Assignment 2: The Process Of Purchasing

iv. The Process of Purchasing

Figure 3.1.1 shows the purchasing process.

• First step in purchasing is identification of materials that need to be purchased. The project manager or the production head generates the material requirements list based on the master production schedule (MPS) and production plan and share it with the purchasing department.

• Then, as already discussed, material specification form is prepared which specifies the exact quantity of materials to be purchased for different departments. The purchase department verifies the requisition forms of different departments based on past purchases and vendor catalogues. Suppose, any error, or ambiguity in the material description, purchase department reverts back to the respective

o Similar to production management, materials management aimed at increasing overall profitability and reducing the overall costs. o The major functions of materials management are as follows: Materials planning and control, purchase management, stores management, materials handling and supply chain management. o Purchasing in one of the functions of materials management that means procuring right materials at the right quantity and at right time by various departments of an organisation. o Five major purchasing instruments used in purchasing process are material specifications, Purchase requisitions, Requests for quotation and purchase orders. o People involved in purchasing processes are department heads, purchase department and suppliers. o Purchase process involves the following steps in order such as specifying the materials requirements, short listing of vendors, call for quotations, vendor selection, placing purchase orders, monitor and expedite the progress, receive and inspect the goods and processing of invoice for payment. Terminal Questions

1. Define ‘materials

What are the various purchasing instruments used in the purchasing process. Mention the contents of each instrument.

8. Draw the flow chart and explain the purchasing process cycle. Answer Keys

Self-assessment Questions

Question No. Answer

1 c

2 d

3 c

4 c

5 b

6 d

7 a

8 c

9 b Activities

Activity Type: (Offline) Individual Duration: 1 Week

Description: Primary Research

Collect the following information from a nearby fast food restaurant and submit it as a report to the professor

a. Material Requirement Plan for the procurement of raw material.

b. Purchase procedures in use.

c. Bill of Material preparation process.

d. The supplier or vendors selection process and criteria

Bibliography

Image Credits

• Figure 3.1.1: extracted from http://www.gpmfirst.com/sites/default/files/book_uploads/9781409454199/files/graphics/fig21_2.jpg e-References

• Materials Management (2016). newagepublishers.com. Retrieved from http://www.newagepublishers.com/samplechapter/001386.pdf

• Introduction to Materials Management (2016). Shodhganga.inflibnet.ac.in. Retrieved from