Page 48 - DMGT525_MATERIALS_MANAGEMENT

Unit 4: Purchasing Management

give advice on imponderables–such as anticipated services from the supplier-which can Notes
affect the decision on the choice of vendor.
3. Receipt of Quotations: A purchaser should obtain a list of satisfactory suppliers and
should send out as convenient, requesting information on quality, price, delivery, etc.

Notes These enquiries must be marked clearly “FOR QUOTATION ONLY”.
Quotations received should be examined for such items as delivery charges, discount
structures (e.g. Discount for prompt payment), supplementary charges and any restriction.
The use of the learning curve as a negotiating tool is advocated by some, while the practice
of incorporating a purchaser into a value analysis team is well established and a useful
practice.
4. Ensuring Delivery of Goods and Services at Right Time: This involves contacting suppliers
before the date of dispatch of items and ensuring timely dispatch. It must be realized that
deliveries which are too early a source of embarrassment, not only because payment may
be demanded early, but also because excessive space might be occupied in stores.
In practice in some organizations, the delivery date and indeed even the time of delivery
may have to be specified to avoid congestion.
5. Warning all Concerned against Delay in Delivery: If it’s clear that a delivery date could not
be met, the appropriate departments must be informed so that work can be rescheduled,
if necessary.
6. Verifying invoice presented by suppliers: The Purchase department verifies and ensures
that all conditions like price, quantity, and quality, etc., that were earlier agreed upon are
in order to a further need for verification of invoices arises from the problem of defective
material being supplied. To help resolve this problem, a note of every rejection should be
passed to purchasing. The recording of these rejected materials will also help in building
up a case against the supplier, and this may as well affect the placing of future orders.
7. Speculative buying: Speculative buying is sometimes the duty of purchase department
and it implies purchasing of goods, not from reasons of immediate need because of favorable
market condition. Thus it may seem to the purchaser, from his intimate knowledge of
market, that a particular commodity is likely to become difficult to obtain or that its price
is likely to rise sharply. Buying in the first case will guard against a hold up, whilst in the
second case it may permit material bought cheaply to be resold at a profit.

!
Caution Speculative buying is both difficult and potentially dangerous, and can result in a
company carrying huge stocks which are difficult to clear.
8. Assisting in pricing: Advising on prices for materials or services to be used in new markets
or in modified design of a product. This aspect can be of substantial value since it may help
deciding major policy matters–for example, the feasibility of meeting a marketing
requirement on price, the likely cost of reequipping a unit etc.
9. Acting as a “window to the world”: Purchasing brings continual contract with outside
organizations, and this can prove a valuable channel of communication whereby news of
novel process, materials, services and equipment are brought to the notice of the
departments concerned.

LOVELY PROFESSIONAL UNIVERSITY 43