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Purchasing it's a part of Materials Control Mangement
- Prepare and issue purchase orders for subcontractors/suppliers in accordance with established procurement policies, issue requests for proposals and verify invoices prior to payment.
- Actively support commercial/procurement issues to facilitate effective business decision-making and the effective resolution of issues and disputes, including customer complaints.
- issues purchase orders in accordance with company policy and negotiated terms and conditions.
- Discuss defective or unacceptable new goods or services with users, vendors and others to determine cause of problem and take corrective and preventative action.
- Ensure supplier compliance with site and company requirements for safety.
- Manage vendor relationships and assist in building effective partnerships.
- Responsible for planning, developing and buying materials, parts, supplies and equipment in a timely and cost effective way; timely manner while maintaining appropriate quality standards and specifications.
- Help to lower the cost and secure agreements.
- Liaise with Accounts Payable Department to ensure accurate and timely payment of invoices, as necessary for the business with the supplier.
Cost reduction
Have optimum stock value and availability
Maximise GMROI
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Hello Team,
· Purchasing is the function of buying Goods & Services from External Source to an Organization.
· Purchase department buys Raw Materials, Spare parts, services etc. as required by the company or Organization.
· Purchase management is One of the most Crucial Area of the Entire Organization. Thus, Needs Intensive management.
· Purchase is the Main Activity in Area of Material management.
· Purchasing management is a department in an organization responsible for purchasing activities.
· Purchase is Most Important Function in any Organization.
· Purchase is the first element which affects the product cost.
· Purchase management decides profitability of the Company.
· Purchasing management also covers the areas of outsourcing and insourcing.
· Purchasing management is the management of purchasing process, and related aspects in an organization.
Because of production companies purchase nowadays about 70% of their turnover, and service companies purchase approximately 40% of their turnover.[1]
The purchasing management department ensures that all goods, supplies and inventory needed to operate the business are ordered and kept in stock. It is also responsible for controlling the cost of the goods ordered, controlling inventory levels and building strong relationships with suppliers.
Objectives of Purchasing Management
* To purchase the required material at minimum possible price by following the company policies.
* To keep department expenses low.
* Development of good & new vendors (suppliers).
* Development of good relation with the existing suppliers.
* Training & development of personal employees in department.
* To maintain proper & up to date records of all transactions.
* Participating in development of new material and products.
* To contribute in product improvement.
* To take Economic "MAKE OR BUY" decisions.
* To avoid Stock- out situations.
* To develop policies & procedure.
Regards,
Saiyid
You can improve business performance by aligning the objectives of purchasing management with your business strategies. At the strategic level, purchasing decisions affect profitability and business growth. For a strategy to be effective, purchasing management objectives have to support its goals. By making sure your purchasing decisions are in line with strategic objectives, you can use purchasing management to help build your business.
1) Value for Money
2) Long term relationship
3) Continuous evaluation
Generally, the purchasing department’s goals are similar to those of anyone who buys something: Get the best possible quality of all supplies, services and equipment at the lowest cost. Most often, the purchasing department is that part of the procurement section that handles the supply chain process. To ensure quality and to prevent unethical practices, purchasing is usually separate from receiving and accounts payable
1. To pay reasonably low prices for the best values obtainable, negotiating and executing all company commitments.
2. To keep inventories as low as is consistent with maintaining production.
3. To develop satisfactory sources of supply and maintain good relations with them.
4. To secure good vendor performance including prompt deliveries and acceptable quality.
5. To locate new materials or products as required.
6. To develop good procedures, together with adequate controls and purchasing policy.
7. To implement such programmes as value analysis, cost analysis, and make-or-buy to reduce cost of purchases.
8. To secure high caliber personnel and allow each to develop to his maximum ability.
9. To maintain as economical a department as is possible, commensurate with good performance.
10. To keep top management informed of material development which could affect company profit or performance.
11. To achieve a high degree of co-operation and co-ordination with other departments in the organisation.
Purchasing is the first phase of Materials Management. Purchasing means procurement of goods and services from some external agencies. The object of purchase department is to arrange the supply of materials, spare parts and services or semi-finished goods, required by the organisation to produce the desired product, from some agency or source outside the organisation.
The purchased items should be of specified quality in desired quantity available at the prescribed time at a competitive price. In the words of Alford and Beatty, ”Purchasing is the procuring of materials, supplies, machines, tools and services required for equipment, maintenance, and operation of a manufacturing plant”.
According to Walters, purchasing function means ‘the procurement by purchase of the proper materials, machinery, equipment and supplies for stores used in the manufacture of a product adopted to marketing in the proper quality and quantity at the proper time and at the lowest price, consistent with quality desired.”
Thus, purchasing is an operation of market exploration to procure goods and services of desired quality, quantity at lowest price and at the desired time. Supplier who can provide standard items at the competitive price are selected.
Purchasing in an enterprise has now become a specialised function. It was experienced that by giving the purchase responsibility to a specialist, the firm can obtain greater economies in purchasing. Moreover purchasing involves more than 50% of capital expenditure budgeted by the firm.
According to Westing, Fine and Zenz “Purchasing is a managerial activity that goes beyond the simple act of buying. It includes research and development for the proper selection of materials and sources, follow-up to ensure timely delivery; inspection to ensure both quantity and quality; to control traffic, receiving, storekeeping and accounting operations related to purchases.” The modern thinking is that Purchasing is a strategic managerial function and any negligence will ultimately result into decrease in profits.
1. Purchasing function provides materials to the factory without which wheels of machines cannot move.
2. A one percent saving in materials cost is equivalent to a 10 percent increase in turnover. Efficient buying can achieve this.
3. Purchasing manager is the custodian of his firm’s is purse as he spends more than 50 per cent of his company’s earnings on purchases.
4. Increasing proportion of one’s requirements are now bought instead of being made as was the practice in the earlier days. Buying, therefore, assumes significance.
5. Purchasing can contribute to import substitution and save foreign exchange.
6. Purchasing is the main factor in timely execution of industrial projects.
7. Materials management organisations that exist now have evolved out or purchasing departments.
8. Other factors like:
(i) Post-war shortages,
(ii) Cyclical swings of surpluses and shortages and the fast rising materials costs,
(iii) heavy competition, and
(iv) Growing worldwide markets have contributed to the importance of purchasing.
The purchasing objective is sometimes understood as buying materials of the right quality, in the right quantity, at the right time, at the right price, and from the right source. This is a broad generalisation, indicating the scope of purchasing function, which involves policy decisions and analysis of various alternative possibilities prior to their act of purchase.
The specific objectives of purchasing are:
1. To pay reasonably low prices for the best values obtainable, negotiating and executing all company commitments.
2. To keep inventories as low as is consistent with maintaining production.
3. To develop satisfactory sources of supply and maintain good relations with them.
4. To secure good vendor performance including prompt deliveries and acceptable quality.
5. To locate new materials or products as required.
6. To develop good procedures, together with adequate controls and purchasing policy.
7. To implement such programmes as value analysis, cost analysis, and make-or-buy to reduce cost of purchases.
8. To secure high caliber personnel and allow each to develop to his maximum ability.
9. To maintain as economical a department as is possible, commensurate with good performance.
10. To keep top management informed of material development which could affect company profit or performance.
11. To achieve a high degree of co-operation and co-ordination with other departments in the organisation.
1. Ensure adequate safety stock is kept at all times.
2. Purchase in EOQ(economically order quantity).
3. Lead Time to supply must be acceptable/intimated to supplier.
4. Price must not vary for the stocks supplied immaterial of time of delivery.
5. No stockout situation must have arisen.
first glance, it may seem to be to find and purchase a quantity of material for the best price. But price is not the only concern. Low-priced material may not be a bargain if it is of unacceptable quality or if delivery is not reliable.
Clearly, the purchasing function involves more than obtaining the best price. It also involves buying the best value, which means buying:
the right quantity and quality
at the best price
from suppliers who are reliable and provide good service
One way to obtain the best value on a purchase is to set purchasing objectives and carefully follow the procurement cycle. This is explained later in this section.
Purchasing Objectives
It is often helpful to state the goals of purchasing for your business. In this way, you will never lose sight of the purpose of the purchasing function and will be able to make more intelligent purchasing decisions.
Here is a sample list of purchasing objectives:
to provide an uninterrupted flaw of materials and services for company operations
to find reliable alternative sources of supply
to buy at the most economic order quantities
to buy the best value: a combination of right quality at the best price with the best supplier service
to maintain good relations with vendors
The Procurement Cycle
Effective procurement consists of a series of steps which form a cycle. The steps in the cycle can be described as follows:
1. Determine needs. Before you buy anything, it is necessary to know what you need to buy and how much. It is important to remember that determining what you need involves not only quantity, but quality decisions as well. Determining and specifying appropriate quality requirements, in some situations, is a more difficult task than deciding what quantity to buy.
2. Select the supplier(s). When there are many suppliers to choose from, it is not simple to choose those who will give the best value - not only in price but in service, and consistent quality as well. Selection of suppliers may also mean finding more than one acceptable vendor if the purchased product is so important that you would suffer substantial losses if it were not available. In such a situation, in case the primary supplier cannot meet your needs as a result of a heavy workload, strike, unavailability of raw materials, etc.
When deciding to use more than one supplier, you have to weigh these advantages against the possible disadvantages of higher price and poorer service when you buy smaller quantities from two vendors rather than larger quantities from a single, reliable one.
3. Negotiate the purchase. In addition to specifying quantities and obtaining agreement on price, this can involve guarantees, method of payment, containers and packaging, delivery dates and other details of the purchase. Proper documentation of the purchase agreement is part of negotiation and assures that any questions or disputes that may arise will be settled in line with your expectations.
4. Follow-up. Here you look at the quality of product and service as well as the accuracy of quantities to determine what improvements, if any, are needed for the future.
