Rights of Industrial Purchasing

What is Industrial Purchasing?

Industrial purchasing may be defined as the decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers.

Rights of industrial purchasing

There are no particular rights for industrial purchasing but purchaser or purchase department expect certain condition from their supplier. This can be described in three ways: 1. A very general managerial level 2. A more specific functional or operational level 3. A detailed level at which precise strategic buying plans are formulated

From a top management perspective, there are five rights of industrial

purchasing which are as follow:1. 2. 3. 4. 5. Of the right quality From the right supplier In the right quantity At the right time At the right price

These are known as the five rights of purchasing and should be the general objectives of all purchasing personnel A sixth factor implied in these items includes the desired services necessary in optimal supply and utilization of materials.

B.R.C.M. College of Business Administration

Rights of Industrial Purchasing

1.Of the right quality

2.From the right supplier

3.In the right quantity

4.At the right time

5.At the right price

From an operating or functional perspective, there are eight basic rights of

industrial purchasing which are as follow:-

1. To support company operations with an uninterrupted flow of materials and services. This is the most fundamental of all purchasing rights. In short, they are more specific in that they want to support company operations with an uninterrupted flow of materials and services 2. To buy competitively. Buying competitively involves keeping abreast of the forces of supply and demand that regulate prices and availability of materials in the market place. A buyer who pays significantly more than his or her competitor does for a given material; service generally is not buying competitively. 3. To buy wisely.

B.R.C.M. College of Business Administration

Rights of Industrial Purchasing

And to buy wisely, this means value + quality + service + price. Buying wisely involves a continual search for better supplier that yields the best combination of quality, service, and price relative to buyers needs. This frequently involves coordination with users in defining the need. It may also involve coordinating and reconciling users need with suppliers capabilities, perhaps through the use of cross-functional design teams, to achieve optimal value considering both issues. 4. To keep inventory and inventory losses at a practical minimum. This is important because the average for most firms for inventory costs is 25-35% of the value of the inventor. The production management job is to achieve a reasonable balance between the level of inventory required to support operations and the cost of carrying the inventory. Therefore, keep it to a minimum. One solution to this is to utilize a J.I.T inventory system. 5. To develop effective and reliable sources of supply. In other words, find supplier who are willing to work with the buyers. Cooperate suppliers that are willing to work with a purchaser to help solve the purchasing firms problems and to minimize its material related costs are an invaluable resource. The identification, investigation, selection, and in some cases development of competent and responsive suppliers is a purchasers paramount responsibility.

6. To develop good relationships with the supplier community and good continuing relationships with active suppliers.

B.R.C.M. College of Business Administration

Rights of Industrial Purchasing Good relationships with supplier are imperative and good relationships with potential suppliers are invaluable.

7. To achieve maximum integration with the other departments of the firm. It is essential for buyers to understand the major needs of their using departments, so that these needs can be translated into materials support actions. While these actions vary from firm to firm, they normally require the purchasing operations to support a using department in its major responsibilities. For example, coordinate with engineering when developing specifications or advise the sales and marketing departments of the future cost of supplies in order to assist them in their forecasting 8. To handle the purchasing and supply management function proactively in a professional, cost- effective manner and of course in an ethical manner

The third level focuses on the detailed level that are developed with precise purchasing plans are made for each of the major categories of materials the
firm uses in its operations.

B.R.C.M. College of Business Administration

Rights of Industrial Purchasing

Bibliography
Purchasing & supply management by Donald W. Dowler & David N. Burt Marketing management by Philip Kotler http://purchaseorderman.blog.com

B.R.C.M. College of Business Administration