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 Purchasing is the first phase of material mgt.

Purchasing means procurement of goods and
service from some external agencies
 Purchasing is an operation of market exploration
to procure goods and services of desired quality,
qty. at low price and at desired time. Suppliers
who can provide standard items at the
competitive price are selected.
Objectives of Purchasing
1. Purchase of satisfactory material
2. To control the qty. of material.
3. Proper negotiations with suppliers.
4. Controls proper use of materials.
5. Co-ordination with other departments.
6. Maintenance of company’s goodwill.
7. Exploration
8. Information abt new material and processes, which can
reduce the cost of prod’n and improve the performance
of the product.
9. To achieve economy and efficiency in the activities of
the purchase deptt. by analyzing.
Functions of Purchasing Deptt.
 Processing the requisition:-

Purchase requisition
No………. Date………..
S.No. Qty Qty. and Price Suggeste Balance
Reqd. Other details d Supplier in stores
of the item
Required By……….. Authorized By……..
2. Location and Choice of suppliers:-
Some guiding factors for the choice of
 Reliabilityof Supply:- Past performance
specially in the time of crisis as well as
sound financial position of a supplier
classifies him to be reliable.
 Assurance of timely delivery
 After sales service
 Attitude with regard to the goods rejected
by the purchaser
 Technical assistance
3. Placing orders
All purchases shd. Be made thru a purchase
order in a specified form and duly signed by
some authorized person.

To Date……
Order No……

Description of item
Date of Supply…… Other reqd’s
 Asa rule original copy is sent to the
supplier, one copy is retained by the
purchase deptt. And one copy is sent to
the concerned deptt. Requiring the
ordered items.
4. Follow-up or progressing the purchase
 Receiving the ordered material at the right
time is most important for an org. Late
deliveries can close the enterprise. For
this follow up the purchase order after
waiting for some reasonable time is
essential. The priority of follow-up
operations shd. Be given according to the
importance or classification of items e.g.
‘A’ class items are to be given top most
5. Invoices received from suppliers are checked
and verified with order specification
6. Delay in availability of requisitioned material
should be conveyed to concerned departments
in time.
7. To maintain records regarding suppliers , their
performance in past, products with them,
probable delivery period for each order etc.
8. To dispose off outdated and scrapped items.
9. Control stores operation of receiving the items
from vendors and issuing it to concerned deptt.
Of the org.
10. To handle damages and demurrage claims
 Purchasing according to requirements:-

This method is appropriate for those items

which are not of regular and common use
in the prod’n process.These items are
generally not stored in inventories. And
Purchasing dept. should keep a record of
reliable and trustworthy suppliers who were
sincere to the org. in past.
2. Purchase for some definite future
 This method of purchasing is generally
used for those items, which are regularly
consumed, but the consumption is
comparatively low and the price changes
for these items are not much.
3. Market purchasing
 The policy of making the purchases at a
time when the fluctuations in price of the
items provide advantage to the purchaser
is known as market purchasing .
4. Speculative Purchasing:-
Here excessive purchases are made when
market is low for the item with the hope of
earning profit by selling the items
purchased in in excess at a higher price
5. Contract purchasing
 Here the purchase dept. enters into
agreement with various suppliers to supply
the items at some future period
6. Scheduled Purchasing:-
The purchasing is scheduled according to
requirements of various depts. of the or.
Methods of purchasing (revision)

1. Purchasing acc. To requirements.

2. Purchasing for some definite future
3. Market purchasing.
4. Speculative purchasing
5. Contract purchasing
6. Scheduled purchasing.
Prod’n Planning(1)

Purchase requition(2)

(3) STORES(10)

A/c’s Dept(11)

Steps in Purchasing procedure
1. Various departments are requested to send their
requirements on a proper requisition form.
2. Purchasing dept. consolidated the requirements from
various departments to know the total requirement for
each item.
3. Market exploration is made to locate the goods and
services of desired quality and quantity at the
reasonable price.
4. Potential suppliers are identified from catalogues,
quotations and past records.
5. Purchase order in specified form is prepared and sent
to the approved suppliers. Purchase order is the
commitment of the buyer to the supplier establishing a
contractual relationship b/w buyer and seller.
6. After some time of placing the order,
follow up process starts to get quickly
delivery of the items.
7. Items received are compared with
purchase order.
8. Defective items i.e. items which are not in
accordance with the specifications laid
down in the purchase order are returned
to the supplier on credit note of exchange