The Purchasing Function

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  • The Purchasing Function
    • Definition
      • Management function responsible for the acquisition of required materials, services and equipment
      • Must work closely related with production department. Materials must be available at the proper time, place, quantity, quality- affects businesses profit and cost
    • Role of Purchasing Function
      • Purchasing manager uses a stock system- to order stock when needed
      • Maximum stock level- Maximum amount of stock (also money) that should be invested in a specific raw material or production component or stock-on- hand
      • Stock should never be under the minimum stock level- customers with their goods and keep production line employees/ machines working effectively for their entire shift
      • Order point/level- levels of stock at which the next order should be placed. The length of the distribution channel must also be considered, (imported goods) time to be shipped, unloaded and transported when calculating order times
      • This department must have a good relationship with suppliers
    • Characteristics for effective department
      • Be on the look out for specials and buy in bulk before annual increase is implemented- savings add to profit
      • Main objective of purchasing: Derive maximum value for each rand that spent on buying

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