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Wednesday, May 26, 2010

Introduction of Purchasing

Purchasing is an important function of materials management. In any industry purchasing refers to buying of equipments, materials, tools, parts etc. required for industry. The importance of the purchase function varies with nature and size of industry.

The objectives of the purchasing department can be outlined as under:

 
To avail the materials, suppliers and equipments at the minimum possible costs: These are the inputs in the manufacturing operations. The minimization of the input cost increases the productivity and resultantly the profitability of the operations.
 

To ensure the continuous flow of production: Ensure the continuous flow of production through continuous supply of raw materials, components, tools etc. with repair and maintenance service.

To increase the asset turnover: The investment in the inventories should be kept minimum in relation to the volume of sales. This will increase the turnover of the assets and thus the profitability of the company.
 
To develop an alternative source of supply: Exploration of alternative sources of supply of  materials increases the bargaining ability of the buyer, minimisation of cost of materials and increases the ability to meet the emergencies.

To establish and maintain the good relations with the suppliers: Maintenance of good relations with the supplier helps in evolving a favourable image in the business circles. Such relations are beneficial to the buyer in terms of changing the reasonable price, preferential allocation of material in case of material shortages, etc. 

To achieve maximum integration with other department of the company: The purchase function is related with production department for specifications and flow of material, engineering department for the purchase of tools, equipments and machines, marketing department for the forecasts of sales and its impact on procurement of materials, financial department for the purpose of maintaining levels of materials and estimating the working capital required, personnel department for the purpose of manning and developing the personnel of purchase department and maintaining good vendor relationship.

To train and develop the personnel: Purchasing department is manned with varied types of personnel. The company should try to build the imaginative employee force through training and development.

Efficient record keeping and management reporting: Paper processing is inherent in the purchase function. Such paper processing should be standardised so that record keeping can be facilitated. Periodic reporting to the management about the purchase activities justifies the independent existence of the department.

Keywords: Introduction of Purchasing, Purchasing, Purchasing department objectives, Objective of Purchasing departmetn

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