1. DPS 304 : Purchasing /Procurement Activities
Purchased materials account for about 50% of the total manufacturing cost. Therefore purchasing plays a crucial role in the Supply Chain Management. Quality starts with purchasing. Purchasing must ensure that parts & materials are: Of correct quality; in correct quantity; and Delivered on time. Therefore it is important to select suppliers committed to quality and make them an integral part of the company’s quality program.

2. Purchasing Activities
Co-ordination with user departments to identify purchase needs
Discussions with sales representatives
Identification of potential suppliers
The conduct of market studies for important materials
Negotiation with potential supplies
Analysis of proposals
Selection of suppliers
Issuance of purchase orders
Administration of contracts and resolution of related problems
Maintenance of a variety of purchasing records

3. Procurement Activities
Participation in the development of material and service requirements and their specifications
Conduct of materials studies and management of value analysis activities
Conduct of more extensive material market studies
Conduct of all purchasing function activities
Management of supplier quality
Purchase of inbound transportation
Management of investment recovery activities (salvage of surplus and scrap)

4. Purchasing / Procurement Goals
Provide an uninterrupted flow of materials, supplies, and service to operate the organization
Keep inventory investment and loss to a minimum
Maintain adequate quality standards
Find or develop competent vendors
Standardize items bought where possible
Purchase required items and services at the lowest ultimate price
Improve the organization’s competitive position
Have good relationships with other departments
Keep administrative costs down

5. Scope and Size of Procurement Function
Depends on variables such as:
the business's strategy and policy as a whole.
make or buy policies
centralisation or decentralisation of purchasing decisions
integration of information systems nationally and internationally
the firm's size and complexity. Small firms with low volume needs may not need a specialist P officer. Buyers of large volumes do.
technical complexity of the goods and services themselves. Do buyers need technological understanding? Supply chain co- ordination may involve advanced IT systems.
multi-item, multi-site, cross border, intra-firm purchasing- to manage and control these interactions may need a bigger function.

6. Procuring for Different Types of Businesses
Primary industry - mining and extraction firms
These firms usually drill, blast, pump, store, move material.
Their operations need capital equipment, consumables, maintenance/repair services and others

7. Procuring for Different Types of Businesses
Manufacturing operations
They process materials/components by shaping, forming, converting, fabricating, assembling. Their processes range across unique design projects, jobbing (one-offs, small or large batch) and line- operations ( large batch or continuous flow e.g. petro-chemicals).
Procuring for these organizations require use of
Formal MRP1 (materials requirements planning) systems with detailed forecasting

8. Procuring for Different Types of Businesses
Service operations
Wholesaler or retail distributors buy and stock goods for resale - adding some service value e.g. polishing, displaying, customer care and staff training. They may offer information and document based products. ( Procure for Stock )
Service providers on the other hand purchase: consumables, fixtures/fittings, phones, carpets, and support services. ( Time based procurement very critical)

9. Buying Situations
Routine order situations -product has been purchased many times in past and has established ordering routines
Procedural problem situations - non-routine and may require training employees on new product use
Performance problem situations - non-routine purchases of substitutes for current products which must be tested for performance
Political problem situations - non-routine purchases for products whose use would affect many departments across the company.

10. Purchasing Decisions
Most important evaluation criteria include considerations on Quality, Price, Delivery, and Service. The decisions relate to what to buy, how much to buy, when to buy, who to buy from etc.

11. Purchasing Decisions Forward buying
Forward buying
This means purchasing in excess of current requirements.
Reasons for forward buying include to minimize risk of rising material costs and protection against future availability.
Disadvantages of forward buying are prices actually going down rather than up and Increased carrying cost.

12. Purchasing Decisions Volume Contracts
Volume Contracts
Sometimes organizations enter into contract with their suppliers as a way of ensuring constant supply quantities and prices and. This helps them meet purchase requirements over time. This may also lead to better quality materials

13. Purchasing Decisions Systems contracts or blanket orders
Systems contracts or blanket orders
These are related to volume contracts. The company agrees to purchase a certain amount over a period of time but they are not legally binding amount. Rather they are just assurances on either parties. They get fixed price. They are also referred to as stockless purchasing because of the lower inventory levels