Sunday, June 8, 2008

PURCHASING MANAGEMENT

PURCHASING MANAGEMENT

Purchasing means procurement of goods & services from some external agencies. The objective of purchase department is to arrange the supply of materials, spare parts & services required by the organization to produce the desired pr from some agency or source outside the organization. According to Beatly, “purchasing is the procuring of materials, supplies, machines, tools & service required for equipment, maintenance & operation of a manufacturing plant.”

Objectives:
1. Purchasing of satisfactory material.
2. To control the quality of material.
3. Proper negotiation with suppliers.
4. Proper use of material.
5. Coordination with other department.
6. Maintenance of company’s goodwill.
7. Other objectives:
(a) Exploration to locate new suppliers.
(b) Information about new material.

Function & procedures of purchasing Management:

1. Processing the Requisition: The purchase department communicates their requirement through requisition form. The format of this form contains the details of the quality, quantity and other necessary specifications about the item to be purchased. The requisition is to be signed by the competent authority.

2. Location & choice of Supplies: On the basis of findings from inspection, examination of samples and analysis of the placing orders. Purchasing agents continually scan the market place in search of potential new suppliers. Continued monitoring and evaluation of the suppliers performance is necessary and should be based upon actual results.

3. Placing of orders: The purchase department tries to purchase the material with desired quality and quantity at the most advantageous terms. A purchase order of specific format duly signed by signed by authorized authority is made.

4. Follow-up: Receiving the ordered material at right time is most important for an organization. Late deliveries can cause loss of operation for this follow up or expanding the purchase order after waiting for some reasonable time is essential. It is necessary to review the outstanding at regular intervals.

5. Verification of Orders: At this stage we will examine the quality & quantity of material received by comparing it with sample selected. If everything is right then the material will be sent to the store department and defecting items will be returned to the suppliers.

Methods of Purchasing:

1. Hand to mouth purchasing (or) purchasing according to the requirement: Under this method items are purchased only when there is a demand for items. Such items are not used regularly in the production process; hence these are not included in the inventory.

2. Purchasing for some definite future period: This method purchasing is generally used for those items which are regularly consume but the consumption is comparatively low and price changes for those items are not much.

3. Market Purchasing/Forward Purchasing: Under this method purchasing is made when market is low in terms of prices. That will give the advantage of cost reduction and saving.

4. Speculative Purchasing: Here excessive purchases are made when market is low for the item with the hope of earning profits by selling these items at high prices in the future.
5. Contract Purchasing: Here the purchase department enter into agreement with various suppliers to supply the items at some future dates.

6. Scheduled Purchasing: It is a scientific method of purchasing. The purchasing is scheduled according to the requirements of various departments. Vendors know about the future demand in advance and prepare for this in part

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