BUSINESS MANAGEMENT AND

ADMINISTATION 1(BMA101B)
Tutor Slides 4
STUDY UNIT 6: Purchasing and supply chain management
Key Concept
• Place the purchasing and supply function, and the nature of purchasing and supply
activities in an organisation, in perspective.
• Explain the role and importance of the purchasing and supply function in the success and
efficiency of a business.
• Explain the application of the management functions of planning, organising and control in
the purchasing and supply function.
• Illustrate and explain the logical steps to be followed in a purchasing and supply
transaction.
• Indicate the role of the purchasing and supply function in quality decisions.
• Explain the role of quantity decisions in the purchasing and supply process.
• Give an overview of the selection and management of suppliers.
• Pinpoint certain aspects of pricing as purchasing and supply activity.
• Place the right time for purchasing and supply.
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The importance of the purchasing and supply function
• The importance of the purchasing and supply function differs from one
business to the next, but in most business, purchasing has a profound
influence on profit and other aspects of the business.

❖Greatest expenditure for the business;

❖inventory holding;

❖profit leverage;

❖contributions to the marketing of products.

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Steps in the purchasing cycle of a commercial business.
❖ Development and description of a need
❖Choice of suppliers
❖Research on prices and availability
❖Issuing the order and concluding a contract
❖Follow up and expediting
❖Receipts, inspection and distribution
❖Handling errors and discrepancies
❖Paying for the order
❖Closing the order

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Quality decisions as a purchasing and supply activity
❖ There are 4 main in each purchasing and supply decisions namely quality, supplier
service, delivery , price .
❖ Quality is the main determining factor- If service and price are good , a company will
not buy if the quality is not right .
❖ Quality is that quality that is purchased at the lowest price, which satisfies a specific
need and performs the function for which it was purchased.

The role of quantity decisions in the purchasing and supply process.

1. Determining the right quality
▪ Conformance to requirements
2. Describing quality so that both the buyer and the seller understand it clearly
▪ Specifications and standardisation, market grades, engineering drawings
3. Controlling quality to ensure that requirements are meant
▪ Supplier certification agreement

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Pinpoint certain aspects of pricing as purchasing and supply activity.
The best price
▪ Price has been traditionally been regarded as the decisive factor
▪ When looking at price there are other cost attached such as quality and
inventory cost
▪ The right price is not necessarily the lowest one
▪ Consider quality, delivery and cost of use
Purchasing price determination
▪ Methods used to determine purchasing prices depend on the nature of
materials and the value of the transaction.
▪ Published price list, marketing info like catalogues, brochures , journal are
used for small value materials
▪ High value materials use quotation and bidding (tenders)

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ASSIGNMENT FEEDBACK.
Question 1
Limited evidence of further research was evident in the assignment. Majority of the
students struggled with application of the key concepts and linking theory to the case study.
❖ Identify not describe the 4 factors of production
❖ Relate the characteristics of entrepreneurs to the case study
❖ Managerial skills and roles (competences)
❖ Define and provide examples of multinational strategy and a global strategy.
Question 2
The SWOT analysis was conducted exceptional well. The interpretation of Q2.2 was a
challenge to many, as majority focused on describing the environmental factors instead of
identifying them in the case study. More work to be done on application.
❖ Identify not describe the participants in Julia’s market environment
❖ Highlight any benefits of planning to Fit Food.

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