Purchasing ppt

Purchasing ppt

1. PURCHASING PURCHASING
MANAGEMENTMANAGEMENT

2. OVERVIEWOVERVIEW
PurchasingPurchasing
Objectives of PurchasingObjectives of Purchasing
Principles of PurchasingPrinciples of Purchasing
Functions of Purchasing Department.Functions of Purchasing Department.
Methods of PurchasingMethods of Purchasing
Steps in Purchase Procedure.Steps in Purchase Procedure.

3. PURCHASINGPURCHASING
PurchasingPurchasing refers to a business or organization refers to a business or organization
attempting to acquire goods or services to accomplish attempting to acquire goods or services to accomplish
the goals of the enterprise.the goals of the enterprise.
All production firms have the need of supplies of All production firms have the need of supplies of
materials and services from external sources. materials and services from external sources.
Purchasing function may include the purchase of raw Purchasing function may include the purchase of raw
material, spare parts.material, spare parts.
The chief function of the Purchasing manager is to The chief function of the Purchasing manager is to
satisfy the materials and supplies related to satisfy the materials and supplies related to
requirements of other depts. This is done in accordance requirements of other depts. This is done in accordance
with the mission, purpose, goals & objectives of the with the mission, purpose, goals & objectives of the
firm.firm.

4. The key issues involved in purchasing are:-The key issues involved in purchasing are:-

QuantityQuantity

QualityQuality

TimeTime

PlacePlace

5. OBJECTIVES OF PURCHASINGOBJECTIVES OF PURCHASING

Purchase of satisfactory material.Purchase of satisfactory material.

Proper negotiations with suppliers.Proper negotiations with suppliers.

Co-ordination with other departments.Co-ordination with other departments.

Timely deliveries.Timely deliveries.

Continuous and regular supply.Continuous and regular supply.

Minimized wastages.Minimized wastages.

QualityQuality

To control the qty. of materialTo control the qty. of material

Information about new material and processes, which can Information about new material and processes, which can
reduce the cost of production and improve the performance of reduce the cost of production and improve the performance of
the product.the product.

6. PRINCIPLES OF PURCHASINGPRINCIPLES OF PURCHASING
RIGHT
SOURCE
RIGHT
PLACE
RIGHT
TIME
RIGHT
PRICE
RIGHT
QUANTITY
RIGHT
QUALITY
PRINCIPLES

7. FUNCTIONS OF PURCHASING FUNCTIONS OF PURCHASING
DEPARTMENTDEPARTMENT
1. 1. Processing the Processing the
requisition:-requisition:-
Purchase requisitionPurchase requisition
No………. Date………..No………. Date………..
S.No S.No Qty Qty
ReqdReqd
Qty. and Qty. and
Other Other
details of details of
the itemthe item
PricePriceSuggestSuggest
ed ed
SupplierSupplier
BalancBalanc
e in e in
storesstores
Required By……… Authorized By...…Required By……… Authorized By...…

8. 2. 2. Location and Choice of suppliersLocation and Choice of suppliers:- :-
Some guiding factors for the choice of supplierSome guiding factors for the choice of supplier
Reliability of SupplyReliability of Supply:- Past performance specially :- Past performance specially
in the time of crisis as well as sound financial in the time of crisis as well as sound financial
position of a supplier classifies him to be position of a supplier classifies him to be
reliable.reliable.
Assurance of timely deliveryAssurance of timely delivery
After sales serviceAfter sales service
Attitude with regard to the goods rejected by the Attitude with regard to the goods rejected by the
purchaser purchaser
Technical assistanceTechnical assistance

9. 3. 3. Placing orders:-Placing orders:-
All purchases should be made through a purchase order in
a specified form and duly signed by some authorized
person.
PURCHASE ORDER
To
_____________ Date……
Order No……
Description of item
PRICE
Date of Supply…… Other reqd’s
Signature…………….

10. As a rule original copy is sent to the supplier, As a rule original copy is sent to the supplier,
one copy is retained by the purchase department one copy is retained by the purchase department
and one copy is sent to the concerned and one copy is sent to the concerned
department requiring the ordered items.department requiring the ordered items.

11. 4. 4. Follow-up or progressing the purchase Follow-up or progressing the purchase
orders:-orders:-
Receiving the ordered material at the right time Receiving the ordered material at the right time
is most important for an org. Late deliveries can is most important for an org. Late deliveries can
close the enterprise. For this follow up the close the enterprise. For this follow up the
purchase order after waiting for some reasonable purchase order after waiting for some reasonable
time is essential. The priority of follow-up time is essential. The priority of follow-up
operations should be given according to the operations should be given according to the
importance or classification of items e.g. ‘A’ importance or classification of items e.g. ‘A’
class items are to be given top most priority.class items are to be given top most priority.

12. 5. Invoices received from suppliers are checked and 5. Invoices received from suppliers are checked and
verified with order specificationverified with order specification
6. Delay in availability of requisitioned material should 6. Delay in availability of requisitioned material should
be conveyed to concerned departments in time.be conveyed to concerned departments in time.
7. To maintain records regarding suppliers , their 7. To maintain records regarding suppliers , their
performance in past, products with them, probable performance in past, products with them, probable
delivery period for each order etc.delivery period for each order etc.
8. To dispose off outdated and scrapped items.8. To dispose off outdated and scrapped items.
9. Control stores operation of receiving the items from 9. Control stores operation of receiving the items from
vendors and issuing it to concerned department of vendors and issuing it to concerned department of
the organisation.the organisation.
10. To handle damages and demurrage claims.10. To handle damages and demurrage claims.

13. 1.1.Purchasing according to requirements.Purchasing according to requirements.
2.2.Purchasing for some definite future period.Purchasing for some definite future period.
3.3.Market Purchasing.Market Purchasing.
4.4.Speculative Purchasing.Speculative Purchasing.
5.5.Contract Purchasing.Contract Purchasing.
6.6.Scheduled Purchasing.Scheduled Purchasing.
METHODS OF PURCHASINGMETHODS OF PURCHASING

14. PURCHASING ACCORDING TO THE PURCHASING ACCORDING TO THE
REQUIREMENTS:REQUIREMENTS:
This method is appropriate for those items which are This method is appropriate for those items which are
not of regular and common use in the production not of regular and common use in the production
process. These items are generally not stored in process. These items are generally not stored in
inventories. And Purchasing department should keep a inventories. And Purchasing department should keep a
record of reliable and trustworthy suppliers who were record of reliable and trustworthy suppliers who were
sincere to the organisation in pastsincere to the organisation in past..

15. PURCHASING FOR SOME DEFINITE PURCHASING FOR SOME DEFINITE
FUTURE PERIOD:FUTURE PERIOD:
This method of purchasing is generally used for those This method of purchasing is generally used for those
items, which are regularly consumed, but the items, which are regularly consumed, but the
consumption is comparatively low and the price consumption is comparatively low and the price
changes for these items are not much.changes for these items are not much.

16. MARKET PURCHASINGMARKET PURCHASING ::
Purchase of goods usually in smaller quantities or in an Purchase of goods usually in smaller quantities or in an
emergency without contract or negotiationsemergency without contract or negotiations..

17. SPECULATIVE PURCHASINGSPECULATIVE PURCHASING ::
When purchasing is done purely from the point of view When purchasing is done purely from the point of view
of taking advantage of a speculated rise in price of the of taking advantage of a speculated rise in price of the
commodity. commodity.
The intent is not to buy for the internal consumption The intent is not to buy for the internal consumption
but to resell the commodity at a later date when the but to resell the commodity at a later date when the
prices have gone up & to make a profit by selling.prices have gone up & to make a profit by selling.
The items may be those that are needed for internal The items may be those that are needed for internal
consumption but the qty. shall be much more than the consumption but the qty. shall be much more than the
requirement so as to take the advantage of the coming requirement so as to take the advantage of the coming
price rise.price rise.

18. CONTRACT PURCHASING: CONTRACT PURCHASING:
In this, the purchase department enters into agreement with In this, the purchase department enters into agreement with
various suppliers to supply the items at some future period various suppliers to supply the items at some future period
periodically.periodically.
In contract purchasing, a purchaser agrees to buy goods to be In contract purchasing, a purchaser agrees to buy goods to be
paid for in a series of installments, each comprising a proportion paid for in a series of installments, each comprising a proportion
of the capital and an interest element.of the capital and an interest element.
After a final payment, legal ownership passes to the user.After a final payment, legal ownership passes to the user.

19. SCHEDULED PURCHASINGSCHEDULED PURCHASING ::
The purchasing is scheduled according to the The purchasing is scheduled according to the
requirements of the various departments or of the requirements of the various departments or of the
organisation.organisation.

20. STEPS IN PURCHASE PROCEDURESTEPS IN PURCHASE PROCEDURE
1.1.Various departments are requested to send their requirements Various departments are requested to send their requirements
on a proper requisition form.on a proper requisition form.
2.2.Purchasing dept. consolidated the requirements from various Purchasing dept. consolidated the requirements from various
departments to know the total requirement for each item.departments to know the total requirement for each item.
3.3.Market exploration is made to locate the goods and services of Market exploration is made to locate the goods and services of
desired quality and quantity at the reasonable price.desired quality and quantity at the reasonable price.
4.4.Potential suppliers are identified from catalogues, quotations Potential suppliers are identified from catalogues, quotations
and past records.and past records.
5.5.Purchase order in specified form is prepared and sent to the Purchase order in specified form is prepared and sent to the
approved suppliers. Purchase order is the commitment of the approved suppliers. Purchase order is the commitment of the
buyer to the supplier establishing a contractual relationship buyer to the supplier establishing a contractual relationship
between buyer and seller.between buyer and seller.

21. 6. After some time of placing the order, follow up 6. After some time of placing the order, follow up
process starts to get quickly delivery of the items. process starts to get quickly delivery of the items.
7. Items received are compared with purchase order.7. Items received are compared with purchase order.
8. Defective items i.e. items which are not in 8. Defective items i.e. items which are not in
accordance with the specifications laid down in the accordance with the specifications laid down in the
purchase order are returned to the supplier on purchase order are returned to the supplier on
credit note of exchange.credit note of exchange.