SAN AGUSTIN, MICHAEL ANGELO

RESEARCH ON PURCHASING, EXPEDITING AND RECEIVING

PURCHASING

Purchasing is the process a business or organization uses to acquire goods or services to

accomplish its goals. Although there are several organizations that attempt to set standards in
the purchasing process, processes can vary greatly between organizations. Purchasing is part of
the wider procurement process, which typically also includes expediting, supplier quality,
transportation, and logistics.
This can be done by the general contractor if the company does all their own
construction work. If the contractor does not do their own work, they obtain it through
subcontractors. Subcontractors are contractors who specialize in one particular aspect of the
construction work such as concrete, welding, glass, or carpentry. Subcontractors are hired the
same way a general contractor would be, which is through the bidding process. Purchase orders
are also part of the purchasing stage.

PURCHASING AND EQUIPMENT DEPARTMENT

The Purchasing and Equipment Department is responsible for the purchasing of the
materials, services and tools and equipment required to complete the project. Purchasing
should be performed by one central group in each division office to maintain the most
economical and efficient method of obtaining the required materials and services.

PURCHASING CYCLE

To enable the purchasing group to identify and contact suitable vendors or suppliers,
the design department should advise the purchasing group in advance of approximate
quantities of materials and types of equipment. Whilst the design department is finalizing the
requirement and preparing the requisition documents. The purchasing group is checking
whether the vendor has the requisite capability and is likely to submit a competitive price and
an acceptable delivery. Purchasing of materials is done by batch, the most needed materials
during the construction phase is bought first.

PURCHASING PROCEDURE

The Purchasing Procedure describes the procedures involved in maintaining controls

over the construction ordering, purchasing and receiving functions needed for construction
projects in the field. It applies to the purchase of all materials, services, tools, supplies,
equipment and equipment rental for all development or construction projects.
A. Canvasing

Through canvassing, the purchasing department can easily enter and compare supplier
quotations in order to optimize the use of cash resources. Canvassing allows them to define
the criteria for choosing the best supplier that can include the supplier terms, price, and any
additional service such as product warranty. Usually 3 supplier, for material quality, and
price comparison.

B. Purchase Order

When a suitable supplier has been chosen by the contractor, a list of

materials/specifications, indicated with the amount of unit/s of materials will be given to
the supplier. A purchase order is a document that confirms an order for construction
materials, sent from a buyer to a material supplier or equipment renter. When a purchase
order is accepted, a legal contract forms between the two parties and sets basic terms
between the parties – like price, payment terms, and time for performance. A purchase
order might be followed up with a written contract that further clarifies the relationship and
expectations of the agreement. On construction projects, POs are typically used to control
the purchasing of products and services from suppliers, and are then retained for record
keeping.

A Purchase Order may include the following information:

 The PO number.
 A description of the products and / or service being purchased.
 Technical details if required.
 Quantities.
 Any discounts to be applied.
 Agreed prices.
 Payment terms.
 Shipment dates.

C. Payment

It is important to understand the upstream payment cycle for purposes of establishing

appropriate downstream processes so that subcontractors and suppliers understand what
type of documentation is required for payment and when such documentation must be
provided to the upstream contractor to pass through to the owner. The process of payment
can be done through an agreement, which within 30 – 50 days the materials purchased
should be fully paid, or it can also be done through cash on deliver.
 Figure 1. Sample Purchase Order

EXPEDITING

Expediting is a concept in purchasing and project management for securing the quality
and timely delivery of goods and components. Make happen sooner or be accomplished more
quickly.

Construction projects – particularly large ones – can involve

significant quantities of materials, labor and other services. A large contractor may have to
manage thousands of employees and hundreds of tons of material and
other products. Delays in the supply of products, materials or equipment can mean
the project will not be completed to time or on budget. As well as the extra,
unforeseen costs involved, such delays can destroy reputations and even result in job losses
or claims.

Expediting on a construction site can be undertaken by a person or persons in

the contractors’ procurement department, by the project management team or by a specialist,
independent third-party firm offering expediting services. Third parties then are only used when
in-house capacity is overstretched or a neutral third party is needed. Most of the time
companies use third party inspector expeditors who are responsible for inspection of critical
items as well as expediting. In strict quality control conditions, those quality inspector
expeditors will give importance to quality work, rather than to expediting work, which may not
be a useful technique to get expediting work completed. Such specialist firms can:

 Supply periodic status reports on the project’s progress

 Identify any problem areas that could cause delays, instigating counter measures to
minimise the impact of such delays
 Ensure the timely delivery of materials and equipment and fulfil the delivery terms of
the contract
 Undertake on-site inductions
 Provide other services
 Inspection, reporting and monitoring the dispatch of materials
 Field and desk (telephone) expediting and supplier performance monitoring

Expeditor

Contacts the supplier for ether updates on the delivery schedule or to reassess the schedule
based on issues with the supply of parts

Desk Expeditors

Desk Expeditors are responsible for establishing and maintaining regular contact with all
suppliers wither by telephone, fax, email or letter to obtain reliable information on the
status of suppliers’ drawings and documentation, sub-supplier materials, production and
delivery of material and equipment.

Field Expeditors

Field Expeditors complement the Desk Expeditors by making personal visits to the suppliers’
works and physically checking the status of the suppliers’ progress. Also responsible for
providing detailed reports to the central office on the complete status of an order.
RECEIVING

With the suppliers in place, a process of project management  will need to be put

in place to ensure that the obligations set out in the purchase orders are being met. This will
generally allow for variations to be instructed, retention of funds until
the orders are complete and damages for failure to perform. There will also generally be a
period following completion of the requirements when the supplier remains responsible for
any defects that may become apparent. Large volume of expensive materials will be control in
the field. Procedures which cover the receipt, storage, and issuance of these materials will be
necessary in order to assure proper stewardship of this function

Coverage of Receiving Procedure:

1. Adequate identification by purchase order, vendor, description, quantity, and date of

receipt.

2. Required receiving inspections consistent with the quality control plan .

3. Overage, shortage, and damage reports, which must be properly filled out.

4. Daily receiving logs should be distributed to management on “need to know” basis.