Purchasing

This paper discusses purchasing activities. The paper begins with an overview of the typical activities in the purchasing area, including the role of the purchasing manager and the relationship of the purchasing function to new product development. The paper then discusses various issues relating to strategic planning for purchasing, including the “make-or-buy” decision, sourcing strategies and development and management of long-term supplier relationships. The paper continues with an overview of management and organizational issues in the purchasing area and a discussion of the reporting structure for the purchasing function, the role of purchasing in the overall organizational structure and the duties and activities of purchasing personnel. The paper also covers the order and fulfillment process, including requisitions and requests for quotations, identification and evaluation of prospective suppliers and final selection of suppliers; negotiation and management of supply and purchase contracts; supplier management and auditing the purchasing function.<br><br>Purchasing strategies and procedures, including management of legal and business relationships with key suppliers, are now recognized as essential element of any company’s overall business strategy. Purchasing involves a wide variety of different activities relating to the production and support of a company’s products and services and the maintenance and repair of the company’s physical assets including facilities and equipment. As with manufacturing, purchasing has matured into a distinct professional discipline that now demands skills and expertise in negotiations and contracting, technology assessment, and finance and accounting. Done well, the purchasing or procurement function can help its company realize significant savings with respect to the direct costs of acquiring the needed goods and can also help manage the expenses associated with having to maintain inventories of raw materials and other supplies until they are needed for manufacturing and related activities.