Purchasing Function Flashcards
Purchasing function activities
- Procurement of required goods and services
- Price negotiation
- Compliance with policy
- Development and maintenance of good relationships with suppliers
- Co-ordination and communication with other departments
Factors that contribute to the importance of purchasing
- they have to know what products are in demand
- they have to keep their eye on inflation to maintain the value of money
- they must prevent stock shortages as much as possible
- stay up to date with technological developments
- ensure that political risks such as strikes don’t become problematic
- consider stock holding stocks
- evaluate the opportunity of investing capital into stock
- keep up to date with changes in economic conditions
Different type of stock
RAW MATERIALS BECOME -Dangerous material -Maintenance stick -Capital goods Or - Semi finished goods -Finished goods -Perishable Stock
Responsibilities of ordering and receiving of goods
- Placing orders for the correct quantity and quality
- Department must have expert knowledge of the goods needed for the other departments
- Information collected from market research must be considered to meet the customers needs
- Buyers will collect information from a variety of sources
Sources to collect information
- Supplier catalogues
- Trade journals
- Computerised information
- Sales reps collect vital insight
- Exhibitions
- Yellow pages
Orders can be completed on:
- Pre-printed forms
- Phoning through the order
- Faxing or writing a letter
- Electronic order via e-mail or the internet
After placing the order:
- goods will be packaged and dispatched
- documents such as invoices and delivery notes must be completed
- stock is received and check for quality and quantity
- record must be kept of the stock on hand
Management of stock: economies of sale
Buyers try to achieve this as the fixed cost per unit are less which allows for bulk discounts
(Only viable if large quantity of stock is needed)
Management of stock: economic order quantities
Best quantity to achieve lowest cost must be considered
Take into account delivery fees and stockholding costs
Lead time
The period between ordering and delivering
EPOSSE (electronic point of sale scanning equipment)
Purpose:
- To do a stock count
- To avoid stock-outs
- To reduce stock holding costs
- To prevent losses and order only when stock is needed
- To prevent theft
- To get rid of obsolete stock
Quality control
Quality control are the methods used by a business to meet the expectations of their customers
(QC builds trust and loyalty within customers. It leads to repeated sales which leads to increased profits)
Quality control methods
- Trade markets
- Commercial standards
- Market grades
- Samples
Advantages of quality control
- Increased sales
- Reduced wattages
- Improved reputation
- Reduced inspection cost
- Good customer relations
- Uniformity in quality
Quality control method: Trade Marks
A picture, symbol used to uniquely identify the brand and distinguish it from others
Used in combination with a brand name to promote the product
Quality control method: commercial standards
Important for mass productions
Quality description to identify standardised products
Quality control method: Market Grades
Used to describe the quality of agricultural product
E.g. first class, second class
Quality control method: samples and inspections
Sampling: few products from batch are tested
Inspection: usually done when the goods are expensive. Time consuming process
South African Bureau of standards
- core functions is standards and accreditation
- ensure the quality of goods produced in South Africa
- protect local industries from low quality imports
- develop, promote and maintain South African national standards
A good supplier must:
- Deliver quality goods
- Deliver promptly
- Give superior service
A good relationship with a supplier can be achieved by:
- Paying suppliers promptly
- Providing easy access for deliveries
- Placing orders in good time
- Adhering to the suppliers’ policies
- Conduction business with integrity
Consumer protection act
It’s purpose is to protect consumers from unscrupulous suppliers
