Purchase department plays important role

The purchase department plays a very important role in an organization because purchasing has its effect on every vital factor concerning the manufacture, quality, cost, efficiency and prompt delivery of goods to customer. Its function is to procure material, supplies, services, machines and tools at the most favorable terms consistent with maintaining the desired standard of quality. Purchasing is the most important function of materials management as the moment an order is placed for the purchase of materials, a substantial part of the company’s finance is committed which affects cash flow position of the company. Thus if the size of a business concern permits, there should be a separate purchasing department. The head of this department is usually known as the purchase manager or Supply manager or the Chief Buyer. The basic objectives behind establishing a separate purchasing department:

• To make continuous availability of materials so that there may be uninterrupted flow of materials for production.
• To make purchases competitively and wisely at most economical prices.
• To make purchase in reasonable quantities to keep investment in materials at minimum .
• To purchase proper quality of materials to have minimum possible wastage of materials and loss of production.
• To develop good supplier relationship which will ensure the best terms of supply of material.
• To develop alternate sources of supply so that materials may be purchased from those alternate sources if a particular supplier fail to supply the materials,
• To adopt the most advantageous method of purchase to ensure smooth delivery of materials from suppliers and to avoid risks of any disputes or financial loss.
• To serve as an information centre on the materials knowledge relating to prices, sources of supply, specification, mode of delivery etc.

The basic objective of setting up a separate purchasing department is to ensure continuous availability of requisite quality of materials, to avoid help up of production and loss in production and at the same time reduce the ultimate cost of the finished product.