (see worksheet Example 16-6). 

Specifications for raw cane sugar are set by purchase contracts. There are no international specifications, although the Codex JUimentarius is composing a draft specification. Because raw sugar is not sold as a food product in the United States (it is transported in bulk, like grain or coal), it is not subject to food regulations. Purchase contracts outside the United States are generady based only on pol U.S. contracts are discussed in the Hterature (6). 

In the early 1960s, when Enoch Powell was Minister of Health in Macmillan s Conservative government, the DoH bought large quantities of tetracycline from Poland for NHS hospital use. This was found to be clinically ineffective and of substandard quality a public outcry in the medical press followed. The cheap drugs exercise was not repeated, but bulk hospital purchase at competitive contract prices continues, and this leads to wide discrepancies between the hospital price and the price charged to prescriptions written in the primary healthcare sector. 

Publication in LNP is free of charge. There is no formal contract, no royalties are paid, and no bulk orders are required, although special discounts are offered in this case. The volume editors receive jointly 30 free copies for their personal use and are entitled, as are the contributing authors, to purchase Springer books at a reduced rate. The publisher secures the copyright for each volume. As a rule, no reprints of individual contributions can be supplied. 

Sometimes raw material cost will dominate the production cost. A chemical company will attempt to protect its source of supply by arranging long term contracts, which also benefits the supplier. Raw material prices for preliminary estimates may be obtained from the sources listed in Table 2.2. Prices of chemicals depend on the quantity purchased. Published prices tend to be high, particularly, for Aldrich, Alfa Inorganic, and Fisher who sell small quantities of many chemicals for research. The most accurate source is the Chemical Marketing Reporter, which publishes prices for chemicals sold in bulk... 

When the details of the design have been finalized, the equipment can be purchased and the plant can be built. Procurement and construction are usually carried out by an EPC firm unless the project is very small. Because they work on many different projects each year, the EPC firms are able to place bulk orders for items such as piping, wire, valves, etc., and can use their purchasing power to get discounts on most equipment. The EPC companies also have a great deal of experience in field construction, inspection, testing, and equipment installation. They can therefore normally contract to build a plant for a client cheaper (and usually also quicker) than the client could build it on its own. 

The effect of synthetic ammonia in the L nited States is very marked. Before the advent of tfie direct synthetic ammonia process, liquid anhydrous ammonia was sellin r in the Eastern states at 32 cents per pound in cylinders. In addition, it was the practice for the dealer to receive a deposit for the cylinder so that his investment was tied up only in those cylinders which were idle at his plant or warehouses. At the present time this ammonia is being purchased by the Government on contract with the Mathieson Alkali Works at 10j/2 cents per pound in 100 pound cylinders, delivered to point of consumption, and no cylinder deposit is required. In bulk, It has sold for as low as 6 cents per pound. 

Identification of the orders and contracts to be placed. The lists of equipment and bulk materials to be purchased and erected on site are obviously the basic starting point, but it has to be decided how these will be packaged into orders and contracts. The following objectives need to be considered in reaching the best compromise. 

The demand for metals as commodities is determined by the international trade cycle. Supply and demand are rarely in equilibrium, and for this reason there is a need for an international terminal market as a gathering of traders to purchase and sell metal, establishing a net supply-demand balance and setting prices accordingly. The bulk of metal traded on world markets is contracted directly between producer and consumer, but is priced on the basis of the international terminal market quotation. 

The optimal amount to be purchased using the long-term bulk contract is thus obtained using Equation 16.10 to be... 

Thus, the manufacturer should sign a long-term bulk contract for 6.63 million units per month and purchase any transportation capacity beyond that on the spot market. 

Most consumers of production, warehousing, and transportation assets in a snpply chain face the problem of constructing a portfolio of long-term bulk contracts and spot market purchasing. The basic decision is the size of the bulk contract. The fundamental trade-off is between wasting a portion of a low-cost bulk contract and paying more for the asset on the spot market. 

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