It is the function responsible for the coordination of planning, sourcing, purchasing, moving, storing and controlling materials in an optimum

manner so as to provide a pre- decided service to the customer at the minimum cost.

Purchasing involves the sourcing, purchasing and delivery of goods and services that a company needs either in its manufacturing and business management or for stock that it resells at a profit. The purchasing department is a very important, if not the most important, part of a business as its good management directly impinges on the bottom line.

Some companies interchange the word procurement for purchasing, in others procurement means purchasing via tender and purchasing means the day to day purchasing via Master Sales Agreements with a select group of suppliers. One of the methods that are used to ensure good purchasing management on day-to-day purchases is the use of purchase orders and purchase requisitions constrained by a known set of rules and procedures. Purchase orders are used to order directly with an agreed supplier

Purchase requisitions are usually raised by people external to the purchasing department when they need a particular product either for maintenance purposes or to increase stock in abnormal situations. In charge of purchasing management will be the Purchasing Manager and they will have a number of purchasing clerks and administration clerks working for them. They will all have job descriptions that detail their roles and responsibilities.

An individual in a company who has the responsibility of purchasing the items required by the company. The purchasing manager is typically in charge of purchasing whatever the company needs, from regular office supplies, to the materials that would be used to manufacture the companys products. In larger companies, the purchasing managers role will sometimes be more supervisory, with other employees in charge of placing the orders.

Materials planning and control: 1. Based on the sales forecast and production plans, the material planning and control is done. 2. This involves estimating the individual requirements of parts, preparing materials budget, forecasting the levels of inventories, scheduling the orders and monitoring the performance in relation to production and sales.

Purchasing 1. This includes selection of sources of supply, finalization of terms of purchase, placement of purchase orders, follow- up, maintenance of smooth relations with suppliers, approval of payments to suppliers, evaluating and rating suppliers

Stores and Inventory Control: This involves physical control of materials, preservation of stores, minimization of obsolescence and damage through timely disposal and efficient handling, maintenance of store records, proper location and stocking.

Better Accountability: 1. Through centralization of authority and responsibility for all the aspects of materials function, a clear cut accountability is established. 2. This helps in evaluating the performance of materials management in an objective manner.

Better coordination 1. When a central purchase manager is responsible for all the functions, the departments under the manager create an identity which is common. 2. It results in better support and coordination in the accomplishment of the materials function.

Better performance: 1. As all the interrelated functions are integrated organizationally, greater speed and accuracy results in communication. 2. Need for materials is promptly brought to notice by materials planning. 3. Purchase department is fed with stock levels and order status by stores and inventory control departments. 4. All this calls for judicious decisions leading to lower costs, better inventory turnover, reduce stock- out options and a general reduction in paper work.

Better morale and team spirit: 1. Under a centralized materials manager, a team spirit is inculcated. 2. This results in better morale and cooperation. 3. The opportunities for growth and development are better in an integrated set- up.

MBO is a tool which is increasingly used by many

organizations.

Reddin defined MBO as the establishment of effectiveness areas and effectiveness standards for managerial positions and the periodic conversion of these into measurable time- bound

objectives linked vertically and horizontally and

with future planning.

A clearly defined Purchase Management policy enables the spelling out of authority and responsibility. It helps in identifying the prerogatives of materials management to avoid confusion that may arise in inter- departmental activities.

Within the materials management area, it facilitates uniform and consistent action in various activities. Procedures and systems get standardized, leading to greater overall efficiency.

Organization: Important areas that come under this category are: 1. Internal structure 2. Delegation of authority 3. Interface relations 4. Coordination of the entire materials management 5. Training needs 6. Development of policy manuals

Purchasing: The important areas of the purchase department are: 1. Source development. 2. Quotations 3. Receiving salesmen 4. Negotiations 5. Personal buying 6. Capital equipment buying 7. Make or buy decisions

These are the areas where the purchase department has to be given exclusive powers with no interference of the others.

Stores: 1. Procedures must be established for receipt, inspection, handling, storing, issue, stock verification, surplus and obsolete material disposal so that their inventory control levels are kept at a desired level. 2. This will ensure proper accounting, safety, minimum lead time.

Policy Manual: 1. Due to its complex nature and its contribution to overall company objectives, many organizations have found it desirable to compile policy manual covering all aspects of material management. 2. The manual is generally prepared with a note from the Chairman. 3. Such a policy manual will be circulated to all the divisions up to the middle management level so as to make certain that policies and procedures are consistently are consistently followed leading to the achievements of corporate objectives.

Some organizations in India have a dirextor in the board exclusively in charge of materials and even small organizations are no exception to the order.

Once the relationship of purchase management with regard to other departments in the overall organizational plan is finalized, the next step is to finalize the internal structuring of the department.

1. Organization based on Commodities: Under this system items are classified according to their nature such as raw materials, spares, finished goods, etc. Depending on the importance of the group, workload varies between the groups and this forms the basis for determining the staff in each commodity group.

The advantage of such a system is that there is no wasteful duplication of efforts as each commodity is separately handled. The group is intimately in touch with its respective commodity market and hence become specialized. Bulk buying and standardization are facilitated in each case.

2. Commodity based on Location: When an organization has several plants located in different parts of the country there are two alternatives. One is to have a centralized organization located at the headquarters. The other is to have a decentralized purchase management set up in each location.

There are many reasons favoring the latter alternative: 1. When the distance between the plants are significant, the purchase management function is impaired when controlled from the headquarters, both in terms of cost and time. 2. The plants product lines play a very important role. Each plant may require many unique materials and a materials management deptt located at the plant will be in much better coordination with plants production, finance and marketing deptt.

Advantages: 1. Buying in bulk and combining the requirements reduces the cost. 2. Surplus in one plant can be used to meet the requirements of the other plant. 3. Since there is only one department dealing with various sources of supply, a high order of skill can be expected.

3.Organization based on Function: Here the materials management deptt is structured on the basis of functions such as stores, transport, receiving, purchase and so on. Thus, stores of different manufacturing divisions will be under one individual who will report to materials manager.

All purchasing activities will be again under one individual who will report to the materials manager. This system which permits specialization in each function is now followed by many organizations in India.

The project schedule would require timely procurement of materials. Storage at site where conventional stores management aspects were not relevant. Flexibility of the set- up to spot inter changeably materials and equipments between projects to avoid delay and idling of equipments.

Ability to obtain or forecast costs which will assist in costing the entire project.

The importance of various factors that has been realized by the materials manager are as follows: The companys long range requirements of materials. The likely sources of supply and their capacities over the next 10 years. Anticipation of shortages in a particular sector.

The technological changes expected in the markets from which materials are purchased. The likely price trends. The expected changes in the government policy in the related areas.

Materials research can be defined as a systematic, formal and continuous analysis of all the factors affecting the materials function. The aim of the research is to ensure optimal decisions, particularly for important items and key raw materials.

Economic Analysis. Market Analysis. Supplier Analysis. Transportation Analysis. Price Analysis. Purchase Analysis.

Techniques and Reporting: SWOT Analysis: 1. The SWOT analysis means Strengths, Weaknesses, Opportunities and Threats. 2. SWOT when carried out helps to formulate strategies for optimal decisions. 3. The information which the executive in charge materials research function requires it normally available in India.

Selective Approach: 1. The ABC analysis approach can be successfully applied in conducting materials research. 2. If this research is not carried out, then the research team would be flooded with projects which have a significant pay- offs. 3. The first step is to identify projects which have a significant pay-offs in a short term.

Maintaining continuity of supply: The purchasing function must ensure the continuous availability of material, supplies and equipments to maintain production schedule or to avoid disruption in production. The purchasing function also requires investments in reserve inventories. The efficiency of purchasing function lies in proper balancing of these factors which require experience, judgment of future activities and trends and various other activities on the part of purchasing authority. Maintenance standards quality: The purchasing function must ensure that the material purchased must be of required quality in order to produce the goods according to specifications and to maintain quality standards.

Avoidance of duplication, waste and obsolescence:The purchasing authority must have the accurate knowledge of the items in hand and the requirements of materials for a particular period in order to have proper decision in view of long range and short range plans. This is necessary to avoid duplication, waste and obsolescence with respect to various items purchased.

Maintenance of company's competitive position: The purchasing authority must constantly examine his specifications for the purchase of right material. This is necessary to make sure that his company's quality standards are neither higher nor lower than those of close competitors and to maintain his company's position in the industry.

Maintenance of company's good image: The purchasing agent must create a good image in the minds of suppliers. This will help him in purchasing operation and to discover new ideas and materials besides lowering its cost or improving products.

Developing alternative sources of supply: Alternative sources of supply should be exposed for increasing the bargaining power of the buyer and minimizing the cost of purchases. Purchases can be made from alternative sources if a particular supplier fails to supply the required items.

Total quality management (TQM) is a management philosophy and strategy designed to involve all members of an organization in the process and responsibility for producing quality products and services.

Total quality management is based on the ideas of W. Edward Deming, Philip B. Crosby, and Joseph M. Juran, quality-control experts in the United States and Japan. TQM was first associated with the Toyota production system. Companies using a total quality management system typically incorporate systems business process reengineering, analyzing and redesigning the work environment traditional quality systems such as ISO 9000

Total quality management includes eight principles. Define quality in terms of customers and their requirements. Pursue quality at the source. Stress objectives rather than subjective measurement and analysis. Emphasize prevention rather than detection of defects. Focus on process rather than output. Strive for zero defects. Establish continuous improvement as a way of life. Make quality everyones responsibility.

The nine total quality management principles lead to sets of activities that will vary, depending on the nature of the organization. Management professor Robert J. Trent developed a set of activities for applying total quality management (TQM) to supply-chain management (purchasing), including the following.

Identify internal supply-chain customers and establish communication linkages. Conduct regular performance reviews. Create performance measures that quantify expectations and requirements. Involve suppliers early in product and process development. Develop a consistent source-selection procedure. Upwardly migrate supplier-performance targets. Use longer-term selectively

TQM consultant Rod Collard describes the implications of total quality management programs as reductions in staff numbers, particularly those previously responsible for directing others changes to a flatter management style, including teamworking and cross-functional teams less control of tasks by individuals, since everyone is responsible for quality