Today, purchasing as a function has acquired a new dimension and may be defined as the function of procurement, with a view to reduce the investment, variety and value of materials so as to facilitate the standardization and competitive marketability of the product.
Purchasing is a process which includes all the functions involved from the time the need is felt till the receipt and approval of the materials purchased. Scientific purchasing has become a basic and integral part of materials management.
5 Main Objectives of Purchasing Function
Following are the main objectives of purchasing function :
1. Purchase of right quality: Quality consideration is the main objective of the purchase because at one time the highest grade material might be the suitable quality but at the other time medium grade material might be the suitable quality. However, the right quality of goods to be purchased must reflect the desired technical characteristics and also the cost and procure-ability factors. Determination of required quality of material and components is the basic responsibility of engineering-production department.
Therefore, one or more engineers of the production department must be related with the purchasing department to help the buyer in properly discharging his responsibilities for purchasing right quality of materials. It is also relevant to state that purchasing objective of right quality is the problem of standardization and the buyer must know which standard specifications are to be used in the purchase of materials, parts and components.
2. Purchase of right quantity: The purchasing objective of right quantity relates to the amount of inventories to be carried. The quantity of purchased goods must be according to the requirement of the production. Purchase of more or less quantities than the requirement, it will lead to huge inventories and lock-up of finances. On the other hand, if purchased quantity is less than the requirement, it will lead to the stoppage of work and machinery may remain idle leading to loss in production. Both situations are harmful for any concern.
Therefore, this objective of purchasing function is also very important. The device of material control and different kinds of inventory control system can be successfully employed to effectively discharge purchasing responsibility as regards the right quantity. The right quantity of different materials will be determined by management policy relating to control of inventories and the manner in which conflicting situations of inventories at too high or too low level are reconciled.
3. Purchase at right price: This is also a very important objective of purchasing function because of required material at the right price can affect company’s profitability. Right price signifies a fair and reasonable price. To assure purchasing at right price, the buyer should have full knowledge of materials or parts to be procured. The buyer or the purchasing manager who fails to procure materials at fair and reasonable price, is not fit in his duty.
4. Purchase at right time: Procurement of material at the right time is also very important objective of purchasing function. If orders are submitted late, it will involve costly expediting and may even interrupt continuous flow of production process causing material shortage. Availability of working capital, material requirements based on sales and production forecasts and market situations are the important factors that buyer should bear in mind while doing his purchases.
5. Purchase from right source: The next is the selection of most suitable sources from which material requirements have to be procured. While selecting a right source, the buyer must see the reliability of the vendor, quick and reliable source, accessibility of the vendor, the cooperation expected of the suppliers, etc. Before final selection of the source, the buyer should carefully analyze the possibility of buying directly from the manufacturer or from the distributor. He should see supplier’s goodwill.
Purchasing Function may be stated in the following manner too :
(i) To provide an uninterrupted flow of materials and to ensure continuous production.
(ii) To buy wisely and contribute to the competitiveness of the end product.
(iii) To maintain inventories at the optimum level to help result in low cost operations.
(iv) To bring about better coordination with other departments in the organization, i.e., with production, performance, engineering departments, etc.
(v) To select suitable sources of supply.
(vi) To develop and maintain good relations with suppliers. Suppliers provide better service to their regular customers and also lend them useful information regarding availability of possible substitutes and price trends.
(vii) To develop adequate purchase policies and rational procedures.
(vii) To train and develop purchasing personnel working under the purchasing executive.