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Unit 4: Purchasing Management

With a more centralized approach to procurement, large corporations are also in the Notes
position to have their purchasing team specialize in certain areas of procurement. An
automobile manufacturer may have one team responsible for purchasing machinery,
another for raw materials, and a third for temporary employees. This type of specialization
would be too costly if all of the purchasing was spread out across the globe but when
dealing with billions of dollars in goods and services being handled in one area,
specialization is almost a necessity.
Tracking suppliers, using reverse auctions, and evaluating costs are all other important
parts of the procurement system. By tracking suppliers, the buyer is able to determine
whether or not they continuously live up to expectations. Through reverse auctions, buyers
are able to keep prices lower while selecting from a wide array of potential sellers. Plus,
continually evaluating costs prevents companies from losing sight of the biggest benefit
of procurement management: its cost-effectiveness.

Source: http://www.epiqtech.com/Purchase-Procurement-Management.htm

4.3 Functions of Purchasing Department

Some important functions of purchasing department are:

1. Locating, selecting and developing qualified sources of supply.
2. Scrutinizing purchase indents and deciding the method of purchase.
3. Floating enquires, processing quotations, conducting negotiations and realizing purchase
orders.
4. Pre-delivery, follow-up and shortage chasing.
5. Coordinate with inward inspection including timely return of defective materials back to
suppliers.
6. Endorsing suppliers invoices for payment.
7. Processing suppliers’ request for price increase including renegotiation of price.
8. Attending on to suppliers’ representatives and traveling salesman.

9. Arranging for meeting between suppliers’ representatives and company officials.
10. Disposal of surplus, obsolete and scrap materials.
11. Advising the management with regard to new materials, new products, forward buying,etc.
12. Acting as a link between company finance department and supplier for timely settlement
of supplier’s bills.
13. Attending the periodical activities like applying for import licensing quota.
14. Study the market conditions and enter into rate contract with the large suppliers to ensure
availability of materials all the time.

4.3.1 Responsibilities of the Purchase Department

Given below is the list of responsibilities of the purchase department. Some of which are wholly
its own, and some of which it shares with other departments.

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