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METHODS OF METHODS OF PURCHASINGPURCHASING

1.1. Bulk PurchasingBulk Purchasing

2.2. Hand to Mouth PurchasingHand to Mouth Purchasing

3.3. Speculative PurchasingSpeculative Purchasing

4.4. Blanket PurchasingBlanket Purchasing

5.5. Reciprocate PurchasingReciprocate Purchasing

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BULK PURCHASINGBULK PURCHASING

Under this type of purchasing large quantity Under this type of purchasing large quantity of purchase for the future. Such a method is of purchase for the future. Such a method is followed when it is felt that material will be followed when it is felt that material will be regular through out the year. Discounts & regular through out the year. Discounts & concessions are enjoyed when the bulk concessions are enjoyed when the bulk purchase is made. The transportation cost purchase is made. The transportation cost is very much reduce in this type of is very much reduce in this type of purchasing. purchasing.

Continuous…Continuous…

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Thus we can say that bulk purchasing Thus we can say that bulk purchasing is an economical purchasing. On the is an economical purchasing. On the other hand it involve more other hand it involve more investment of capital possibility of investment of capital possibility of over stocking & high cost storage of over stocking & high cost storage of less due to damagesless due to damages..

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HAND TO MOUTH HAND TO MOUTH PURCHASINGPURCHASING

This type of purchasing is also known as This type of purchasing is also known as purchasing by purchasing by ZEROZERO stock buying. It means stock buying. It means that no purchase is made until a need arise that no purchase is made until a need arise and buying only the quantity which necessary and buying only the quantity which necessary to meet the current need. This method to meet the current need. This method applies principally to emergency applies principally to emergency requirements or to the goods used to requirements or to the goods used to infrequently that they should not be carried infrequently that they should not be carried into stock.into stock.

Continuous…..Continuous…..

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Whenever the material is bought under this Whenever the material is bought under this method there will be zero stock for that method there will be zero stock for that type of materials. The main type of materials. The main advantageadvantage of of this purchasing is that there is no blockage this purchasing is that there is no blockage of capital in the material, no carrying cost, of capital in the material, no carrying cost, no wastages and no fear of obsoleteness. no wastages and no fear of obsoleteness. But the basic But the basic disadvantagedisadvantage of this type of this type of purchasing is always fear of stoppage of of purchasing is always fear of stoppage of production due to shortage of material & production due to shortage of material & sometimes during the period of shortage sometimes during the period of shortage materials are purchased at high cost.materials are purchased at high cost.

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SPECULATING SPECULATING PURCHASINGPURCHASING

Some time manufactures prefer to buy the Some time manufactures prefer to buy the material in more quantity as compared to material in more quantity as compared to required in production. The purpose is to required in production. The purpose is to resell the surplus material at a high price resell the surplus material at a high price to earn the profit. Such type of purchasing to earn the profit. Such type of purchasing is done when the prices are very low and is done when the prices are very low and there is expectations that in future the there is expectations that in future the price of that vary material will definitely price of that vary material will definitely rise. rise.

Continuous…Continuous…

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It has only singleIt has only single advantage advantage of of having the possibility of huge having the possibility of huge speculative profit but speculative profit but disadvantagesdisadvantages include blockage of include blockage of large amount of capital, requirement large amount of capital, requirement of large storage space and risk of of large storage space and risk of obsolesces etc.obsolesces etc.

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BLANKET PURCHASINGBLANKET PURCHASING

In this type of purchasing the items of In this type of purchasing the items of same group order in one category.same group order in one category.

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RECIPROCATE RECIPROCATE PURCHASINGPURCHASING

In this type of purchasing sell to others In this type of purchasing sell to others and buy from them that is called and buy from them that is called reciprocate purchasing.reciprocate purchasing.

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PURCHASE PROCESSPURCHASE PROCESS

Specification & Requirement

Requisition

Check Specification Price& Vendors

Purchase Plan

Source of Selection

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Finalization of Terms & Conditions

Purchase Order

Supplier Acceptance

Delivery Of Materials

Receipt of Materials & Incoming Inspection

Maintaining The Records

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SPECIFICATION & SPECIFICATION & REQUIREMENTSREQUIREMENTS

Specifications are a detailed description or Specifications are a detailed description or listing of the characteristics of materials, listing of the characteristics of materials, parts & components used in making a parts & components used in making a product. Specifications described the quality product. Specifications described the quality of the product desired in quantitative terms of the product desired in quantitative terms through specification. Proper specification through specification. Proper specification result is increased sales, decreased costs, result is increased sales, decreased costs, stronger competitive position.stronger competitive position.

Continuous…Continuous…

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In some cases, an order is placed only In some cases, an order is placed only there is some need for the product. there is some need for the product. This method is appropriate for those This method is appropriate for those items which are not of regular & items which are not of regular & common use in the production common use in the production process. Purchasing department process. Purchasing department consolidates the requirements from consolidates the requirements from various departments to know the various departments to know the local requirements for each item.local requirements for each item.

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REQUISITIONREQUISITION

The departments of the organization The departments of the organization communicate to the purchase communicate to the purchase department their requirement for department their requirement for various items through requisition form. various items through requisition form. The format of requisition form contains The format of requisition form contains the details of the quality and other the details of the quality and other necessary specification about the item necessary specification about the item to be purchased. The requisition is to to be purchased. The requisition is to be signed by the competent authority.be signed by the competent authority.

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CHECK SPECIFICATIONS CHECK SPECIFICATIONS PRICE & VENDORSPRICE & VENDORS

The suppliers are rated on the basis of their The suppliers are rated on the basis of their past performance with the company. past performance with the company. Purchasing is a repetitive and a continuous Purchasing is a repetitive and a continuous process. The suppliers one selected should be process. The suppliers one selected should be continued or dropped is a matter of judgment. continued or dropped is a matter of judgment. The evaluation of supplier is known as vendor The evaluation of supplier is known as vendor rating provides valuable information helps in rating provides valuable information helps in improving the quality of decision. The 3 basic improving the quality of decision. The 3 basic aspects which are considered are aspects which are considered are QUALITY, QUALITY, PRICE & SERVICE.PRICE & SERVICE.

Continuous….Continuous….

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Negotiation strive to develop our fix Negotiation strive to develop our fix point on those ranges which is point on those ranges which is considered satisfactory by both the considered satisfactory by both the parties. Price fixing is some time parties. Price fixing is some time qualified by the quantity of purchase qualified by the quantity of purchase sustained buying from negotiating sustained buying from negotiating supplier, transportation and other supplier, transportation and other allied costs & insurance etc. allied costs & insurance etc.

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PURCHASE PLANPURCHASE PLAN

Specification files and purchase Specification files and purchase records are consider while making records are consider while making the purchase plan. Specification files the purchase plan. Specification files are those files in which proper data are those files in which proper data regarding the requirements which regarding the requirements which are used in making a product is are used in making a product is mentioned. mentioned.

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SELECTION OF SOURCESELECTION OF SOURCE

After the purchase plan the purchasing After the purchase plan the purchasing department proceeds to select the department proceeds to select the source of supply. Register of source of supply. Register of suppliers are mentioned by the suppliers are mentioned by the purchasing departments. A right purchasing departments. A right supplier is one delivers materials of supplier is one delivers materials of the correct specifications on the the correct specifications on the stipulated delivery dates.stipulated delivery dates.

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FINALISATION OF TERMS & FINALISATION OF TERMS & CONDITIONSCONDITIONS

Before placing an order following terms Before placing an order following terms & conditions should be considered:-& conditions should be considered:-

WarrantyWarranty Cancellation ProvisionCancellation Provision Public Liability & Workmen Public Liability & Workmen

Compensation ProtectionCompensation Protection Patent ProtectionPatent Protection Federal Law & Reputation Compliance.Federal Law & Reputation Compliance.

2020

PURCHASE ORDERPURCHASE ORDER

All purchases should be made through All purchases should be made through a purchase order in a specified form a purchase order in a specified form a duly signed by some authorized a duly signed by some authorized person. The purchase order must person. The purchase order must contain the details the suppliers, contain the details the suppliers, description of the items required description of the items required corresponding prices & amount corresponding prices & amount required. required.

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SUPPLIERS ACCEPTANCESUPPLIERS ACCEPTANCE

As late deliveries can close the As late deliveries can close the enterprise for this follow up & enterprise for this follow up & expediting. The purchase order after expediting. The purchase order after waiting for reasonable time is waiting for reasonable time is essential. The priority of follow-up essential. The priority of follow-up operations should be given according operations should be given according to the importance or classification of to the importance or classification of items.items.

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DELIVERY OF MATERIALSDELIVERY OF MATERIALS

After suppliers acceptance the delivery After suppliers acceptance the delivery of materials is done. The goods of materials is done. The goods delivered are of desired delivered are of desired specifications both in quality & specifications both in quality & quantity. If some goods delivered quantity. If some goods delivered does not confirm with the does not confirm with the specifications or are damaged during specifications or are damaged during transshipment then steps are taken transshipment then steps are taken for adjustments on claims. for adjustments on claims.

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RECEIPT OF MATERIALS & RECEIPT OF MATERIALS & INCOMING INSPECTIONINCOMING INSPECTION

The receiving department receives the The receiving department receives the materials supplied by the vendors. The materials supplied by the vendors. The quantity is verified & tallied with the quantity is verified & tallied with the purchase order. The purchase department is purchase order. The purchase department is informed immediately about the receipt of informed immediately about the receipt of the materials. If the materials require any the materials. If the materials require any quality control or inspection, they are sent quality control or inspection, they are sent for such testing. The inspection department for such testing. The inspection department tries to verify that the incoming materials tries to verify that the incoming materials comply with the standard, quality as comply with the standard, quality as specified in the purchase order.specified in the purchase order.

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PAYMENT OF SUPPLIERPAYMENT OF SUPPLIER

When the goods are received in satisfactory When the goods are received in satisfactory condition, the invoice is checked before it condition, the invoice is checked before it is approved for the payment.is approved for the payment.

Generally the invoice is checked to see that Generally the invoice is checked to see that the goods were dully authorized to the goods were dully authorized to purchase, they were properly ordered, purchase, they were properly ordered, they are priced as per the agreed terms, they are priced as per the agreed terms, the quantity & quality conform to the the quantity & quality conform to the order, the calculations are arithmetically order, the calculations are arithmetically correct etc.correct etc.

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MAINTAING THE RECORDSMAINTAING THE RECORDS