CHAPTER 7 PURCHASING

CHAPTER 7 PURCHASING

PURCHASING is the process of buying. Must have 2 parties that involve in this process which is as a seller and a buyer. Purchasing is responsible for placing the orders and for ensuring that the goods arrive on time.

PURCHASING OBJECTIVES

Have categories:
   ~Obtain goods and services of the required quantity and quality

                  ~  Obtain goods and services at the lowest cost

                  ~    Ensure best possible services and prompt delivery by the supplier
        ~Develop and maintain good supplier relations and developing potential suppliers

PURCHASING CYCLES

There are 7 steps:

~ receive and analyzing purchase requisitions

~selecting suppliers

~determine the right price

~issuing purchase orders

~follow up to ensure delivery dates are met

~receive and accept goods

~approve supplier’s invoice for payment

SELECTING SUPPLIER

The overall objective for purchasing is to get all the right things together

i)                    Quality

ii)                   Quantity

iii)                 Delivery

iv)                Price

SOURCING

Here have 3 types of sourcing:

i)                    Sole sourcing – only 1 supplier

ii)                   Multiple sourcing   - >1

-          Adv: lower price, better service

iii)                 Single sourcing – plan decision by org. to select 1 supplier for an items

FACTOR IN SELECTING SUPPLIER (TMRASJOP)

I)                  Technical ability

II)                Manufacturing capability

III)              Reliability

IV)              After-sales services

V)                Supplier location

VI)              JIT capabilities

VII)            Other considerations

VIII)          Price

PRICE DETERMINATION

1   1) BASIS FOR PRICING

    ~ fair price – describe what should be paid for the items, lowest price

    ~fixed costs – cost incurred no matter volume sales eg: equipment depreciation, taxes

    ~variable costs – directly associated with amount produces or sold ex : direct labor

@ material

    ~break-even-point         - < BEP incurred loss, high volume profit also high

      2)  COMPETITIVE BIDDING – occur when comparing the price to get lowest prices

3    3)   PRICE NEGOTIABLE       – negotiate price between buyer and seller.

-          4 types of product that can be negotiate:

-          Commodities

-          Standard product

-          Items of small value

-          Made to order items