PURCHASING

It is an activity of getting
the right material to the
right place at the right time
in the right quantity at the
right price.

Objectives/Principles of Purchasing

1) Right time: To ensure timely

supply, proper follow up &
control over delay in the
transportation, placing order
and inspection of incoming
material are essential. Lead
time has to be controlled to
get the material at right time.

Objectives/Principles of Purchasing
2) Right price: Deciding right
price depends upon type of
material, market conditions,
availability, demand & supply,
socio-political & economic
aspects. For getting right price
competitive bidding &
negotiations should be
adopted.

Objectives/Principles of Purchasing
3) Right source/supplier/vendor:
Market research is carried out
for locating reliable vendor,
considering reliability, quality,
cost, past performance, after
sales service, public relations
etc. The process is: vendor
selection, development and
rating.

Objectives/Principles of Purchasing

4) Right quantity: Purchase

department should
carryout inventory analysis,
EOQs, discount offers etc.
to find the optimum
quantity.

Objectives/Principles of Purchasing

5) Right quality: It means

suitability of an item for its
intended purpose. Ensure
quality specifications,
tolerances, brand/make,
past performance,
reputation of vendor etc.

Purchasing Procedure
1. Indenting by production department to
purchase department
2. Tenders/Quotations enquiry &
evaluation
3. Selection of supplier
4. Placing orders to the suppliers
5. Follow up of purchase orders
6. Receipt of material
7. Inspection of material
8. Payments & close the order

Methods of Purchasing
1.
2.
3.
4.

5.
6.

Purchasing strictly by requirement hand to

mouth purchasing
Purchasing for a specified period
Market purchasing based on production
plan and market trends
Contract purchasing contracts are given to
the suppliers in advance (rate contract,
running contract)
Central purchasing purchasing on large
scale; cheaper rates; but delay
Directorate General of Supplies and
Disposals (DGSD) they get materials at
minimum rates from the different
manufacturers and supplies are done to
various government departments

Source Selection
1. Searching (in Indian Trade
Journal, News Papers,
Telephone Directories, DGSD,
ISI, DGTD, Exhibitions)
2. Selection
3. Negotiations
4. Trial orders
5. Rating

Vendor Evaluation
1. Good maintenance
2. Production & Technical
competence
3. Quality Control & Inspection
facilities
4. Financial resources
5. Other companies supplied to
6. Delivery
7. Quality
8. Price