Industrial purchasing system

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Information about Industrial purchasing system
Business & Mgmt

Published on February 6, 2014

Author: cshekhar8



This P.P.T focuses on different aspects of Industrial Purchasing System. By this P.P.T I am trying to explain term Auction , Order Placement , Documentation, Purchase Requisition, The Bills Of Materials, The Automatic Order , The Budget , Bidding, Order Placement etc

Industrial Purchasing System A method used by businesses to buy products and/or services. A purchasing system manages the entire acquisition process, from requisition, to purchase order, to product receipt, to payment. Purchasing systems are a key component of effective inventory management in that they monitor existing stock and help companies determine what to buy, how much to buy and when to buy it. The purchasing system can not be actuated until a need is recognized in some form of document authorizing buying action.

Auction An auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder. In economic theory, an auction may refer to any mechanism or set of trading rules for exchange. Auction is used for requisition for products on low rates for industrial use.

Documentation The actuating document may take several forms, such as requisition , a bill of materials ,an automatic reorder, or a budget . Familiarity with these documents is small but significant constituent of the marketer’s information base, because they will be made. Documentation work requires all the details regarding purchase process. In common , documents includes , requisition, the bill of materials , the automatic order , the budget etc.

Purchase Requisition Purchase Requisition or Purchase Request is a precise document generated by an internal or external organization to notify the purchasing department of items it needs to order, their quantity, and the time frame that will be given in the future. It may also contain the authorization to proceed with the purchase. It is also called Purchase Order Request. As part of an organization's internal financial controls, the accounting department may institute a purchase requisition process to help manage requests for purchases. Requests for the creation of purchase of goods and services are documented and routed for approval within the organization and then delivered to the accounting group.

The Bill Of Materials It usually contains a list of items which are needed to complete a certain project or produce the products specified in a customer’s order. This documents typically originates in the production planning or engineering department and includes the quantities of materials needed and delivery shedules desired as well as material specifications.

The Automatic Reorder In the case of continuing need , particularly for standard items, suppliers or material bought on established specifications , an automatic order authorization is fairly common. This document defines minimum inventory levels, order points and economic order quantities for designated commodities. A buyer is authorized to reorder such an item in the quantity specified whenever its inventory reaches the level identified as its order point

The Budget The budget usually includes projections of the number of units of each end product the firm plans to produce during the budget period. Executive approval of the budget results in the translation of output figures into requirements for materials and authorization for the commitments with suppliers for these requirements. Such commitments generally call for delivery of all or some stipulated share of the total requirements during the budget period.

Bidding Bidding is an offer (often competitive) of setting a price one is willing to pay for something or a demand that something be done. A price offer is called a bid. Government units and most public institutions are required to purchase on the bid system. A contemplated bid is advertised well in advance so that any interested supplier may have time to submit a bid. After a set date , no bids will be accepted and all bids received by this time are opened usually in the presence of the bidders themselves. The bids are made public and the lowest responsible bidder is awarded for the order. If no bids are acceptable , the purchasing officer ordinarily has no alternative but to reject them all and initiate the procedure again , calling for new bids.

Order Placement Placing an order usually involves the use of a purchase order form even in emergency situations when usual procedures are set aside. It is also true that all conditions of the purchase agreements many not be stipulated in the purchase order. Order placement must be specific in terms and it must cooperate with the present demand and future demand as per organizational requirements.

Follow Up Ideally it should not be necessary to follow up an order. Although follow-up procedures in current use are too varied to permit much generalization , responsibility for initiating them usually rests with the buyer who places the order. Follow up procedure itself may involve no more than a telephone call , a series of letters or a questionnaire. On the other hand , it may include a group of specialists , who spend virtually full time keeping suppliers on schedule. Expeditors are often vested with considerable responsibility and spend much of their time visiting suppliers plants to investigate deliveries and to keep shipments moving.

Receipts The receiving units commonly reports incoming shipments some form of “material received” memorandum. Typically copies of the memorandum are forwarded to the purchasing department to be checked against the invoice , to the stores department for entry in inventory records and to using department as notification of fulfillment of its requisition. In addition to the verification of quantities received , it may be necessary to verify quality as well. Sample checking, specialized inspection division are practices to judge the quality of received goods.

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