Purchasing Management

Purchasing
Process of buying

Objectives:
 Obtaining goods & services of the required quantity and quality  Obtaining goods & services at the lowest cost  Ensuring the best possible service and prompt delivery by the supplier  Developing and maintaining good supplier relations and developing potential suppliers

Basic Functions:
 Determining Purchase Specifications: right quantity, right quality and right delivery (time & place)  Selecting Right Source  Negotiation  Issuing and administration of purchase orders

Purchasing Cycle
1. 2. Receiving & Analyzing purchase requisition Selecting Supplier I. Finding potential suppliers II. Issuing request for quotations III. Receiving & analyzing quotations Determine the right price Issuing purchase orders Following up to ensure delivery dates are met Receiving & accepting goods Approving suppliers invoice of payment

3. 4. 5. 6. 7.

Establishing Specifications
1. 2. 3. Quantity Requirements Price Requirements Functional Requirements I. Functional Specifications and Quality II. Value Analysis

Functional Specifications
Functional specifications can be described in the following ways or by a combination of them: 1. By Brand 2. By Specification
I. II. III. I. II. Physical & Chemical Characteristics Material & Method of Manufacture Performance Buyer Specifications Standard Specifications

Sources of Specification

1. 2.

By Engineering Drawings Miscellaneous

Selecting Suppliers
A. Sourcing:
1. 2. 3. Sole Sourcing Multiple Sourcing Single Sourcing

B.

Factors in Selecting Suppliers:

1. 2. 3. 4. 5. 6. 7. 8. Technical ability Manufacturing capability Reliability After sales service Supplier location JIT capabilities Price Other considerations

Price Determination
.Know what you want and not pay more than necessary

A. B. C.

Basis for Pricing

 Break even analysis

Competitive Bidding Price Negotiation

 Types of Product
1. 2. 3. 4. Commodities Standard products Items of small value Made - to order items

Purchasing Methods
 Bulk Purchasing  Hand to Mouth Purchasing  Speculative Purchasing  Blanket Purchasing

Global Sourcing
 Lower price available  Availability of foreign products that are not available domestically  Higher quality products  Intensification to global competition  To help develop foreign presence  Better delivery or service available