Pegasus Veterinary Hospital (PVH) is a partnership of five veterinarian surgeons who specialize in treating horses. PVH is located in a $25 million facility on 20 acres of land, employing over 40 full-time staff members. The business manager of PVH had conducted the following spend analysis of last year's purchasing expenses at PVH:

PVH's approach to purchasing in each of these five categories has always been the same, but the business manager suspects that PVH could benefit from taking a more sophisticated approach, recognizing some key differences between the categories. As an example, surgical supplies and pharmaceuticals are critical to the care that PVH provides, and most of these items are highly specialized to the treatment of horses and not easily located on short notice. Hay and grain, in contrast, can be purchased from a variety of vendors for immediate delivery. Veterinary-grade horse supplies are available from several national suppliers who offer overnight shipping, making this category of purchasing only slightly less convenient than commercial- grade horse supplies, which can be bought at any one of a dozen nearby farm and pet supply stores. Horse transportation service is a surprisingly problematic category of expense, considering how little PVH spends in this category. Most PVH clients prefer to transport their horses to and from the PVH facility themselves, to avoid the additional expense of being billed by PVH for transportation. Occasionally, however, a PVH client requests that PVH provide transportation as well as treatment for the horse, meaning that PVH must then hire a transportation service. While PVH is not a frequent user of this service, it must be able to hire transportation for a sick or injured horse on very short notice.

a. Which category would PVH most likely consider core to its business, and thus invest the most effort in securing a long-term strategic supply partner?

b. In which category should PVH focus most strongly on competitive bidding and award its business based on the lowest-cost bid, viewing these purchases as tacti- cal decisions only?

c. If petty cash were to be used for any of PVH's purchasing, it would be most appropriate to which category?

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Total Expenditures Category Surgical supplies and pharmaceuticals Horse transportation services in Previous Year $215,111 Percent of Previous Year's Expenditures 52% $25,100 6% Commercial-grade horse supplies, $10,154 2% not including hay and grain Hay and grain $130,200 31% Veterinary-grade horse supplies, $35,010 8% including special feed and sterile bedding