CONCEPTS OF PURCHASING MANAGEMENT
Introduction.
Management is the manipulation of organization resources with the aim of optimizing their use so as to maximize profit and achieve various objectives. It can also according to Mary Parker be defined as the art of getting things done through people. A concept is mainly an idea or intervention to help sell or publicize a commodity. Generally, purchasing in itself refers to the process involved in ordering and receiving goods and services via means of request or creation of a purchasing order and the receipting of goods. Purchasing management can be referred to as the concept of managing strategic purchasing. Strategic purchasing is the process comprised of planning, implementing, evaluating, and controlling operating purchasing decisions for
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Supplier payment
• Relationship management:
This comprises on performance monitoring and improvement
Principles of purchasing management
i. Right price
The price of an item is the primary concern of any manufacturing organisation. Generally, it is determined by the cost of production, quality, delivery time, demand and supply. Right price is determined through value analysis. There is need for negotiation between suppliers and the purchasing departments to come up with the right price ii. Right quantity
Excess purchases should be avoided as it results in overstocking. To determine the right quantity to be purchased the manufacturing organisation should consider the changes in tastes and preferences of the market, warehousing capacity of the purchasing organisation and materials to be purchased. iii. Right time
In cases of regularly used items, right time refers to the time the stock reaches minimum level. To determine the right time, the purchasing manager should have the lead time information for all products. Lead time is the duration between need recognition until item delivery and provision for its use. This covers the entire time span for the materials cycle. iv. Right
The cost of the product manufactured in the industry are planned by the strategic managers, they planned according to the present strategy of the company and their rivals in the market. The cost leaders make the low price strategy when they having a huge demand on the product, as they reduce the price the demand of product increased. Then the market value of the product will be raised.
The distribution of the product determines the pricing policy because if the seller decides to sell the product at exclusive stores then the price is likely to be high. The costs of production also affects the pricing as the higher the costs, the greater its price. The organizational goal is also a major influential factor for pricing. If the organization strives for profit maximization, then the price will be set high. However, if the aim of the seller is to survive then the price will be set...
When it comes to selling a product, one of the most important aspects to consider is how you manage the inventory. Typically, people do not think about how inventory can drive company costs and how much thought must be put into this topic. Businesses must consider product demand, lead time, holding costs, service levels, among many other variables. All of these factors will result in different methods of holding inventory and will determine how a business orders their materials.
*A basic economic concept plays a vital part in prices of goods. The prices are set in a market that is supported by the laws of supply and demand. Supply and demand factors determined the wants and desires of people or a group. Supply is the product or service a producer has uncommitted and capable to legal transfer by selling . Demand is the amount of the product or service that buyers want to buy .This means that every market has two sides. The two sides are buyers and sellers. The demand side of the market are the buyer. The supply side of the market are the sellers. The relationship of supply and demand has a lot of influence on the price of tangible and intangible goods that are made and bought to satisfy the needs and desires of consumers in a society.
There are various factors that affect price decisions (inflation, suppliers, competition, demand, and quality of the product or sensitivity).
The furniture company Somerset needs to retain its customer service record and remedy any of its global supply chain issues before it has an adverse effect on the brand and start losing customers. With a frequent change in the product catalog, keeping an excessive inventory will cut its profit and some of the product may become obsolete even before the furniture hits the retail outlet stores. In order to achieve profit and success, business employee many strategies and the supply chain strategy are one of the operational management techniques that use analytical decision making process to achieve the company goals and provide tools to effectively compete in the market (Taylor and Russell, 2014).
Meanwhile, price strategies are important to be considered by every marketer before market a new product into a new market. Basically, the price is the amount a customer pays for the product. It is determined by a number of factors including market share, competition, material costs, product identity and the customer’s perceived value of the product. The business may increase or decrease the price of product if other stores have the same product.
The basic goal of inventory management is balancing the conflicting economics that don’t want to hold too much of stock. Inventory problems of greater or smaller quantities on hand is the reason behind business failures, production halts occur when manufacturer experiences stock out. When an item is not stocked according to the customer expectations, the retailer have to pay the penalty of losing its customer not only in this but also in future period of time. Wanke [2] studied that inventory management approaches are a "functions of product, operations related and demand related variables like delivery time, obsolescence’s, coefficient of variance in sales and inventory turnover" and that logistics managers may decentralize
Price is the amount of money paid by customers to purchase the product. Margin account should be taken into account in the decision as a response to the possibility of a competitor according to quickmba, 2004. The price which is creates sales revenue. For example is the cost. The price of goods is an important factor in the value of sales made. In theory, prices should be determined according to customer demand with the goods sold are affordable. Customers will researching the prices of goods sold because it shows how they appreciate what they are looking for and what they want to pay. The price is not issue to my restaurant. This is because my restaurant offers the price that customer can afford. We are offers a premium and medium price to the customer compare to other restaurant. Besides that, we also offering a high quality in service compare to other. For example, other restaurant they offer the best quality food at the highest prices compare to us we are offer a high quality food and service at the premium and medium
Price is the values entirety that consumers trade for the advantages of having or utilizing the product or services. Different places and cultural have different spending culture. Therefore the price has to be relevant according to the product offer because it can reflect the image of a
The price of a product brought some interpretation by the user. Low price is considered as poor quality. High price is difficult for the market because customers prefer to choose products at the low price. The price can determine the gain or loss of a business. Marketers must be clever in the pricing of a product.
With supply solely, factors involved with regulation of the supply also control some aspects of demand. Things such as production costs and desired net profit can determine whether a business succeeds or not. Having a balance between quantity and price is the greatest control any business can have. Pricing is obviously one of the most beneficial, or destructive, parts of a business. Pricing is the first and most valuable thing an individual will look at, which will overrule most other judgments based off of quality and detail. Balancing the price, however, helps to create a pristine product, with just the right amount of detail that will fuel the market, while still generating a steady net income.
Purchasing process is the process of buying the right material, at the right quantity, at the right moment, at the right price and from the right supplier ( Heinritz et al, 1986). It can also be defined as the way an organisation behaves towards it suppliers, as suppliers are the pillar of strength for all organisations at large. According to We...
Inventory management is a method through, which a business handles tangible resources and materials to ensure availability of resources for use. It is a collection of interdisciplinary processes including a full circle from the demand forecasting, supply chain management, inventory control and reverse logistics. Inventory management is the optimization of inventories of manufactured goods, work in progress, and raw materials. According to Doucette (2001) inventory management can be challenging at times; however, the need for effective inventory management is largely seeing more as a necessity than a mere trend when customer satisfaction and service have become a prime reason for a business to stand apart from its competition. For example, Wal-Mart’s inventory management is one of the biggest contributors to the success of the company;
The acquisitions process starts from obtaining the necessary raw materials to make a product and ends with the delivery of the product to the buyer. Acquisition and Supply Chain Management encompasses activities such as contract administration, product procurement and manufacturing, and logistics.