PURCHASE ORGANIZATION

88 – SUZIE SEQUEIRA89- JEFFLON SEQUEIRA90- SAMEER SHARIF91- KARISHMA SHARMA

SYBMS (B)

GROUP MEMBERS

INTRODUCTION

Purchase is main activity in area of material management , it is the most imp function in any organisation.

This is the place where money is spent out of the organisation.

Thus, it decides the profitability of the company.

The PURCHASING ORGANIZATION is an organizational unit within Logistics. Almost all business transactions related to procurement are carried out in a purchasing organization.

A foundation of any business, the purchasing department is responsible for everything related to ordering materials and dealing with vendors.

A good purchasing department will minimize costs of purchased goods, screen vendors for quality and track orders from initiation to reception.

The quality of the purchasing department can have a significant impact on a business's profit margins.

DEFINITION

The Director of Materials Management & CPO has responsibility for the procurement of all goods and service.

The purchasing department is responsible for all review and approval of all vendors.

The Purchasing Department is responsible for initiating and maintaining effective and professional relationships with suppliers, actual and potential. 

Purchasing personnel are to seek to obtain and purchase all goods and services at the lowest possible total end cost, considering the guidelines of prices, service, quality, delivery and reliability.

The Purchasing Department is responsible for questioning requests that are beyond the University's "generally accepted" terms and conditions and for consulting with the Office of General Counsel on these issues

PURCHASING DEPARTMENT

STRUCTURE OF PURCHASE ORGANISATION

PREVENT SHORTAGE :The purchasing department is responsible for

acquiring materials necessary for manufacturing and running your business. To guarantee that material shortages do not impact productivity, purchasing departments use techniques such as multiple sourcing.

MINIMIZE EXPENSES :The purchasing department plays an important role

in maximizing your business's profits. It compares prices and negotiates with suppliers to get your business the best price possible on necessary goods.

ROLE OF PURCHASE ORGANISATION IN A BUSINESS

PRE APPROVE VENDORS :The purchasing department evaluates vendors in

terms of price, quality, customer reviews and time to fill orders, and produces a list of approved vendors.

TRACK ORDERS :• Orders are documented through purchase order forms,

which specify important identifying information about materials ordered as well as the quantity ordered.

CHECK INVOICES :The purchasing department checks invoices when they

arrive for accuracy, before passing them on to accounting. It compares the invoice to the purchase order form and goods actually received.

ROLE OF PURCHASING ORGANISAYION IN A BUSINESS (CONTD..)

Material requirement review. Make or buy analysis. Material standardization. Determination of quality. Supplier selection. Price forecasting. Value analysis. Market analysis. Productivity / cost improvements. Long -range purchasing policy.

MAJOR FUNCTIONS OF PURCHASING MANAGEMENT

It can also be called as “7r’s “Buying the material at the right price.Buying material of right quality.In the right quantityAt the right timeFrom the right sourceAt the right place.With the right mode of transport.

PURCHASE PARAMETERS

To obtain the specific materials and supplies of quality.

To procure the material and supplies in time and at the proper place.

To procure them at lowest possible ultimate cost.To maintain good vendor relationship.To implement activities such as make-or-buy

analysis, cost analysis and value analysis to reduce cost.

To keep top management informed about the latest developments.

To keep the expenses incurred as low as possible.To ensure continuity in supply of raw material.

OBJECTIVES OF PURCHASING

FORMS OF PURCHASING DEPARTMENT

There are 3 forms of purchasing department :-

a) Centralized purchasing.

b) Decentralized purchasing.

c) Centralized – decentralized purchasing.

With centralized purchasing , all records are kept at one place & under one supervision and control.

Thus, it is more effective for taking action to meet the changing market needs.

Centralization aids in the standardization of specifications and tends towards lower inventory investments.

Usually, any organisation having a single location must adopt centralized purchasing as a rule.

CENTRALISED PURCHASING

When manufacturing plants are widely dispersed geographically and manufacture different products having materials decentralized purchasing is better.

In such a case each manufacturing unit will have their own purchasing department.

The individual purchasing department of each plants will have functional relationship with the corporate director.

The director will enforce general purchasing policies for all purchase department of their organization.

DECENTRALIZED PURCHASING

Many firms operating several plants whose geographical locations may not be too widely scattered & whose products & material requirements may cover a large number of similar parts & materials used in common & in large quantities, may adopt centralized-decentralized purchasing approach.

CENTRALIZED-DECENTRALIZED PURCHASING

It is a primary function, directly influencing the major cost of operating a business.

Discovering new material which may be used to advantage as substitutes for materials in use.

Identifying possible new line of products to added. Building up goodwill in business world. See changes in trends, either in price or other

factors, that will affect the sales of the company. Its knowledge of vendors, and the manufacturing

and marketing policies of other industries.

IMPORTANCE OF PURCHASING DEPARTMENT

PURCHASING CYCLE

1) Recognition of need.2) Description of specifications &

requirements.3) Check on suppliers, price &

specifications.4) Determination of price and availability of

materials.5) Preparation of purchase orders.6) Suppliers acceptance of purchase orders .7) Follow up of supplier.8) Receiving and inspection of materials.9) Checking the invoices and authorizing

payments of bills .10)Closing the order.

THE PURCHASING CYCLE

SUPPLIER OPTIMIZATION

The company chooses an optimum mix of vendors who can provide the best prices and terms.  This process usually means that the less able suppliers who cannot provide a quality service at the terms and prices required are discarded.  This is by far the most common of the various purchasing strategies. TQM

Total Quality Methods, requires the vendors to provide an ever increasing quality service with zero errors. The supplier ensures purchasing best practices using a number of tools such as six sigma. RISK MANAGEMENT

As more companies obtain their supplies from countries such as China and India, they are more concerned with the risk management of this supply chain. Whilst these countries can supply products at very advantageous prices, these advantages can be soon negated by a natural or human disaster.

CORE PURCHASING STRATEGIES

Pune civic body to purchase 5 ambulances:-The pune civic body’s purchasing department will be purchasing 5 ambulances for public welfare that can be used it times of emergency.

BSP- warns about another food grain scam to come up:- there are chances of food grain scam to come up like 2003-04 worth rs.500cr. The investigation is undertaken by the CBI and all the purchase departments for the same is to be investigated.

Soon health department to issue fresh drug purchase tenders:- The health and family welfare department has planned to float fresh tender for procurement of medicine. 

WRITE UPS RELATING PURCHASE DEPARERMENT

E-PROCUREMENT STRATEGY FOR A LEADING INTEGRATED STEEL AND POWER COMPANY BASED IN CENTRAL INDIA.

The client is a leading manufacturer of sponge iron and long steel products (wire rods). They also have a captive power plant fulfilling their requirement for internal use as well as selling it in the market.

There is a lack of transparency in the sourcing process. Also, on-the-table negotiation skills are not utilized properly due to lack of time as well as capability.

CASE STUDY

BACKGROUND

All commodities irrespective of their strategic nature, spend, frequency of consumption, etc. are purchased on “as and when the request comes” basis. As a result, the purchase department functions perpetually on fire-fighting mode.

Since the purchase is flooded with requests, a lot of maverick buying happens without putting any thought, constituting heavy losses to the client annually.

Due to inefficiencies, entire atmosphere in the organization is vitiated with blame-game, political bickering, no-accountability scenarios, and hence high attrition rate of good employees.

The client approached us with a mandate to make the sourcing process transparent to all stakeholders.

CASE STUDY (CONTD..) BUSINESS SCENARIO

To adopted a systematic and methodical approach to address the opportunity:

1. Separated the sourcing function with the daily ongoing procurement activities.

2. Created an e-procurement cell to address sourcing needs, identified right skill set of people to fill-in, detailed out entire process, assigned ownerships, defined timelines for each activity, to all for effective functioning

3. Evaluated and finalized technology partner for e-sourcing needs.

4. Conducted first few e-sourcing events as POC, monitored the subsequent ones, and finally handed full responsibilities to the e-procurement cell.

CASE STUDY (CONTD..) OUR SOLUTION

THANKING YOU.