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I. Purchasing Management Introduction

The purchasing department is responsible for acquiring goods and services to support organizational goals. Its objectives include maintaining product quality and value, minimizing inventory costs, ensuring a steady flow of inputs and outputs, and strengthening competitive position. Key functions involve developing specifications, soliciting bids, evaluating bids, awarding contracts, inspecting goods received, and storage and release of goods. Purchasing departments help identify needs, source competitive prices, and ensure budget adherence and separation of duties between receiving and payments. They aim to lower costs, reduce risk, manage relationships, improve quality, pursue innovation, and leverage technology. In an organizational chart, a purchasing department typically reports to finance or operations.

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CLAUDIA RIVERA GARCIA
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45 views

I. Purchasing Management Introduction

The purchasing department is responsible for acquiring goods and services to support organizational goals. Its objectives include maintaining product quality and value, minimizing inventory costs, ensuring a steady flow of inputs and outputs, and strengthening competitive position. Key functions involve developing specifications, soliciting bids, evaluating bids, awarding contracts, inspecting goods received, and storage and release of goods. Purchasing departments help identify needs, source competitive prices, and ensure budget adherence and separation of duties between receiving and payments. They aim to lower costs, reduce risk, manage relationships, improve quality, pursue innovation, and leverage technology. In an organizational chart, a purchasing department typically reports to finance or operations.

Uploaded by

CLAUDIA RIVERA GARCIA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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I.

Purchasing Management
Introduction

M.B.A. Claudia Rivera García


What is Purchasing?

• According to the Business Dictionary, it is the activity of


acquiring goods or services to accomplish the goals of
an organization.

• The Cambridge Dictionary defines it as the activity of


buying goods and services from a company

• The Oxford Dictionary describes it as Acquire


(something) by paying for it

M.B.A. Claudia Rivera García


Purchasing importance in the organization
The major objectives of purchasing are to:
1) Maintain the quality and value of a company's products
2) Minimize cash tied-up in inventory
3) Maintain the flow of inputs to maintain the flow of outputs, and
4) Strengthen the organization's competitive position.

Purchasing may also involve:


a) Development and review of the product specifications
b) Receipt and processing of requisitions
c) Advertising for bids
d) Bid evaluation
e) Award of supply contracts
f) Inspection of good received
g) Their appropriate storage and release.

Purchasing departments are at the center of successful supply chain management.

Typically, they help other departments identify their needs, manage the requisition process and source competitive prices, and
generally act as controllers to ensure adherence to budgets.

To ensure quality and to prevent unethical practices, purchasing is usually separate from receiving and accounts payable.
M.B.A. Claudia Rivera García
Advantages of having a Purchasing Department
• A well-run department should allow you to achieve immediate savings by choosing a mix of suppliers who can provide the best prices and terms. Suppliers
who cannot provide the right level of quality at the prices required are terminated.
1. Lower costs • Savings can be also provided by taking advantage of warranties and discounts.
• Purchasing can also help to save by providing better transparency in how your company spends.

• Supply chain management involves sharing and managing risks with suppliers. This can be done by moving the risks to the suppliers who are best able to
2. Reduce risk and ensure manage it. Or it can be done through diversification of supply.
the security of supply • The purchasing department has to identify what goods and services are crucial to the company and take the appropriate steps to secure their supply chains
accordingly. Often, this comes down to an economic decision, where higher risks can result in lower prices, or vice-versa.

• Purchasing is not only about sharing risk, it is also about sharing benefits.
• Passing on risk to a supplier or outsourcing a service often requires more management of the supply chain. The challenge is to get the supplier interested in
3. Manage relationships working with your business and to invest in the long-term relationship.
• The department has to work with internal stakeholders: marketing, finance, logistics, distribution, etc. to ensure that they are all aligned.

• Purchasing departments can help to improve quality by establishing target performance levels for quality and then tracking performance against those
targets. Critical to quality characteristics is a typical metric used to measure things such as durability, the look and feel of the product or the timeliness of
4. Improve quality delivery.
• Some companies work closely with their vendors to develop their processes and assist them in improving quality.

• Because the purchasing department is always in contact with a variety of outside businesses, it is in an ideal position to source innovative goods and
5. Pursue innovation services that can provide a competitive advantage to your business—an edge in either price, quality or convenience.
• The purchasing department will also play an important role in helping you source supplies for innovative products or services developed by your own firm.

• Your purchasing department should identify technology solutions to address your supply chain problems.
6. Leverage technology • The purchasing department should also play an important role in the selection and implementation of ERP systems, inventory control systems and other
technology that aims to improve the efficiency of your supply chain management.

M.B.A. Claudia Rivera García


Where can I find the Purchasing Department in the
Organizational Chart
President

Finance and
Human Resources
Administration

Marketing Engineering Manufacturing Materials

Electronics
Customer Service Fabrication Planning
engineering

Software
Domestic Sales Assembly Purchasing
engineering

Mechanichal Receiving and


International Sales Testing
engineering Inspection

Production
Design Traffic and logistics
Scheduling
M.B.A. Claudia Rivera García

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