In the previous section, you learnt about purchase and buy decision where the production manager decides the right part so that it can be used effectively. Now let us discuss about purchase request.
The activities of purchasing starts with the receipt of a document called purchase request by the purchase manager. This document is an authority to proceed with procurement action for materials. The purchase manager is responsible for arranging material supplies required for the project. The purchase department ensures that the following factors are taken care of:
- Studying and analysing the purchase request from project manager.
- Identifying the potential suppliers.
- Completing the purchase cycle.
- Ensuring payment to suppliers
- Assessing the supplier.
Purchase plays a vital role in any type of project. It keeps up supply lines alive by planning to issue purchase orders, following supplies, and ensuring the availability of right quality of material at right time at right price, which adds to the revenues considerably. The objectives of purchase are to:
- Ensure goods and services of quality and right quantity.
- Obtain goods and services at the most competitive price.
- Ensure prompt delivery of goods and services.
- Maintain supplier relations and develop potential suppliers.
Purchase cycle covers the following steps:
1. Receipt and analyses of purchase request.
2. Select potential suppliers for materials in purchase request.
3. Issue request for quotation.
4. Analyse quotations received.
5. Determine the right price.
6. Negotiate with the suppliers.
7. Issue purchase orders/contracts.
8. Secure commitment from suppliers or enter into contract.
9. Follow up with suppliers/contractors to ensure timely execution.
10. Arrange to receive the goods.
11. Arrange for quality check of goods.
12. Ensure that the supplies reach the consumer.
13. Approve suppliers invoice for payment to supplier/contractor.
The material requirement planning, issues a purchase request covering the following information:
- Originating department and project.
- Material part number with full specification/detailed drawing.
- Quantity required and unit.