Purchasing Department

Most major companies and even some government organizations have a purchasing or procurement department as part of everyday operations. These departments provide a service that is the backbone of many manufacturing, retail, military and other industrial organizations. Many individuals, even some who work for these companies, are unaware of what the purchasing department does, why it exists or what purposes it serves. To understand better what the role of the purchasing department is, consider some functions it performs.

 Receiving indents

The first and foremost function of purchasing is receiving demand/requisition of material from different departments of the organization, such as from production, stores, maintenance, administrative, drawing office, planning, tool room, packing, painting, heat treatment etc.

After receiving the indent from users’ departments it examines in details and takes action according to the need and urgency of any item. This is called ‘recognition of need’.

 Assessment of demand or description of need

After recognizing the need with appropriate description is necessary for the sound and successful purchasing. An improperly described demand can cost heavily money-wise as well as time-wise.

Purchasing department must have adequate knowledge of items being purchased to be able to secure full description.

 Selection of sources of supply

Most important function of a purchasing department or officer is the selection of the sources for the requisitioned items of stores. For majority of items, selection of one of the vendors should be made. While selecting the item, the purchase officer has to see whether the item to be purchased is on a regular basis. Whenever the items are to be bought from single manufacturer, such as branded or patented item, there is no difficulty in the selection of the sources of supply; the order can be placed with the party according to terms and conditions of their sale.

 Receiving of quotation

As soon as the purchase requisition is received in the purchase division, sources of supply will be located; a decision is then taken in respect of the method of tendering/limitation of quotations from prospective suppliers.

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Prices are also ascertained by preparing a comparative statement with the help of either of the following documents supplied either by the supplier or taken from the previous records of advertisements, like: (a) Catalogues, price lists; (b) Telephonic quotations; (c) Previous purchase records; (d) Quotation letter or tender; (e) Sample and related price cards; (f) Negotiation between suppliers and the purchase department like catalogue, price lists etc.

It is in the interest of purchasing department to keep this information up to date.

 Placing order

Since purchase order is a legal binding between the two parties, it should always be accurate, clear and acceptable to both. The purchase order should contain the following particulars:

(a) Description and specifications of the material.

(b) Quantity order.

© Transport and packing charges and shipping instructions.

(d) Name and address of the supplier.

(e) Date, time and place of delivery.

(f) Price, discount and terms of payment.

(g) Signature of the purchase manager.

(h)

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