DEPARTMENT OF INDUSTRIAL & PRODUCTION ENGINEERING ASSAM ENGINEERING COLLEGE GUWAHATI-13

PURCHASING IN MATERIAL MANAGEMENT

Presented byAnand Kumar Prajapati (07/359) Ashok Kumar Bengani (07/346) 8th Semester Industrial & Production Engineering Department

PURCHASING Purchasing is both science and art. Any purchasing activity starts with the recognition of need.

Basic purchasing principles are1. Buying the right quality. 2. Buying the right quantity. 3. Buying at right price. 4. Buying from the right source. 5. Buying at the right time and place

O . BJECTIVES1.To ensure uninterrupted flow of materials. 2. To buy economically in the competitive market. 3. To keep inventory investment low. 4. To develop buyer-supplier relations. 5. To develop alternative and reliable sources of supply. 6. To act as a material intelligence information centre with regard to specification, processes, price, quality,etc.

FUNCTIONS OF PURCHASING DEPARTMENT

Selection of supplier. Analyzing the bids. Price negotiation. Issuance of Purchase Orders. Follow-up actions. Cost-anlysis and market study Maintenance of price catalogues, information library, etc.

PROCEDURE OF PURCHASING
1.Ascertaining the need and recognition of it. 2.Accurate statement of specifications, character, quality and quantity requirements with full description. 3.Transmission of the purchase requisition. 4.Negotiation with the possible sources of supply. 5.Analysis of the proposal, determination of the price, availability and delivery time. 6.Selection of vendor and placement of the supply order. 7.Expediting and follow-up. 8.Arranging for receipt, inspection, replacement of the rejected and defective materials and goods, etc. 9.Checking of invoice and bill payment 10.Completion of records and files.

CENTRALIZED BUYING In centralized purchases, purchasing responsibility ,as all other operating responsibility is generally dedicated to a specific person or department . Advantages 1.This ensures better control since one person or department is responsible ,and records pertaining to purchase transaction ,commitments ,expenditures are also easily available. 2.Better performance can be expected from other departments when they are relieved of purchasing responsibility Disadvantages 1.It is somewhat slow when different plants require immediate supplies ,which due to geographical and locational reasons cannot be effected 2.Due to such barriers ,local purchases are often resorted to and any problem relating to a particular material can be settled on the spot which is not often possible in centralized system

PURCHASING INPUTS
Purchasing requisitions. Product specification. Blueprint. Market grades. Brand or trade name. Commercial standards. Material specification. Performance characteristics. Resource limitation. PURCHASING OUTPUT Supply source Market condition. Price determination. Discounts. Delivery terms. Hedging.

NEGOTIATION It is essentially a discussion between a buyer and a seller with a view to reaching an agreement. This may be in regard to : 1) Price 2) Delivery 3) Quality or/and performance characteristics 4) other special features. If held in a true sprit of give and take , negotiation creates a good buyer-seller relationship.

FORWARD BUYING A purchase contract having been concluded earlier with respect to price, delivery and terms already settled, is called forward buying.

HEDGING- Any contract of purchase or sale having as its main purpose the elimination of price fluctuation is called hedging. MAKE OR BUY DECISION 1.Consideration which favour making the part: a) Cost b) Desire to integrate plant operations c) Utilization of excess plant capacity d) Need to have direct control over production e) Unreliable suppliers f) Desire to maintain a stable workforce 2. Consideration which favour buying the part: a) Suppliers research and specialized know how b) Cost consideration c) Small volume requirement d) Limited production capacity e) Desire to maintain a stable workforce f) Desire to maintain multiple sources of supply and indirect managerial control

VENDOR RATING The rating may be done as1)Quality performance: Number of lot accepted Number of lots supplied 2) Delivery performance a) Adherence to time schedule number of deliveries made in time * weightage total no. of schedule delivery b) Adherence to quantity schedule Quantity supplied * weightage Schedule delivery 4)Price performance Minimum price offered Vendors price * weightage * 100

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