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Purchasing Principles

Purchasing Principles
All types of organizations are involved in purchasing goods and services. Purchasing is broadly divided into two classes: mercantile purchasing and industrial purchasing. Mercantile purchasing means buying items in order to resell them at a profit. In industrial purchasing, materials are bought for consumption, conversion and fabrication. In industrial purchasing, various items such as raw materials, parts, components, supplies, spares, tools and appliances are procured. These items are purchased at the lowest rates possible. This constant purchasing ensures that the production can go on smoothly and continuously. The company turnover increases as more investment is made. The purchasing process also integrates all the other departments of the organization such as production, engineering, marketing finance and human resources.

Purchasing principles are based on acquiring high quality materials in correct quantities at a fair price. The material is sourced from a reliable and trustworthy supplier. The production is undertaken as per the customer demands. The bill of materials is the requisitioning document. This bill lists all items which are mandatory for completing one order. The supplier is selected depending on the quality of materials, the rates he offers, the ability to deliver on time, the after sale services and his financial condition. The purchase order is placed with the finalized supplier. It is the confirmed announcement that the buyer will purchase the materials from the particular supplier. The copies of the purchase order are sent to receiving, accounting, stores and inspection department. The order is followed up to keep track of the progress or the delay in delivery. After the receiving department receives the order the quantity is checked against the purchase order. The quality inspectors test the quality of the items. The invoice is checked before payments are made.

Purchasing is a subsidiary part of the materials management. It can be graphically depicted as under:
    Purchasing Principles

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