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Lesson Note Principles of Purchasing

The document discusses the importance of materials management and purchasing in business operations, emphasizing that effective procurement is essential for reducing costs and ensuring profitability. It outlines the key functions of purchasing, including identifying needs, selecting suppliers, negotiating terms, and ensuring compliance with agreements. Ultimately, purchasing is defined as the responsibility of acquiring the right materials and services at the right time and price to support organizational activities.

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Victoria Udoka
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23 views

Lesson Note Principles of Purchasing

The document discusses the importance of materials management and purchasing in business operations, emphasizing that effective procurement is essential for reducing costs and ensuring profitability. It outlines the key functions of purchasing, including identifying needs, selecting suppliers, negotiating terms, and ensuring compliance with agreements. Ultimately, purchasing is defined as the responsibility of acquiring the right materials and services at the right time and price to support organizational activities.

Uploaded by

Victoria Udoka
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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HISTORY OF PURCHASING

There are only wo fundamental inputs in which management, be it in private or public sector

of an economy, is primarily interested:(ii) Men and (i) material management is equally

interested in other resources. However, from management point of view, materials

management offers greater promise as a cost reducing device. The reason(s) are not far-

fetched. The basic goal of a business activity the development and manufacturing of products

that can be marketed at a profit. This goal is accomplished by the appropriate blending of

what management authorities historically have called the five M's: Machines, Manpower,

Materials, Money, and Management. Materials today are the lifeblood in the industry.

Materials of the appropriate quality must be available at the right time, in the right quality, at

the needed location and an acceptable total cost. Failure to fulfill any of these responsibilities

concerning materials to company costs and decreases company profit just as would do

outmoded production methods, inefficient personnel, and ineffective marketing activities.

The Concept of Purchasing:

Procurement or better still, purchasing (The two terms all be used interchangeably), is one of

the basic functions common to all type of business enterprises. These functions are so basic

because no business can operate without them. By its very nature, purchasing is a 'service

function, orientated towards catering for the supply requirement of various departments by

making purchases of materials, requirements, supplies or services, etc. Which they need.

Carter (1989) thus described purchasing as: The department, which is concerned with the

process of ascertaining the organization's material and service needs, selecting suppliers,

agreeing on terms, placing orders and receiving goods and service.

Most English dictionaries have stated that procurement mean buying, while supply is stated

to mean the art of providing articles or materials. Viewing purchasing broadly, siropolis
{1977) conceptualized purchasing in terms of the essential activities or task associated with

the acquisition the materials. services and equipment used in the operation of an organization.

According to him, the purchasing function involves:

1) pinpointing the need for materials and services

2) searching out and selecting suppliers

3) settling with suppliers Such matters as price and payment terms

4) Signing the contract or order

5) following through to make sure suppliers live up to their end side of the agreement.

In summary therefore, Siropolis (1977) defined purchasing as a business function this way: It

is the entrepreneur's responsibility to buy materials and services of the right quality, in the

right quantity, at the right time, from the right supplier, at the right price. Lysons, K. (2000,

p.1) in answer to a question, which he posed as what is purchasing" defined purchasing as:

The function responsible for obtaining by purchase, lease or other legal means, equipment.

materials, Components, supplies and services required by an undertaking for use in

production or resale.

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