What is Modified Rebuy?
Definition
Modified Rebuy is a buying situation where a company reorders products from an approved vendor with modifications in the order specifications. The company might request changes in features, design, packaging, quantity or delivery time.
A modified rebuy buying situation occurs when the buyer is dissatisfied with their previous order or has a new requirement. Depending on the new requirement the order specification might change.
In this case, the supplier is mostly part of an approved supplier list. The supplier is then chosen such that their offering matches the requirements list.
Different types of Buying Situation
Modified rebuy is part of 3 main types of buying situations which are as follows:
- Straight rebuy - when a company repeats their last order to the same supplier without any modifications
- Modified rebuy - when a company reorders from an approved supplier but with modifications to the order
- New buy - when a company places an order with a certain supplier for the first-time
Depending on these parameters companies resort to one of these buying situations:
- New requirements - this could be one of the justifications for change in order
- Complexity of the problem being solved - complex problems don’t have routine solutions, so based on how the solution changes the requirements might also change
- Time taken to solve the problem - if the task is complete there is no need to repeat the order
Modified Rebuy vs Straight Rebuy
New Buy
New buy or new task buying situation refers to a situation when a company orders from a certain supplier for the first time. In new buy buying situation, companies have to carry out thorough research to finalize the right supplier for their specific needs.
Straight Rebuy
Straight rebuy is when a company reorders goods from an approved supplier without any modifications to their previous order. Here the goods received are identical to the goods received in the previous order in terms of quantity, quality, features, and other specifications.
Suppliers have the responsibility to maintain high product quality and timely delivery to ensure this buying situation occurs. In straight rebuy, typically there is no pre-purchase research on suppliers. Also, unless the order quality deteriorates companies continue to reorder in the same fashion.
Modified Rebuy
Modified rebuy buying situation occurs when a company reorders from the same supplier but changes a part of the order. When companies are dissatisfied with any aspect of the delivered goods they resort to this buying situation.
This buying situation can cause delays in delivery and might disrupt the regular process adding more complications. Sellers mostly prefer the straight rebuy buying situation. So to avoid modified rebuy they try to get immediate feedback from their clients. This allows them to change elements in their process which will help lead to maximum satisfaction.
Examples of Modified Rebuy
Here are a few examples of different reasons why the modified rebuy situation might occur.
New requirements
Restaurants change or add new items to their menu based on the current season. So even if the supplier remains the same, the order can change. For example, during the holiday's menus might include more berries-based desserts. For this, the restaurant might order more types of berries for a couple of months.
New suppliers
Let’s consider a company that has an approved list of suppliers. The purchasing team will compare the different vendors and finalize one based on their current requirements. So in this case, the supplier chosen is new but he is part of the approved list.
Product changes
If a company is not satisfied with any aspect of the product they are receiving they can change their order to purchase a different product. This can happen even when a supplier stops selling a particular product leaving the company no choice but to order a different product.
High prices
High prices can be another reason that leads to modified rebuy. A company has to limit its operating cost and one way to do that is by optimizing its raw materials purchase cost. So if the prices with a certain vendor or product are very high, the company can choose to change the vendor or product to get a better deal.
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