Modified Rebuy Meaning
Modified rebuy is the term used in the context of supply chain management, in case of modified rebuy companies modifies the previous order which the company has placed with the supplier and that modification can be in terms of price or quality, terms of the order, payment terms. In simple words suppose you are eating strawberry ice cream for the past many years from the same shop and one day you decide to eat chocolate ice cream than you are doing a modified rebuy as you have changed the order form strawberry ice cream to chocolate ice cream. In order to understand more about this term, one should look at some of the important characteristics of modified rebuy –
Characteristics of Modified Rebuy
Change in Order Terms
The first and foremost feature of modified rebuy is that there should be change in the original order terms and that change can be in terms of price which company was paying to its supplier or it can be in terms of quality of product which company or it can be in terms of quantity of material which company was taking from suppliers and so on. In simple words, if the company changes anything from a previous order placed with the suppliers then it will come under the category of modified rebuy and not straight rebuy.
Same Supplier
Another feature of this rebuy is that the supplier should be the same because if the company changes the supplier then it will be termed as a new order and not a rebuy. Hence in the above example if you are asking for chocolate ice cream from another shop and not the same shop than it is not a rebuy order rather it is a fresh order as that shopkeeper is new to you.
Risky
It can be risky because the chances of suppliers providing the product in the same way as the company wants are less because the supplier is doing it for the first time, unlike straight rebuy orders where the supplier has supplied the product multiple times. In simple words, just like in case of chocolate ice cream there is a risk that you may or may not like the flavor of chocolate as you are used to eating strawberry flavor ice cream same is the case with companies where they may or may not like the order from the supplier.
Complex Process
It is a complex process because when supplier has to repeat the order which he or she has been fulfilling from past many year than there is no scope of confusion as it is a routine process but moment company changes anything with respect to its order than supplier has to understand the requirement of the company properly and then prepare the order according to the new terms which sometimes can be a complex process and not a simple one like straight rebuy.
Relationship with Supplier
Modified rebuy is possible only when the company has a good relationship with the supplier as no supplier would want to change anything about the order as it involves the time and resources of the supplier. In simple words relationship between supplier and company plays important role in case of modified rebuy as suppliers can also give their valuable input to the company with respect to the modification order resulting in benefits for both suppliers as well as the company.
As one can see from the above that modified rebuy has unique characteristics and that is the reason why any company thinking of placing a modified rebuy order from its suppliers should carefully read the above points and then go ahead with their decision.