function , in a business environment , is one of the most
critical functions as it provides the input for the organisation to
convert into output. Materials today are lifeblood of industry. They
must be available at the proper time, in the proper quantity , at
the proper place, and the proper price. Company costs and company
profits are greatly affected by them as normally , a manufacturing organisation spends nearly 50% of its revenue in purchasing.
Purchasing Function vs. Purchase department :
Purchasing function is a function commonly seen in all those
organisations that undertake purchasing activities.
department is a unit of an organisation that performs purchasing
The purchasing function is usually performed by a specialised
and centralised purchasing department , directed by an efficient
achieve the performance in an
Profit making Centre ?
Purchasing is responsible for spending nearly half of a
company's income for buying the input materials.
saving achieved by it results into direct saving for the company and
all such savings are a company's profit.
Going by a thumb rule "even 1% saving achieved in
Purchasing results in 5% profit for any organisation".
Procurement vs. Purchasing
It is used to define one of several supply functions involved in
logistics activities. In the broadest sense procurement includes the
entire process by which all classes of resources (people, materials,
facilities and services) for a particular project are obtained.
Since purchasing is a unique function , it differs a bit from
procurement in the sense that while procurement , with the same
objective has a wider domain , purchasing with the same objective is
included in it !
Objectives of Purchasing:
The classical definition of objectives of purchasing is to buy
materials and services of the right quality , in the right
quantity, at the right place , from the right source and
at the right time.
However , in general management parlance the objectives of
To support company operations with an uninterrupted flow of
materials and services.
To buy competitively and wisely
To help keep a minimum Inventory
To develop reliable alternate sources of supply
To develop good vendor relationship and a good continuing supplier
To achieve maximum integration with the other departments of the
To train and develop
highly competent personnel
are motivated to make the firm as well as their
To develop policies and procedures which permit accomplishment of
the preceeding seven objectives at the lowest reasonable operating
The basic objective , in pure practical terms is ,of course, to
derive the maximum value for each unit of currency spent in buying.
Purchasing is no doubt a vast subject and as the
competition among the firms grows this function of
business is expected to see a lot of evolution
Types of Purchasing:
Considering the nature of business an organisation has there could
be different approaches and hence Purchasing can be any of these