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BUSINESS 1106purchasing and materials management

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BUSINESS 1106purchasing and materials management

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Hogeschool Rotterdam (HR)

Purchasing Purchasing describes the process of buying. It is the learning of the requirement, identifying and selecting a supplier, negotiation price. Purchasing is an element of the wider function of procurement and it includes many activities such as ordering, expediting, receipt and payment....

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business 1106purchasing and materials management

Institution
Hogeschool Rotterdam (HR)
Education
BUSINESS 1106purchasing and materials management
Course
BUSINESS 1106purchasing and materials management

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Subject: Purchasing and Materials Management

Course Code: POM-325 Author: Dr. Vijender Pal Saini

Lesson No.: 1 Vetter: Dr. Sanjay Tiwari

Purchasing and Materials Management

Structure

1.0 Objectives

1.1 Introduction

1.2 Purchasing Management

1.3 Important of Purchase Management

1.4 Purchasing Activities

1.5 Types of Purchase

1.6 Purchasing Cycle

1.7 Characteristics of a Purchasing Manger

1.8 Materials Management

1.9 Classification of manufacturing materials

1.10 Objectives of Materials Management Department

1.11 Relationship between Materials Management Department and other Departments

1.12 Risks to be Considered by Purchase Material Manager

1.13 Summary

1.14 Key Words

1

,1.15 Self-assessment questions

1.16 References/Suggested readings

1.0 Objectives

After going through this lesson, you will be able to:

 Understand the concept of Purchasing and Materials Management.

 Identify purchasing activities and know the importance of purchase

management.

 Describe the concept of Materials Management and explain the relationship

between Materials Management Department and other Departments

1.1 Introduction

Purchasing

Purchasing describes the process of buying. It is the learning of the requirement,

identifying and selecting a supplier, negotiation price. Purchasing is an element of the

wider function of procurement and it includes many activities such as ordering, expediting,

receipt and payment. Purchasing is responsible for obtaining the materials, parts, supplies

and services needed to produce of a product or provide a service. (Joyce, 2006) Purchasing

can be divided into two broad categories, large and small purchases, based on seven

characteristics of purchased product – volume, specificity, technological complexity,

essentiality, fragility, variability, and economic value. (Parikh, 2005)

Bulk Purchase

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,In case of bulk purchases there are high volume items, large amount, and more frequent

utilization with more specific use. Bulk purchases are handled in large organisations and

multinational organisations with the standardized purchasing process, where as some other

organizations use separate purchasing process. There are frequent misuse and lack of

control in purchasing process in those organizations in which same standardized process is

used for both bulk and small purchasing. Large purchases are typically non-urgent in

nature. Large-volume, continuous-usage items can be covered by blanket purchase orders,

which often involve annual negotiation of prices.

Small Purchase

In case of small purchase there are low volume items, small amount, less frequency of

utilization, high variety and low technical complexity. Mainly small purchases include

machine parts, auto parts, machine repairs, in frequent sullies of offices and miscellaneous

goods. Small purchases are urgent in nature.

There are two basic types of purchasing in the business world: purchasing for resale or

purchasing for consumption or conversion. (Dobler, 1984) Purchasing for resale or resale

purchasing is mainly performed by retailers and wholesalers (called merchants).

Purchasing for internal consumption or conversion is called industrial buying. The

industrial buyers generally face different and complex problems with comparisons of

merchandise buyers or resellers. For instance, the industrial buyers have to spend time to

anticipate in determining what products should be produced or manufactured and what

product should be purchased from outside or suppliers. They also correlate their purchasing

3

, with sale forecasts and production schedules. In some books, you will find the terms like

purchasing, procurement, supply chain, materials management, supply material and

logistics interchangeably. But there is a hair-line difference in all these terms.

Important Terms

Purchasing

Purchasing describes the process of buying. It covers the knowledge of the requirements,

identifying and selecting a supplier and negotiating price

Procurement

It is a broader term. It includes purchasing products required for production, stores, traffic,

receiving, inspection and salvage.

Materials Management

It includes planning, organising, communicating, directing and controlling of all those

activities mainly concerned with the flow of materials into an organisation. Material

management views material flows as a system.

Logistics Management

It is the planning and controlling of the flow of raw material in a cost effective manner

from the suppliers or point of origin to the manufacturing and then flow of finished goods

for consumption in the customers’ hands.

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