Question

Discuss the functions of the Purchasing Department.

Answer 1

1. Preparing Purchase Budget: The Purchasing Department, in consultation with the Production and other relevant departments, prepares the organisation’s purchase budget. This budget provides detailed information about the quantity and quality of materials to be procured, the timing of purchases, and the total estimated cost of the materials for the upcoming year.
2. Developing Purchase Procedure: To ensure the efficient procurement of materials, a purchase procedure is established. This procedure outlines a systematic sequence of steps to be followed when purchasing materials. The key steps include receiving purchase requisitions, inviting quotations from suppliers, and placing a purchase order with the most suitable supplier, among others.
3. Receiving Purchase Requisitions: The Purchase Department procures materials only after receiving properly authorised purchase requisitions from various departments of the organisation. A purchase requisition is a formal written request for the procurement of materials. It includes details such as the quantity, quality, specifications, and purpose of the materials, the required date, the date of requisition, the name of the requesting department, and the signature of the authorised manager.
4. Determining Sources of Supply: Once purchase requisitions are received, the Purchase Department requests quotations (price estimates) from suppliers. Typically, offers are sought from at least three suppliers. A comparison of the quotations is then carried out, and based on this evaluation, the most appropriate supplier is chosen.
5. Placing Purchase Order: The Purchase Department issues a written purchase order to the chosen supplier, usually on a pre-printed form. This document specifies details such as quantity, quality, price, delivery method, and payment terms. It serves as an authorization for the supplier to send the listed materials.
6. Following-up of Purchase Order: If the materials are not delivered by the date specified in the purchase order, the Purchase Department sends a reminder to the supplier. Following up on purchase orders is essential to ensure timely delivery, as delays may lead to interruptions in work.
7. Maintaining Suppliers: The Purchase Department keeps a record of approved suppliers and should establish alternative sources so that materials can be obtained from other suppliers when required. This list must be reviewed and updated regularly. Additionally, maintaining healthy relations with suppliers is important to ensure consistent and efficient supply of materials.
8. Keeping Purchase Records: The Purchase Department keeps systematic records of all purchases, including details about suppliers, prices, quality standards, and delivery terms. It also guides the management on issues related to procurement.