Page 44 - DMGT525_MATERIALS_MANAGEMENT

Unit 4: Purchasing Management

Self Assessment Notes

Fill in the blanks:
1. ……………… in a sense is the task of buying goods of right quality, in the right quantities,
at the right time, at the right sources, and at the right price.

2. Purchasing was regarded as one of the activities of the ……………….. management.
3. The purchase department is headed by the ………………….. .

4.2 Objectives of Scientific Purchasing

Scientific purchasing is the technic of purchasing goods of right quality, in the right quantities,
at the right price, at the right time and from the right source. By adopting suitable purchasing
methods in centralized or decentralized environment the objectives of the scientific purchasing
can be successfully achieved.
Where the Replenishment method merely replaces inventory that has been sold, Scientific
Purchasing uses sophisticated calculations to forecast your inventory requirements. This method
will ensure that you order only what is in demand and that you don't replace stock that is
unpopular or out-of-season. In order to accomplish this, Scientific Purchasing uses a combination
of statistical tools to measure trends and then predict future requirements based on those trends.
Linear regression is used to determine average daily demand for past periods. This average is
then used to predict how much stock you will sell until your next order is received. Changes in
the retail price due to promotions or price increases are also considered, as are current inventory
on hand, orders due to arrive, bonus sizes, case packs and seasonal fluctuations in demand. To
summarise, the objectives of Scientific purchasing are:
1. To procure the needed materials at a competitive price of the right quality, in the right
quantity and at the right time.

2. To maintain continuity of supply to ensure production schedule at minimum inventory
investment.
3. To ensure the production of goods of better quality at a competitive price by procuring
materials that best suit the product and the purpose for which they are intended.
4. To suggest better substitutes to materials which are currently being used with a view to
lower the cost and maintain quality of products.
5. To render assistance in standardization, variety reduction, value analysis, make or buy
decisions and other cost reduction programs.

6. To assist in fixing probable price and delivery schedule.
7. To create a goodwill and enhance the company's reputation for being fair and maintaining
integrity through its dealings with the suppliers.

8. To enable the company, to maintain competitive position and earn a fair return on its
investment.

Self Assessment

Fill in the blanks:
4. One of the objectives of scientific purchasing is to maintain continuity of supply to ensure
production schedule at ……………… inventory investment.

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