Purchase Management, Material Management #Top 20 Definition of Purchase management, Importance of Purchase Management.
Compile by Mohan Regmi@2022
Introduction
to Purchase Management
Purchase Management is a basic function of
materials management in a company. Their basic function is procuring the inputs
for production function. This function encloses suppliers in the external
market to the organization and several internal to the organization.
Till recent time, the purchasing process
simply involved placing an order with the supplier who offered the lowest
price. Nowadays, increase in competition and market demand and scarcity of
resources have forced organizations to re-examine manage their purchasing
activities vary carefully and significantly. The purchasing functions have been
expanded considerably and include activities such as verifying the credentials
of suppliers, inspecting the quality of the material to be purchased, ensuring
the timely delivery of the material, etc. more of that it is vital to know what
purchase management actually means and its importance in an organization as
well as in our daily life.
Definitions
of Purchase Management
1. According to the J. H. Westing, L. V. Fine, Gary Joseph Zenz,"Purchasing management is a
managerial activity that goes beyond the simple act of buying. It includes
research and development for the proper selection of materials and sources.
Follow up to ensure both quantity and quality and controlling traffic,
receiving, store keeping and accounting operation related to purchase."
2. In
the word of Khan SAR, Dong QL, Yu Z(2016)
Purchase Management is defined as, “The process of obtaining and managing of
materials, components or services needed to operate a business or other type of
firm. The elements of supply management contain the actual
materials/components, budgets, information, and employees. The key purpose of
this procedure is to keep costs stable and use resources effectively to
increase the efficiency of the business and profits”
3. According to Melanie chan,"Purchase management is the
business discipline that enables companies to manage the activities and
relationships that make up the purchasing function necessary to do business."
4. According
to Carr and Smeltzer (1997), “Strategic purchasing is
the process of planning, implementing, evaluating, and controlling strategic
and operating purchasing decisions for directing all activities of the
purchasing function toward opportunities consistent with the firm's
capabilities to achieve its long‐term goals”.
5. Elliott-Shircore
and Steele (1985), who stated “Purchasing
is the process by which a company (or other organisation) contracts with third
parties to obtain goods and services required to fulfil its business objectives
in the most timely and cost-effective manner.”
6.
According to Dr.
Walters purchasing function
means, “the procurement by the purchase of the proper material, machinery,
equipment and supplies for stores used in the manufacture of a product adopted
to marketing in proper quality and quantity at the proper time and at the
lowest price, consistent with the quality desired”
7.
According to Westing, Fine and Zenz, “Purchasing is a
managerial activity that goes beyond the simple act of buying. It includes
research and development for the proper selection of materials and sources,
follow-up to ensure timely delivery; inspection to ensure both quantity and
quality; to control traffic, receiving, storekeeping and accounting operations
related to purchases.”
8.
According to Alford and Beatty, “Purchasing is the
procuring of materials, supplies, machines, tools and services required for
equipment, maintenance, and operation of a manufacturing plant”.
9.
In the word of Dobler
(1990, p.105) defines Purchase Management as
“procurement activities; inventory management; receiving activities; stores and
warehousing; in-plant materials handling; production planning scheduling and
control; traffic and transportation; surplus and salvage.”
10. As
per Compton and Jessop (1995, p.26)
defines purchasing as “the obtaining by various means (e.g., loan, transfer,
hire purchase) of supplies and services with or without consideration.”
11. In
the word of Van Weele and Rozemeijer (1996, p.22)
defined purchasing as including, “all activities required in order to obtain
the product from the supplier and get it to the place where it is actually
used. It encompasses the purchasing function, store, traffic and
transportation, incoming inspection, and quality control and assurance. Some
firms also include salvage and management of environmental issues (as they are
related to materials) in procurement.”
12. According
to Method123 Procurement Management, or
procurement process is, “a method by which items are purchased from external
suppliers. The procurement management process involves managing the ordering,
receipt, review and approval of items from suppliers. A procurement process
also specifies how the supplier relationships will be managed, to ensure a high
level of service is received. This is a critical task in Procurement
Management. In essence, the procurement process helps you ‘get what you have
paid for’.”
13. As
per to Dr. Harshita Bhatnagar, “Purchase
management defines the acquisition of various goods and services from the
outside network”
14. According
to LYSONS, “Purchasing is that function
responsible for obtaining by purchase, lease or other legal means, equipment,
materials, supplies and services required by an undertaking for use in
production”.
15. According
to BAILEY and FARMER, “Purchasing is the
procurement of right quality of material, at the right time in the right
quantity, from the right source at the right price”.
16. According
to John, Chandra, Tim (2008) defined that,
procurement includes sourcing and purchasing and coves all of the activities
involved in the product/ service sourcing, purchasing and delivery from
supplier to the customer.
17. According to Charles Izuoba, “purchasing is one of the basic functions common to
all organization. It refers to the process of acquiring goods, services, and
equipment from another organization in a legal and ethical.”
18. According to the William Malsam,"Purchase management is
critical to keeping an organization well supplied."
19. According to Kasneb,"Purchasing is defined as a
process of acquiring goods, services and work in return for a price."
20. According to Sachin Thorat, " The process of buying and
procuring the materials, parts, components, equipment's, spares parts, tools
and supporting items required by industries or any organization to deliver its
products as per customer requirements at the competitive rates and of good
quality."
Definitions;
As per my opinion, Purchase
Management is a management of at those activities associated with accusations
of all goods and services required in an organization.
Importance
of Purchase Management
·
Purchase management is
very much essential in our daily life because whatever the things we required
in our daily activities is all associated with purchasing as everything is not
possible to produce by oneself. On account of above statement purchasing become
very much significant and often gives problems like paying higher price and more
delivery charges in emergency, buying unnecessary product as and when marketer
influence us.
Furthermore, to understand purchase
management in day to day life as simple as making shopping list before hand and
Aveling advantages like accruing better quality goods in competitive price,
able to buy necessary goods within allocated budget that way necessary goods is
never left out as well purchasing motive is fulfilled
Ø Purchase
management is considered to be very important function of materials management
in a company. As stated above its importance is felt even outside the formal
scope of materials management that is in daily scenario. As the purchase
decisions bids a very large portion of financial resource of the company. Thus,
purchase function is said to be highly important. Purchase personnel deal with
large number of external agencies while performing this function. Hence, they
represent good percentage of company’s goodwill in the outside world. As they
negotiate and finalize deals worth lot of money for the company their integrity
and efficiency is of utmost importance for the organization.
While the value of
purchased items varies from industry to industry, it adds up to more than fifty
percent of sales in all industries, James
Aitken, (2002). Purchase management is regarded as a
significant activity in many organizations because of the high cost involved in
carrying out purchasing activities, increasing quality benchmarks, and
increasing global competition. Therefore, following are the main reasons that
purchase management to be important;
i.
Cost Reduction
Cost control is a critical
factor in purchasing management. This function analyze which suppliers are
selling the necessary inputs for production and at what cost. From this
information, they and analyze a lot of other factors, which include on-time delivery,
warranties, industry reputation and length of time in business. Because
switching suppliers time and again might prove to be costly, finding a reliable
supplier is important for cutting costs down.
ii.
Customer Satisfactory and goodwill
Purchasing management helps
largely in ensuring customer satisfaction. Purchase department have this
obligation in two ways: quality of product and on-time deliveries. This are the
two main ways customers are affected by the decisions of purchasing professionals.
Thus, purchase management play a critical role in shaping the customer’s
experience with the organization and consumer relationship will enhance the
reputation of organization.
iii.
Stabilization of Price
An important of purchasing
management is in achieving stabile price. When the cost of production
fluctuates wildly, other departments experience obstacles. For example, it
hinders the marketing team to fixed price to charge customers, finance experts to
estimate profits and accountants to determine the company’s cash flow this
function is all interconnected. Purchasing department will be able keep the
cost of production stable in many ways, one of which is negotiate with suppliers
to achieve the lowest price and to lock them in the value for a lengthy
contract. Alan E. Branch, author of “International Purchasing and Management,”
explains that these contracts also shield multinational corporations from the
risk of currency fluctuations, which can also affect the cost of production.
iv.
Supply Chain Management
Securing the supply chain
is another critical important of purchasing management as purchasing is a basic
element in supply chain, supply chain is never complete without proper
Purchasing Management. Buyers are responsible for ensuring that all of the
necessary materials appear on time, intact and of expected quality. If any of
these materials are delayed, the effects reverberate throughout the production
chain. Thus, it’s very essential to conduct the function ‘purchase management’.
Henceforth, above importance move along
with its goals which are popularly known as 5R’s of purchase namely, right
price, right quantity, right quality, right place and right time. In simple
terms, if the above 5Rs are achieved primary objective is fulfilled.
Reference
1.
MBA Knowledge Base . (2021). MBA Knowledge
Base . Retrieved from mbaknol:
https://www.mbaknol.com/operations-management/introduction-to-purchase-management/
2. Murphy, K. (2022).
Retrieved from https://planergy.com/blog/purchase-management/
3. qualityhubindia.
(2021, July 26). qualityhubindia. Retrieved from qualityhubindia:
https://qualityhubindia.com/what-is-purchase-management-definition/
4. R.Khana. (n.d.). Production
and Operation Management. New Delhi: PHI Learning Private Limited, .
5. Saini, D. V. (2019). Dr. Vijender Pal Saini.
Retrieved from ddegjust:
http://www.ddegjust.ac.in/studymaterial/dstudymaterial.htm
6. Vankatesh. (2021, 12
31). Retrieved from https://www.yourarticlelibrary.com/purchase-management/purchasing-objectives-and-types-of-purchasing/53166
Comments
Post a Comment