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Purchasing of Materials

The work of purchasing materials should be handled, if the size of the concern permits, by a separate Purchasing Department, under an official designated as Purchase Manager. In order to ensure procurement of materials of requisite quantity at economic prices, following points should be noted:

1. Purchasing should be centralized i.e. all purchases should be done by the purchasing department except for small purchases which may be done by departmental managers. This will result in efficient buying on account of the specialized knowledge of the purchase manager, and advantages prices and favorable terms because of bulk purchases.

2. Full co-operation between purchasing department and other departments is necessary. It will be proper if standard lists containing requirements of all the departments of the factory are prepared.

3. Close liaison is a must between the purchasing and the accounts departments, as purchasing involves financial liability. It should be the endeavour of the purchasing department to avoid unnecessary investment in inventories.

4. The purchase manager should have a good technical knowledge of the industry, and a large measure of administrative and organizing ability.

5. A proper purchase procedure should be followed.

Purchasing procedure

Purchase requisition: The initiation of purchase begins with the receipts of a purchase requisition by the purchasing department. The purchase requisition is prepared by the storekeeper for regular stock items and by the departmental head for special equipment or materials not stocked as regular items. The requisition is prepared in triplicate, the original copy is sent to the purchasing department, the second is retained by the storekeeper or executive initiating the purchase requisition and the third copy is sent to the costing department.

Inviting quotations: On receipt of purchase requisition, the purchase department would invite tenders or quotations for supply of goods. A schedule of quotations may be prepared.

Purchasing order: The purchase order is prepared by the purchasing department. It is a written authorization to the vendor or supplier to supply a specialized quantity and quality of materials at the stipulated terms and at the time and place mentioned.