Purchasing Cycle Jose Rizal University PDF

Purchasing Cycle September 05, 2024 Group Work Describe a typical purchasing process followed by a SME, startup and corporation  Buying Situations Straight Re-buy: Where repetitive purchasing of similar items is carried out from same supplier. Modified Re-buy: Where the purch...

Purchasing Cycle September 05, 2024 Group Work Describe a typical purchasing process followed by a SME, startup and corporation  Buying Situations Straight Re-buy: Where repetitive purchasing of similar items is carried out from same supplier. Modified Re-buy: Where the purchase is modified in some way. New Tasks: No purchasing experience exist in respect of the particular item to be bought. Typical Purchasing Cycle Recognize, define, and describe the need Transmit the need Investigate, qualify, and select the supplier Prepare and issue the purchase order Follow up the order (including expediting and de-expediting) Receive and inspect the material (except in the case of some JIT systems and some partnering agreements) Audit the invoice Close the order. Recognition, Definition, Description, and Transmission of the Need Typically originates from the operating departments or from inventory control. Purchasing is usually notified of the need through: A standard purchase requisition A material requirements planning (MRP) schedule Standard Purchase Requisition A serially numbered request originating in the operating departments. Should contain the following information: Description of materials, quantity, date required Estimated unit cost Operating account to be charged Date accomplished Authorized signature. MRP Schedule Contains specific material requirements for a given production schedule during a specific btime period. This schedule is sent to purchasing for directv use in obtaining thev required materials. Eliminates the necessity of preparing numerous PRs. Definition and Description of Need Materials requirements must be defined effetively. Clear, complete, appropriate definition and description is a joint responsibility of the user and the buyer. 1. Buyer’s Responsibility: a. Checks the document for accuracy and completeness. b. Determines that the need has been adequately defined. c. Ensures that the appropriate method of description has been used to guarantee a satisfactory purchase for the user as well as provide all possible latitude in the selection of a supplier Terms and Conditions Define the contractual obligations of the vsupplier and the vpurchasing organization Should be considered an integral part of the specifications Standard terms and conditions includev sections covering warranties, liability, indemnity, payment terms, legal jurisdiction, intellectual property ownership, contingencies, cancellations, shipping requirements and inspection. Specification Traps Customization Assumptions arises from mistaken assumption that the product being purchased must be customized to conform to user requirements. Standardization refers to methods used to reduce or veliminate custom, one-time and seldom-used components and processes that introduce variability and can potentially create added cost and quality problems. Specification Traps Disregarding Performance Requirements Specifications unnecessarily stricter than actual performance would simply add cost without adding benefits. May also eliminate potential suppliers who are unable to perform to the higher requirements and thus eliminate price-reducing competition. Conversely, specifications that are too loose or too open or with important details missing, tend to invite unacceptable quality and can create costly mistakes. The supplier can provide a product or material that meets specification precisely but will not perform to its intended function. Specification Traps Brand Name Limits competition and thus increase likelihood of higher prices. May or may not improve the chances of receiving better quality; nevertheless, they typically cost more as a result of higher advertising cost to create the brand name. Supplier Selection and Preparation of P.O. After receipt of PR buyer identifies potential sources of supply. After qualifying a preliminary group of potential sources, buyer may employ the techniques of competitive bidding or negotiation or both. For competitive bidding, buyer initiates the procedure by requesting quotations from a reasonable number of firms. Once a supplier is selected, the purchasing department prepares and issues a serially numbered purchase order. Supplier Selection and Preparation of P.O. In the P.O., quality specifications must be described precisely; quantity requirements, price, and delivery and shipping requirements must be specified accurately. Conditions of acceptance should also be stated or referenced on the order. In summary, the order should include all data required to ensure a satisfactory contract and should be ordered in a manner which leaves little room for misinterpretation by either party. Supplier Selection and Preparation of P.O. Most firms also include as part of the order, a series of terms and conditions that are standard for all orders. (boilerplate) Boilerplate: these terms and conditions are designed to give legal protection to the buyer on such matters as: In summary, the order should include all data required to ensure a satisfactory contract and should be ordered in a manner which leaves little room for misinterpretation by either party.