I propose defining a smart buyer as a person who buys the best value from a set of options which will provide what the customer expects, what the customer desires, and what will thrill the customer upon receipt. I also propose that the customers include the stakeholders, the users, the regulators, and society as a whole.
Value is defined as the pair {quality,cost} where the higher the quality and the lower the cost, the higher the value.
People buy something for a purpose. Examples of purposes are to enhance beauty, to increase prestiege, and to accomplish a task. Note that these purposes may be associated with the pairs {enhance, beauty}, {increase, prestiege}, and {accomplish,task}. In function analysis these pairs are called functions. Functions provide the basis for value engineering which is a powerful method for reducing cost. Functions are an integral component of comprehensive quality function deployment which is a powerful method of ensuring that the customer obtains a quality object.
Object is defined here as the integrated system received by the customer. A system serves a purpose. A system always contains processes, information, structure, and organization. A system may contain hardware, software, or people.
Quality is defined here as the degree to which the customer receives what they expect, what they desire, and what thrills them.
The use of the term "degree" implies we have a way of measuring the "degree." This can be accomplished by defining the qualities of an object in terms of the functions associated with the object. The qualities of a function are modifications of the function by adverbs and adjectives (Ohfuji, 1995). Thus, the sentence "I will drive the blue car fast" can be associated with the triples {drive,car,speed} and {drive,car,color}. These triples are measurable qualities of the statement. They take the form {verb,noun,attribute} (Dean and Unal, 1992). These measurable qualities are called quality characteristics.
Quality can be measured in terms of the quality characteristics associated with the object delivered to the customer.
Cost is the monetary measure of the work of human endeavor. The cost of an object is the monetary measure of the work of human endeavor expended to genopersist the object. To genopersist an object is to conceptualize, evaluate, design, prototype, test, produce, deploy, operate, support, evolve, retire, and manage the object. We may independently measure the cost to {conceptualize,object}, {evaluate,object}, {design,object}, {prototype,object}, {test,object}, {produce,object}, {deploy,object}, {operate,object}, {support,object}, {evolve,object}, {retire,object}, and {manage,object}. These are the genopersistation functions.
The implementation of a function is called an activity. Thus activity based costing is the measurement of the cost of the implementation of functions. The activity based cost of an object is the cost of the implementation of the functions which genopersist the object.
The cost to deliver an object to the customer is the cost to conceptualize, evaluate, design, prototype, test, produce, and deploy the object. There is an associated delivery cost for the supplier and the customers of the supplier.
The cost to society of the object has both direct and indirect components. The direct cost to society is the cost to society to deploy, operate, support, evolve, retire, and manage the object. The indirect cost to society is the cost associated with interactions between the delivery of the object by the supplier and society. These costs include the environmental impact of the delivery to the customer.
The existence of the cost to society is one reason why society must be considered as a customer. The second reason is that an overall quality to society exists through the effect of the object and the genopersistation of the object upon society.
Drawing from her many interviews with Dr. Deming, Walton (1986) states that he emphasized that "Price has no meaning without a measure of the quality being purchased." Scherkenbach (1986) uses his experience at Ford to support Deming's fourth point.
Windham (1995) proposes that we must purchase based upon quality, not price. Based upon statistical process control, he proposes a quantitative quality based incentive which will encourage suppliers to provide quality products which, based upon the Taguchi loss function, will reduce the overall cost of the purchasing organization.
Ohfuji (1995) observes that the qualities discussed above and cost are the primary drivers of purchasing decisions by unconstrained consumers. Dean (1995b) observes that cost is also driven primarily by qualities of the product and of the process to bring forth the product. This leads to the theory that the qualities of the product and of the process to bring forth the product are the primary drivers of purchasing decisions by unconstrained consumers.
Smart Buyer Bibliography
To Design for Competitive Advantage
Originated on 951127 | Improved on 950112
Author Ed Dean |
Curator Al Motley