Company purchase:

Purchasing refers to a business or organization attempting to

acquire goods or services to accomplish the goals of its enterprise. Though there are
several organizations that attempt to set standards in the purchasing process,
processes can vary greatly between organizations.

Meaning and Definition:

Purchasing is the first phase of Materials Management. Purchasing means
procurement of goods and services from some external agencies. The object
of purchase department is to arrange the supply of materials, spare parts
and services or semi-finished goods, required by the organisation to produce
the desired product, from some agency or source outside the organisation.

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The purchased items should be of specified quality in desired quantity
available at the prescribed time at a competitive price. In the words of Alford
and Beatty, Purchasing is the procuring of materials, supplies, machines,
tools and services required for equipment, maintenance, and operation of a
manufacturing plant.
According to Walters, purchasing function means the procurement by
purchase of the proper materials, machinery, equipment and supplies for
stores used in the manufacture of a product adopted to marketing in the
proper quality and quantity at the proper time and at the lowest price,
consistent with quality desired.
Thus, purchasing is an operation of market exploration to procure goods and
services of desired quality, quantity at lowest price and at the desired time.
Supplier who can provide standard items at the competitive price are
selected.

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Purchasing in an enterprise has now become a specialised function. It was

experienced that by giving the purchase responsibility to a specialist, the
firm can obtain greater economies in purchasing. Moreover purchasing
involves more than 50% of capital expenditure budgeted by the firm.

According to Westing, Fine and Zenz Purchasing is a managerial activity that

goes beyond the simple act of buying. It includes research and development
for the proper selection of materials and sources, follow-up to ensure timely
delivery; inspection to ensure both quantity and quality; to control traffic,
receiving, storekeeping and accounting operations related to purchases.
The modern thinking is that Purchasing is a strategic managerial function
and any negligence will ultimately result into decrease in profits.

Importance of Purchasing:
1. Purchasing function provides materials to the factory without which wheels
of machines cannot move.

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2. A one percent saving in materials cost is equivalent to a 10 percent
increase in turnover. Efficient buying can achieve this.
3. Purchasing manager is the custodian of his firms is purse as he spends
more than 50 per cent of his companys earnings on purchases.

4. Increasing proportion of ones requirements are now bought instead of

being made as was the practice in the earlier days. Buying, therefore,
assumes significance.

5. Purchasing can contribute to import substitution and save foreign

exchange.
6. Purchasing is the main factor in timely execution of industrial projects.
7. Materials management organisations that exist now have evolved out or
purchasing departments.
8. Other factors like:
(i) Post-war shortages,
(ii) Cyclical swings of surpluses and shortages and the fast rising materials
costs,
(iii) heavy competition, and
(iv) Growing worldwide markets have contributed to the importance of
purchasing.

Objectives of Purchasing:
The purchasing objective is sometimes understood as buying materials of the
right quality, in the right quantity, at the right time, at the right price, and
from the right source. This is a broad generalisation, indicating the scope of
purchasing function, which involves policy decisions and analysis of various
alternative possibilities prior to their act of purchase.

The specific objectives of

purchasing are:
1. To pay reasonably low prices for the best values obtainable, negotiating
and executing all company commitments.

2. To keep inventories as low as is consistent with maintaining production.

3. To develop satisfactory sources of supply and maintain good relations with

them.

4. To secure good vendor performance including prompt deliveries and

acceptable quality.

5. To locate new materials or products as required.

6. To develop good procedures, together with adequate controls and

purchasing policy.

7. To implement such programmes as value analysis, cost analysis, and

make-or-buy to reduce cost of purchases.

8. To secure high caliber personnel and allow each to develop to his

maximum ability.

9. To maintain as economical a department as is possible, commensurate

with good performance.

10. To keep top management informed of material development which could

affect company profit or performance.

11. To achieve a high degree of co-operation and co-ordination with other

departments in the organisation.

Duties of purchaser:

Purchasing Agent Job Duties:

Verifies purchase requisitions by comparing items requested to master list; clarifying

unclear items; recommending alternatives.

Forwards available inventory items by verifying stock; scheduling delivery.

Prepares purchase orders by verifying specifications and price; obtaining

recommendations from suppliers for substitute items; obtaining approval from
requisitioning department.

Obtains purchased items by forwarding orders to suppliers; monitoring and expediting

orders.

Verifies receipt of items by comparing items received to items ordered; resolves

shipments in error with suppliers.

Authorizes payment for purchases by forwarding receiving documentation.

Keeps information accessible by sorting and filing documents.

Provides purchasing planning and control information by collecting, analyzing, and

summarizing data and trends.

Updates job knowledge by participating in educational opportunities.

Accomplishes purchasing and organization mission by completing related results as

need.

DETAILS OF THE PURCHASING

CYCLE
IDENTIFY NEED
It is at this stage that the biggest impact on cost and sustainability can be made.
Staff should consider whether the goods/services they are contemplating are
genuinely needed. If the goods/services are required consider alternative to
outright purchase such as lease, rent, refurbish existing equipment, share with
other departments.

DEVELOP SPECIFICATIONDEVELOP SPECIFICATION

Once the need has been established the specification must be produced. This is key
as the specification communicates details of the requirement to suppliers and
enables them to form a price. The specification also forms the legal basis of the
contract between the supplier and UEA so it is important that all relevant
requirements and limitations are set out clearly.
The specification will influence the cost of the goods/services and their impact. It is
important that goods/services are not over specified as this will add to the cost.

think about how the item will be disposed of at the end of its life. Consider
requesting items that can be remanufactured/composted/disassembled into
component parts for recycling/re-use etc.

use Ecolabels to draft specifications, for details please see the Ecolabels
section of the Purchasing webpages.

energy efficiency - eg specific 'A' rated appliances or equipment with

'standby' modes.

specify use of renewable materials.

specify use of resources from sustainably managed supplies eg wood from

FSC certified forests.

specify electronic invoicing and payment.

reduce the number of deliveries; this will reduce emissions and cost.

IDENTIFY SUPPLIERSIDENTIFY SUPPLIERS

The following number of suppliers should be invited to quote/tender:

Purchase under
5k

No obligations although prudent to shop around

5k to 20k

3 - 5 written quotations should be obtained

20k to EU limits

5 sealed-bid tenders should be sought

EU Limited

Dependant on the process but usually a minimum of 5

suppliers taken
through to tender.
TENDERING PROCESSTENDERING PROCESS
The purchasing team will assist staff with the production of tender documentation
and will issue all tenders.
All bidders must be treated fairly and equally, to facilitate this all supplier queries
should be directed through the purchasing team.
Tenders are received via the In-tend electronic tendering portal to ensure an audit
trail.
EVALUATION OF BIDSEVALUATION OF BIDS
The purchasing team will support staff in the evaluation of bids. Quotations and
tenders should be evaluated only on the information supplied not on past
knowledge of suppliers.
AWARD CONTRACTAWARD CONTRACT
When the evaluation is complete the contract will be awarded to the supplier that
has achieved the highest quality/price score.
MANAGE CONTRACTMANAGE CONTRACT
Following contract award for ongoing purchases the supplier will be monitored to
ensure that performance meets the standards required.

Function of purchasing department

The functions of purchasing department are varied and wide which are based upon different
approaches. The purchasing activities may be divided into those that are always assigned to the
purchasing department and those that are sometimes assigned to some other department. The
followings are some of the important functions which are necessary to be performed.
1. Receiving indents
2. Assessment of demand or description of need
3. Selection of sources of supply
4. Receiving of quotation
5. Placing order
6. Making delivery at the proper time by following up the orders.

7. Verification of invoices
8. Inspection of incoming materials
9. Meeting transport requirements of incoming and outgoing materials
10. Maintaining purchasing records and files
11. Reporting to top management
12. Developing coordination among other departments
13. Creating goodwill of the organisation in the eyes of the suppliers.

1. Receiving indents:
The first and foremost function of purchasing is receiving demand/requisition of material from
different departments of the organisation, such as from production, stores, maintenance,
administrative, drawing office, planning, tool room, packing, painting, heat treatment etc.
After receiving the indent from users departments it examines in details and takes action
according to the need and urgency of any item. This is called recognition of need. Sometimes,
needs can be met by transfer of a stock of one department to another department. In other
cases, the reserve stock or the stocks kept in bank can be utilized i.e., pledged stock with bank.

2. Assessment of demand or description of need:

After recognising the need with appropriate description, i.e., qualitative as well as quantitative, is
necessary for the sound and successful purchasing. An improperly described demand can cost
heavily money-wise as well as time-wise.
The real problem arises when the order is placed for want of preciseness in the description of
goods needed, the items are received and these are not acceptable to the user department and
it also becomes difficult to convince the suppliers to return the goods in case of faulty supplies.
Therefore, purchasing department must have adequate knowledge of items being purchased to
be able to secure full description.
The purchasing department should not have such alternative purchases of commodities, which
are not available easily, on their own responsibility or at a lower cost unless and until it gets the
consent from the user department.

In a nutshell, it is recommended that the description of items for purchase on the part of
indenter, purchaser and seller should be quite clear and without ambiguity to promote harmony
in an organisation.

3. Selection of sources of supply:

Most important function of a purchasing department or officer is the selection of the sources for
the requisitioned items of stores. There are different sources of supply which have no similarity
between them.
For majority of items, selection of one of the vendors should be made. While selecting the item,
the purchase officer has to see whether the item to be purchased is on a regular basis i.e., it is
being purchased time and again or it is a seldom purchase on non-recurring basis.
Whenever the items are to be bought from single manufacturer, such as branded or patented
item, there is no difficulty in the selection of the sources of supply; the order can be placed with
the party according to terms and conditions of their sale.
Selection of source of supply requires the services of shrewd purchasing officer who can keep
pace with policies of the organisation and market from where the materials have to be
purchased.

4. Receiving of quotation:
As soon as the purchase requisition is received in the purchase division, sources of supply will
be located; a decision is then taken in respect of the method of tendering/limitation of quotations
from prospective suppliers.
Prices are also ascertained by preparing a comparative statement with the help of either of the
following documents supplied either by the supplier or taken from the previous records of
advertisements, like:
(a) Catalogues, price lists etc.
(b) Telephonic quotations.
(c) Previous purchase records.
(d) Quotation letter or tender i.e., letter of inquiry.
(e) Sample and related price cards.

(f) Negotiation between suppliers and the purchase department like catalogue, price lists etc.
It is in the interest of purchasing department to keep this information up to date. Even for the
items which are being purchased on a regular basis, the purchasing section should invite
tenders and know full well the market price. It will ensure that prices being paid to the existing
vendor are competitive.

5. Placing order:
Placing a purchase order is the next function of purchasing officer. Since purchase order is a
legal binding between the two parties, it should always be accurate, clear and acceptable to
both. The purchase order should contain the following particulars:
(a) Description and specifications of the material.
(b) Quantity order.
(c) Transport and packing charges and shipping instructions.
(d) Name and address of the supplier.
(e) Date, time and place of delivery.
(f) Price, discount and terms of payment.
(g) Signature of the purchase manager.
(h) The name and address of the buyer.

6. Making delivery at the proper time by following up the orders:

Since one of the objectives of successful purchasing is delivery of goods at right time so as to
ensure delivery when and where needed? In normal practice, the responsibility of the
purchasing department is upto the time the material is received in the stores and is approved by
the inspection department.
Every purchasing department has the responsibility for follow-up of the orders it places on
different suppliers. All items do not require extensive follow-up. For some less important and low
value items follow-up would be costly and wastage of money and time only.

7. Verification of invoices:
In normal course, it is also the responsibility of purchase department to check the invoices and
accordingly advise the accounts department for clearing the payment to the parties concerned.
Contradictory statements have been given as to who should be assigned this function.
Some are of the view that invoices should be checked by the purchase department placed by it
whereas other suggests that it should go to the accounting department. In support of this, the
experts add that it is part of the responsibility of purchase department that orders are accurately
executed and properly filled as per terms and conditions of the contract.
If there is any error in the bills, the purchase department can get the correction done or
adjustment effected. If the invoices are checked by the stores or accounts departments, there
may be some delay in attending to the errors.

8. Inspection of incoming materials:

The purchasing department should have a close contact with inspection department. On receipt
of the materials from different suppliers, they are to be inspected as per specifications indicated
in the purchase order to verify their quality and quantity.
Uninspected materials are a burden on the economy of the organisation. If inspection is
delayed, the payments of the suppliers also are likely to be delayed, resulting in bad relations
between suppliers and purchasers.

9. Meeting transport requirements of incoming and outgoing

materials:
The purchasing officer must make goods/materials available at the right time they are required,
at the place they are needed, and at the lowest possible cost. It is a big responsibility, and even
a slight error amounts to delay in consignment required at a particular time.
In this regard, the purchase department should have a thorough knowledge of the means of
transportation. It should make a correct choice of carriers or routes because otherwise it may
entail delay and additional transportation costs.

10. Maintaining purchasing records and files:

Purchasing involves a lot of paper work. Daily a number of letters, bills, quotations, notes,
challans, railway receipts, parcel, way bills, bills of ladings, goods received notes, lorry receipt,

goods receipt (transport delivery notes), inspection notes have to be dealt with. It involves a lot
of clerical work.
This department has to refer to previous correspondence on purchase orders, notes,
catalogues, blue prints, price lists etc. very frequently which makes it imperative to maintain
records in appropriate manner. These records are essential for making the day to day purchase.

11. Reporting to top management:

It is also an important function of the purchasing department to prepare weekly, monthly,
quarterly, bi-annually and yearly reports regarding expenditures of this department and send the
same to top management along with details of purchases made and suggestions or
improvements, if any.

12. Developing coordination among departments:

A purchasing department has to fulfill the needs of other departments in the organisation. It is
the function of purchasing department to work in close coordination and cooperation with other
departments of the company.
To a considerable extent, the attitude and reactions of other departments towards purchasing
department extends to these other departments. Mutual trust and cooperation is essential
between the purchasing department and other departments to secure high degree of efficiency.

13. Creating goodwill of the organisation in the eyes of the

suppliers:
Good vendor relationship has to be maintained and developed to reflect enterprises image and
goodwill. Maintaining such relations requires mutual trust and confidence which grows out of
dealings between the two parties over a period of time. Worth of a purchasing department can
be measured by the amount of goodwill it has with its vendors.

Purchase policy and guidelines

Purchasing Policy
At Fujifilm we contribute to the quality of life through our products and services. To provide these, we, in turn,
purchase materials and services from suppliers around the world. Our purchasing policy promotes consistently
high standards in these transactions.

Basic Purchasing Policy

Fujifilm performs purchasing activities based on the Fujifilm Group Procurement Policy.

Purchasing Guidelines
In applying our purchasing policy, we pursue fairness by following ten guidelines.
1.

1.Quality, price, reliability, and supply stability are the main criteria upon which we base decisions on
initiating new business and carrying out specific transactions.
2.
2.As a rule, we compare offers from several vendors simultaneously to nurture competition and select
suppliers fairly.
3.
3.We purchase from multiple suppliers to avoid excessive reliance on a single vendor and to prevent
vendors from depending excessively on us.
4.
4.We create opportunities for newcomers by periodically reviewing our regular vendors.
5.
5.We request offers only when considering purchasing. If asked, we explain, within limits, our reasons
for not accepting an offer or competitive bid.
6.
6.As a rule, we specify terms in written contracts. Ongoing transactions are also based on written
contracts.
7.
7.We to not require vendors to purchase our products or services.
8.
8.We preserve the confidentiality of vendor information obtained in transactions.
9.
9.We do not engage in transactions that lead to the violation of a third party's intellectual property
rights.
10.
10.Our purchasing personnel do not permit personal interest to influence relationships with existing or
prospective vendors.