What Is Purchasing and Procedures In The Purchasing Process

Definition of Purchasing and Procedures in the Purchasing Process – The term Purchasing is often used in foreign and domestic industries. So basically, Purchasing is a process of finding sources and ordering goods or services for production activities. The department that handles the purchasing process is usually called the Purchasing Department.

Purchasing is one of the most important functions of Material Management. In addition to being involved in purchasing Materials for Production purposes.

So purchasing is simply a task for finding and purchasing production machines, production equipment, and equipment along with other facilities that support the smooth production process.

Please to also read: Definition of Material Management and its Scope.

The main objective of Purchasing is to maintain the availability and stability of material supply and also reduce the costs associated with it so that the cost of making finished goods can be reduced to a minimum level.

Procedure in the Purchasing Process

The procedure below is a sequence of steps in the Purchasing process.

Understanding Needs and Receiving Requests from Needy Parties

The first step in the Purchasing process is to correctly understand the needs of those who need these goods and services. The party or section in need will submit a request for an order or purchase with a written document such as a Purchase Requisition Form that has been approved by the head of the department or the relevant Manager.

Purchase Request Forms must be clearly stated about the desired goods such as material specifications, desired quantities, required dates, and suggested suppliers.

Supplier Selection

The supplier selection process usually consists of two basic aspects, namely conducting a search of all potential suppliers and making a list of all identified suppliers.

Information about Suppliers, in general, can be obtained from several sources such as trade directories, advertisements, self-recommendation emails from suppliers themselves, attending exhibitions, participating in industry conventions or suggestions from associations and business forums.

The more sources we identify can help us determine which supplier is the most appropriate. The thing to consider in choosing a supplier is that price is not the only consideration in getting the right supplier. Because in addition to price, several important points must be considered such as the ability to provide the required amount, the quality of the products needed, the financial capabilities of the supplier company, and so on. If all the points mentioned are the same, then the Price will be the decider in selecting the Supplier.

Place an order

After determining which Supplier is chosen, the next step is to place an order or in the industry it is usually called a “Purchase Order” or “PO”.

A Purchase Order is basically a document sent to a Supplier to supply the goods or services needed. In general, the Purchase Order (PO) document or letter consists of 6 copies, each of which is addressed to the Supplier, the requestor, the Warehouse Officer, the accounting department, the inspection section, and another copy for the Purchasing part itself as an archive.

Follow up and monitor the progress of the Order

After making an order and the supplier knows what is needed, the next Purchasing procedure is to monitor the progress of the order or commonly referred to as “Follow-up” in the Industry. This procedure is required so that the Supplier can provide and deliver the required goods or services on the promised time and quantity.

The Purchasing Officer will usually ask the Supplier about the development of the required goods and services via Email, telephone or a direct visit to the supplier’s office / factory.

Goods Receipt and Inspection

The Receiving Department will accept the goods supplied by the Supplier and match the amount with the Purchase Order document. The Purchasing Section will be notified of the arrival of the item and the results of the inspection.

Invoice Payment

After the ordered goods are received with satisfactory conditions and in accordance with the request, the invoice will be checked before approval. After the invoice is checked and approved, the payment is made according to the agreed agreement.

Voting of Purchasing Documents

Most purchases in industrial companies are repeat purchases or Repeat Orders. Therefore, important documents on previous purchases are a guide for future purchases. From these documents, the Purchasing Officer or Management can better understand which suppliers are good and right for orders or purchases in the future.

Maintain relationships with suppliers

And the relationship between the company concerned and the supplier must be maintained properly. This relationship must be established in the form of mutual trust and good faith to help and respect each other. A good relationship will be beneficial and beneficial for both the buyer and supplier.

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