Principles of purchasing

6 principles of purchasing & 8 major processes of purchasing in the course title: Principles of Purchasing.
prepared by university student.

1. PRINCIPLES OF PURCHASING
Some of the major principles of purchasing are: Right quality, right quantity, right time, right source,
right price and right place.
1. Right quality.
Right quality is the suitability of an item to meet its purpose.
For producing the goals of quality the best grade of all material are selected.
The quality must be built with the product for creating good will right production, standardization,
elimination and for better quality the right quality purchases is very crucial.
The right quality is determined by the cost of the material and technical characteristics as a suitor to the
specific requirements.
It should be defined clearly and described in terms of specification.
2. Right quantity.
Quantity that may be purchased at a time with a minimum total cost and which obviate shortage of
materials. Economic order quantity helps in determining the right quantity of the material to be
ordered.
Avoid excess purchase it results in overstocking and unnecessary capital blocked and inventory carrying
cost goes up.

Factors to consider when deciding the quantity of good for purchase
I. The nature of manufacturing process, i.e. whether is big or small.
II. The nature of material to be used such as durability and perishability.
III. Prevailing material condition. Changes in taste and preference of people for cost of materials to
be purchased.
IV. Cost possession and storing capacity.
3. Right time.
Material should be purchased at the right time so that it may result into excess invest in stock-outs.
It is the time when the stock reaches minimum level.
Any under delay in supplying material on different jobs delays production.
4. Right source.
It should be located within a reasonable distance from the buyer’s organization i.e to minimize the
delivery delays higher transportation charges and improve the persons conduct between the buyer and
seller and enable after sales services.

2. Right source of procurement of met that supplier has the ability to supply material of right quality,
quantity, price as ordered at agreed price and who is committed without follow-up and has adequate
manpower and financial resource ability to handle the order.
The selection of the right source involves the consideration such as search for more and more sources,
selection of the appropriate source through some scientific analysis, negotiations with the selected
supplier and post purchase rating of supplier.
5. Right price.
It is the price which brings the best ultimate value of money invested in purchasing materials.
Right price of a product depend on is quality, delivery time and ultimate live of material, demand and
supply curve, extend of competition, government restrictions, after sales services, discount offered and
terms of purchased.
Determination of proper price depends not only on material knowledge but also a clear understanding
pricing process.
6. Right place.
Besides obtaining material of right quality and quantity from the right source at right price, it should be
ensured that the materials are available at the right place. Transportation and material handling, cost
are greatly affected by the selection of the right place from where materials are to be acquired.
For minimizing these costs selection of the right place for the acquisition of materials is of utmost
importance. If local as well as outside supplier fulfill this conditions the former should be preferred.
Eight main stages in purchasing process.
1. Identification of the need.
The purchasing or buying begins when someone in the company recognizes the problem or need that
can be made by acquiring goods and services. For example; a lawn company wants to offer mowing
service to its client to do this it need to purchase a mower. Thus the need to make purchase of a
product, that is a mower is identified.
2. Description of the need.
This phase involves determination of the characteristics and quantity of the needed item the general
characteristics could be reliability, durability, price etc. And the marketer along with the purchasing
manager engineers and users can describe the needs.
3. Selection of the product.
Select a specific product to meet the need. For example; the lawn company must select which type of
answer from the many push and riding varieties on the market meets the company. E.g. the type of
mode.
4. Appoint purchase team.

3. Put a team together to manage the purchase process. It includes finalizing the list of required technical
specification of the product and the bid solicitation and award process.
The phase pertains to the search for the qualified suppliers among the potential sources.
5. Budget for purchase.
Establish the budget for the purchase relying on the range of prices identified by research done by
purchase team.
6. Research potential supplier.
Research the various product type that fit the need along with the supplier to identify the most durable
model at the best price. E.g. If a lawn company decides to purchase a riding mower the search is
conducted into which brand and manufacturer provides the most durable product for the priced asked.
7. Solicit bids.
Bid is a legal agreement between two or more parties.
Solicit bids from the manufacturers and suppliers to the identified products that meets all required
technical specification.
8. Award contract.
The procurement officer should consider a supplier who is financial stable, manpower, business integrity
and capability of supplying products according to their specifications.
He should also meet the ten Cs E.g. competence, cost, capability, consistence and six R of purchasing.
Select a supplier from the bid submitted and award the purchase contract.