Purchasing Function and Departmental Involvement

Study Notes

Purchasing Function

Purchasing is not solely the responsibility of the purchasing department, but involves all departments in the company.
The purchasing function involves obtaining the right material, in the right quantities, with the right delivery (time and place), from the right source, and at the right price.

Departmental Involvement

Choosing the right material requires input from:
- Marketing department
- Engineering department
- Manufacturing department
- Purchasing department

Quantities and Delivery

Quantities and delivery of finished goods are established by the needs of the marketplace.
Manufacturing planning and control (MPC) decides when to order which raw materials to satisfy marketplace demands.

Purchasing Department Responsibilities

Purchasing department is responsible for:
- Placing orders
- Ensuring goods arrive on time
- Locating suitable sources of supply
- Negotiating prices

Interdepartmental Collaboration

Input from other departments is required in:
- Finding and evaluating sources of supply
- Helping the purchasing department in price negotiation

Purchasing in a Broad Sense

Purchasing is everyone's business in a broader sense.

Purchasing Functions

Purchasing involves obtaining the right material, in the right quantities, with the right delivery, from the right source, and at the right price.
It requires input from various departments, including marketing, engineering, manufacturing, and purchasing.

Involvement of Departments

All departments in the company are involved in the purchasing function.
Marketing department helps in choosing the right material.
Engineering department helps in choosing the right material.
Manufacturing department helps in establishing quantities and delivery of finished goods.
Purchasing department is responsible for placing orders and ensuring timely delivery.

Purchasing Responsibilities

Purchasing department is responsible for locating suitable sources of supply and negotiating prices.
Input from other departments is required in finding and evaluating sources of supply and price negotiation.

Types of Purchases

Purchasing can be divided into two broad categories: Bulk purchases and small purchases.
Bulk purchases involve high volume items, large amounts, and frequent utilization with more specific use.
Bulk purchases are typically handled in large organizations and multinational organizations with standardized purchasing process.
Large-volume, continuous-usage items can be covered by blanket purchase orders, which involve annual negotiation of prices.

Small Purchases

Small purchases involve low volume items, small amounts, less frequency of utilization, high variety, and low technical complexity.
Small purchases include machine parts, auto parts, machine repairs, and miscellaneous goods.
Small purchases are urgent in nature.

Description

Learn about the purchasing function in an organization, including the importance of interdepartmental collaboration and the right factors to consider. Discover how marketing, engineering, manufacturing, and purchasing departments work together to achieve purchasing goals.