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 employee 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.
- to maintain of ROL
- To help the practitioner .
Procurement cycle refers to a term used to describe the actions, procedures, systems and methods used to purchase and obtain the goods and services and required execute a project.
Purchasing Cycle :
2) purchase Requisition
3) Purchase Quotation
4) Purchase Order
5) Goods Receipt
6) Purchase Invoice
7) Payment out
8) Goods Issue
9) Approval to manent
Purchasing Cycle / System OR Steps in Purchasing
- Get Requirement from User Department with Proper specification.
- Send the INQUIRY to the Vendors(Suppliers). (Request Quotation)
- Get the QUOTATIONS from Vendors.
- Make COMPARATIVE Statement.
- NEGOTIATE, Fix the Price and Terms & Conditions.
- Place the ORDER to the right Vendor.
- FOLLOW up with Vendor.
Purchasing Process includes as usual 8 main stages as follows:
- Market survey
- Studying Market
- Making Purchase Decision
- Placing Orders
- Receipting Goods and Services Received
- Accounting Goods and Services
- Receiving Invoices and Making Payment
- Credit note in case of material defect
Purchasing Management Process
Purchasing Management Process consists usually of four stages:
- Purchasing Planning
- Purchasing Operation (PR-PO Approval)
- Purchasing Tracking and Delivery
- Purchasing Reporting
Purchasing Reporting includes;
- comparing actual and estimated values
- calculating purchasing task and project statistics
- sorting, grouping or filtering tasks by attributes
- creating charts to visualize key statistics and KPIs
THE IMPACT OF PURCHASING MANAGEMENT
A large study based on 175 company surveys with a respond rate of 22% performed by Carr and Pearson (2002) shows that the factors strategic purchasing and Purchasing Management have a positive impact on the firm’s financial performance in both small and large firms. Carr and Pearson (2002) also write that Purchasing Management and supplier involvement does affect the success of a new product introduction. This study also shows that a link exist between implementation of strategic Purchasing Management and achievements of a firm’s comprehensive goals. It is also stated in the report by Carr and Pearson (2002) that it is believed that most firms recognize the importance of strategic purchasing, because they spend a large percentage of their sales on purchased inputs. Carr and Pearson (2002) also finish their study with the words “Based on this study, management should better understand the importance of Purchasing Management, supplier involvement, strategic purchasing and its relationships with firm’s financial performance.
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