9. Purchasing

Purchasing  Purchasing

is the first phase of material mgt. Purchasing means procurement of goods and service from some external agencies  Purchasing is an operation of market exploration to procure goods and services of desired quality, qty. at low price and at desired time. Suppliers who can provide standard items at the competitive price are selected.

Objectives of Purchasing 1. 2. 3. 4. 5. 6. 7. 8.

9.

Purchase of satisfactory material To control the qty. of material. Proper negotiations with suppliers. Controls proper use of materials. Co-ordination with other departments. Maintenance of company’s goodwill. Exploration Information abt new material and processes, which can reduce the cost of prod’n and improve the performance of the product. To achieve economy and efficiency in the activities of the purchase deptt. by analyzing.

Functions of Purchasing Deptt.  Processing

the requisition:-

Purchase requisition No………. Date……….. S.No. Qty Qty. and Price Suggeste Balance Reqd. Other details d Supplier in stores of the item Required By………..

Authorized By……..

2. Location and Choice of suppliers:Some guiding factors for the choice of supplier  Reliability

of Supply:- Past performance specially in the time of crisis as well as sound financial position of a supplier classifies him to be reliable.  Assurance of timely delivery  After sales service  Attitude with regard to the goods rejected by the purchaser  Technical assistance

3. Placing orders All purchases shd. Be made thru a purchase order in a specified form and duly signed by some authorized person. 

PURCHASE ORDER

To

Date…… Order No……

Description of item PRICE Date of Supply……

Other reqd’s Signature…………….

 As

a rule original copy is sent to the supplier, one copy is retained by the purchase deptt. And one copy is sent to the concerned deptt. Requiring the ordered items.

4. Follow-up or progressing the purchase orders  Receiving

the ordered material at the right time is most important for an org. Late deliveries can close the enterprise. For this follow up the purchase order after waiting for some reasonable time is essential. The priority of follow-up operations shd. Be given according to the importance or classification of items e.g. ‘A’ class items are to be given top most priority.

5. Invoices received from suppliers are checked and verified with order specification 6. Delay in availability of requisitioned material should be conveyed to concerned departments in time. 7. To maintain records regarding suppliers , their performance in past, products with them, probable delivery period for each order etc. 8. To dispose off outdated and scrapped items. 9. Control stores operation of receiving the items from vendors and issuing it to concerned deptt. Of the org. 10. To handle damages and demurrage claims

METHODS 

Purchasing according to requirements:This method is appropriate for those items which are not of regular and common use in the prod’n process.These items are generally not stored in inventories. And Purchasing dept. should keep a record of reliable and trustworthy suppliers who were sincere to the org. in past.

2. Purchase for some definite future period  This

method of purchasing is generally used for those items, which are regularly consumed, but the consumption is comparatively low and the price changes for these items are not much.

3. Market purchasing  The

policy of making the purchases at a time when the fluctuations in price of the items provide advantage to the purchaser is known as market purchasing . 4. Speculative Purchasing:Here excessive purchases are made when market is low for the item with the hope of earning profit by selling the items purchased in in excess at a higher price

5. Contract purchasing  Here

the purchase dept. enters into agreement with various suppliers to supply the items at some future period periodically. 6. Scheduled Purchasing:The purchasing is scheduled according to requirements of various depts. of the or.

Methods of purchasing (revision) 1. 2. 3. 4. 5. 6.

Purchasing acc. To requirements. Purchasing for some definite future period. Market purchasing. Speculative purchasing Contract purchasing Scheduled purchasing.

Prod’n Planning(1)

Purchase requition(2)

PURCHASE ORDER (4)

SUPPLIER(5)

MATERIAL

PURCHASE DEPT. (3)

A/c’s Dept(11) PAYMENT CHECK

RECEIVING SECTION(7)

STORES(10)

MATERIALS(9)

INSPECTION(8)

Steps in Purchasing procedure 1. 2.

3.

4. 5.

Various departments are requested to send their requirements on a proper requisition form. Purchasing dept. consolidated the requirements from various departments to know the total requirement for each item. Market exploration is made to locate the goods and services of desired quality and quantity at the reasonable price. Potential suppliers are identified from catalogues, quotations and past records. Purchase order in specified form is prepared and sent to the approved suppliers. Purchase order is the commitment of the buyer to the supplier establishing a contractual relationship b/w buyer and seller.

6. After some time of placing the order, follow up process starts to get quickly delivery of the items. 7. Items received are compared with purchase order. 8. Defective items i.e. items which are not in accordance with the specifications laid down in the purchase order are returned to the supplier on credit note of exchange