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Purchasing
function , in a business environment , is one of the most
critical functions as it provides the input for the organisation to
convert into output. Materials today are lifeblood of industry. They
must be available at the proper time, in the proper quantity , at
the proper place, and the proper price. Company costs and company
profits are greatly affected by them as normally , a manufacturing organisation spends nearly 50% of its revenue in purchasing.
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Purchasing Function vs. Purchase department :
Purchasing function is a function commonly seen in all those
organisations that undertake purchasing activities.
Purchase
department is a unit of an organisation that performs purchasing
function.
The purchasing function is usually performed by a specialised
and centralised purchasing department , directed by an efficient
manager to
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achieve the performance in an
economical manner.
Profit making Centre ?
Purchasing is responsible for spending nearly half of a
company's income for buying the input materials.
Obviously, any
saving achieved by it results into direct saving for the company and
all such savings are a company's profit.
Going by a thumb rule "even 1% saving achieved in
Purchasing results in 5% profit for any organisation".
Procurement vs. Purchasing
It is used to define one of several supply functions involved in
logistics activities. In the broadest sense procurement includes the
entire process by which all classes of resources (people, materials,
facilities and services) for a particular project are obtained.
Since purchasing is a unique function , it differs a bit from
procurement in the sense that while procurement , with the same
objective has a wider domain , purchasing with the same objective is
included in it !
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Objectives of Purchasing:
The classical definition of objectives of purchasing is to buy
materials and services of the right quality , in the right
quantity, at the right place , from the right source and
at the right time.
However , in general management parlance the objectives of
purchasing are:
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To support company operations with an uninterrupted flow of
materials and services.
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To buy competitively and wisely
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To help keep a minimum Inventory
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To develop reliable alternate sources of supply
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To develop good vendor relationship and a good continuing supplier
relationship
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To achieve maximum integration with the other departments of the
firm
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To train and develop
highly competent personnel
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who
are motivated to make the firm as well as their
department succeed
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To develop policies and procedures which
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permit
accomplishment of the preceding seven objectives at
the lowest reasonable operating cost. The basic objective , in pure practical terms is ,of course, to
derive the maximum value for each unit of currency spent in buying.
Purchasing is no doubt a vast subject and as the
competition among the firms grows this function of
business is expected to see a lot of evolution |
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Types of Purchasing:
Considering the nature of business an organisation has there could
be different approaches and hence Purchasing can be any of these
types:
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