Purchasing management
Introduction
Its purpose is to ensure continuity of supply of raw materials, subcontracted items and spare parts and at the same time reduction in ultimate cost of finished goods. Subcontracted items are those items which are produced by other manufacturing and purchased by the company and the previous contract exist.
Meaning of purchasing management
Purchasing is the process of obtaining the materials, tools and supplies that are required for the manufacturing of a product. About 50 to 60 % of total expenditure of a production organization comprises – of raw materials, components and services. Therefore, the purchasing should be done in such a manner so that the total saving of a company increases. Purchase department handles all the activities related to the purchasing of items for an organization.
Definitions
According to Alford and Beaty “ purchasing is the procuring the materials, supplies, machine tools, and services required for the equipment, maintenance and operation of a manufacturing plant”.
Objectives of purchasing
Purchasing management is the responsible for purchasing raw material and other items, which it decides keeping in mind the following objectives:
1. To obtain the required materials, tools and services at a competitive price for production.
2. To ensure that the supply of material according to the product on requirement at minimum inventory investment.
3. To advice on timely deliveries and improved performance of items, keeping in mind the design, development and estimated cost of each department.
4. To maintain the goodwill of the company by fair dealing with the customers and suppliers.
Functions of purchase department
1. It provides source for the supply of capital goods and equipments, raw materials, spares etc.
2. It scrutinizes purchase indents and decides appropriate method of buying.
3. It conducts discussions and releases purchase orders.
4. It helps in per delivery transcription and shortage chasing of purchased items.
5. It co-ordinates with inward inspection that includes timely return of defective materials back to suppliers.
6. It sanctions supplier’s statement for payment.
7. It processes supplier’s requests for increase in price of production materials.
8. It attend supplier’s representatives and traveling salesman.
9. It arranges discussions and meeting between supplier’s representatives and companies officials.
10. It disposes excess, outdated and leftover material.
11. In handles management of new materials and new products in the market.
12. It researches and studies the possibility of substituting native materials for imported once.
13. It act as a link between company’s finance department and suppliers for timely payments and settlement of supplier’s bills.
14. It attend journal activities like applying for import license, quota etc.
Purchasing procedure
1. Initiation of purchased requisition.
2. Selection of source of supply.
3. Finalization of terms of purchasing.
4. Placement of purchase orders follow-up.
5. Maintenance of smooth relations with suppliers.
6. Approval of payment to suppliers.
7. Evaluation and rating of suppliers.
if u want to get a diagram of this them mail me himanshu143goel@gmail.com
Essentials of purchasing management
if u want to get a diagram of this them mail me himanshu143goel@gmail.com
Methods of purchasing
The purpose department provides all the production goods and materials that are required by a company. Any store department or functional department can request for the goods and materials. These requests may be received for direct materials, indirect materials and production items, seasonal items, low price items etc. as there are ample variations in practices that are followed for the purchase of items, so there is a need to select suitable purchasing methods. In the following section, we will discuss about the various methods of purchasing.
1. Hand to mouth purchasing
It is also known as “buying according to the requirements”. According to this method, items are purchased often in small quantities.
Suitability: - this method is effective only when the items are purchased from a vendor that is known for quality, reliability and integrity. These vendors can fulfill a buyer’s order without taking advantage of the situation.
2. Scheduled purchasing
The process of buying the items that are in form of distributed deliveries according to the delivery schedule provided by the buyer to the supplier is termed as the scheduled purchasing.
Suitability: - this method is best suited for regularly used items such as cutting tools, casting, forgings, lubricants etc. items that are produced according to the buyer’s design and requires long lead time to manufacture.
3. Market purchasing
Purchasing of sufficient quantity of items in advance when the prices of these items are low in termed as the market purchasing. This method of purchasing is also known as forward purchasing.
Suitability: - in public buying to avoid favoritism to a specific vendor.
4. Speculative purchasing
The process of buying large quantities of items when its price is low so that tentative profits can be obtained by selling them at higher prices is termed as the speculative purchasing.
Suitability: - it is not really a function of the purchasing department.
5. Seasonal purchasing
The process of buying an item as per its annual requirements during its season is termed as the seasonal buying. This method of buying is used for items that are available in a particular season only. These items are required for food processing and other similar industries.
Suitability: - it is applicable for the items, which are either purely seasonal or items, which have decreased market price during off-season.
6. Blanket order purchasing
The process of buying variety of items from a single source is termed as the blanket order purchasing.
Suitability: - in public buying to avoid favoritism to a specific vendor.
7. Tender purchasing
It is generally followed by the government departments and public sector undertaking in India. This method is applied by the private sector organization if the value of the purchase exceeds the prescribed limit fixed by the management as policy decisions.
8. Group purchasing
The process of buying items of insignificant value in a single purchase order is termed as the group purchasing.
Introduction
Its purpose is to ensure continuity of supply of raw materials, subcontracted items and spare parts and at the same time reduction in ultimate cost of finished goods. Subcontracted items are those items which are produced by other manufacturing and purchased by the company and the previous contract exist.
Meaning of purchasing management
Purchasing is the process of obtaining the materials, tools and supplies that are required for the manufacturing of a product. About 50 to 60 % of total expenditure of a production organization comprises – of raw materials, components and services. Therefore, the purchasing should be done in such a manner so that the total saving of a company increases. Purchase department handles all the activities related to the purchasing of items for an organization.
Definitions
According to Alford and Beaty “ purchasing is the procuring the materials, supplies, machine tools, and services required for the equipment, maintenance and operation of a manufacturing plant”.
Objectives of purchasing
Purchasing management is the responsible for purchasing raw material and other items, which it decides keeping in mind the following objectives:
1. To obtain the required materials, tools and services at a competitive price for production.
2. To ensure that the supply of material according to the product on requirement at minimum inventory investment.
3. To advice on timely deliveries and improved performance of items, keeping in mind the design, development and estimated cost of each department.
4. To maintain the goodwill of the company by fair dealing with the customers and suppliers.
Functions of purchase department
1. It provides source for the supply of capital goods and equipments, raw materials, spares etc.
2. It scrutinizes purchase indents and decides appropriate method of buying.
3. It conducts discussions and releases purchase orders.
4. It helps in per delivery transcription and shortage chasing of purchased items.
5. It co-ordinates with inward inspection that includes timely return of defective materials back to suppliers.
6. It sanctions supplier’s statement for payment.
7. It processes supplier’s requests for increase in price of production materials.
8. It attend supplier’s representatives and traveling salesman.
9. It arranges discussions and meeting between supplier’s representatives and companies officials.
10. It disposes excess, outdated and leftover material.
11. In handles management of new materials and new products in the market.
12. It researches and studies the possibility of substituting native materials for imported once.
13. It act as a link between company’s finance department and suppliers for timely payments and settlement of supplier’s bills.
14. It attend journal activities like applying for import license, quota etc.
Purchasing procedure
1. Initiation of purchased requisition.
2. Selection of source of supply.
3. Finalization of terms of purchasing.
4. Placement of purchase orders follow-up.
5. Maintenance of smooth relations with suppliers.
6. Approval of payment to suppliers.
7. Evaluation and rating of suppliers.
if u want to get a diagram of this them mail me himanshu143goel@gmail.com
Essentials of purchasing management
if u want to get a diagram of this them mail me himanshu143goel@gmail.com
Methods of purchasing
The purpose department provides all the production goods and materials that are required by a company. Any store department or functional department can request for the goods and materials. These requests may be received for direct materials, indirect materials and production items, seasonal items, low price items etc. as there are ample variations in practices that are followed for the purchase of items, so there is a need to select suitable purchasing methods. In the following section, we will discuss about the various methods of purchasing.
1. Hand to mouth purchasing
It is also known as “buying according to the requirements”. According to this method, items are purchased often in small quantities.
Suitability: - this method is effective only when the items are purchased from a vendor that is known for quality, reliability and integrity. These vendors can fulfill a buyer’s order without taking advantage of the situation.
2. Scheduled purchasing
The process of buying the items that are in form of distributed deliveries according to the delivery schedule provided by the buyer to the supplier is termed as the scheduled purchasing.
Suitability: - this method is best suited for regularly used items such as cutting tools, casting, forgings, lubricants etc. items that are produced according to the buyer’s design and requires long lead time to manufacture.
3. Market purchasing
Purchasing of sufficient quantity of items in advance when the prices of these items are low in termed as the market purchasing. This method of purchasing is also known as forward purchasing.
Suitability: - in public buying to avoid favoritism to a specific vendor.
4. Speculative purchasing
The process of buying large quantities of items when its price is low so that tentative profits can be obtained by selling them at higher prices is termed as the speculative purchasing.
Suitability: - it is not really a function of the purchasing department.
5. Seasonal purchasing
The process of buying an item as per its annual requirements during its season is termed as the seasonal buying. This method of buying is used for items that are available in a particular season only. These items are required for food processing and other similar industries.
Suitability: - it is applicable for the items, which are either purely seasonal or items, which have decreased market price during off-season.
6. Blanket order purchasing
The process of buying variety of items from a single source is termed as the blanket order purchasing.
Suitability: - in public buying to avoid favoritism to a specific vendor.
7. Tender purchasing
It is generally followed by the government departments and public sector undertaking in India. This method is applied by the private sector organization if the value of the purchase exceeds the prescribed limit fixed by the management as policy decisions.
8. Group purchasing
The process of buying items of insignificant value in a single purchase order is termed as the group purchasing.
After implementing an e-procurement software, pushing paper POs through the system is replaced by a more efficient electronic approval and tracking process. No longer is the question asked;
ReplyDelete"Have you seen my Purchase Order for XX” but…
“I know you have my order, can you please approve it so I can order the XX?”
The process and ability to track purchase requisitions and orders becomes as easy as finding an e-mail. No longer are your end users wasting precious time and productivity trying to tack down their orders. It becomes so streamlined and structured, the organization can focus on contract compliance and budget management to save money more effectively.
http://gravitygarden.com/procure-to-pay/purchase-order-process.html
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