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
Due to the various options of distribution channels their prices vary. Consumers take that into consideration when purchasing their products.
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...
Price - Price of the product is set for the customer to purchase the product. It also determines profit.
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.
Murray and Dicroce (2003) suggest that management is a process that uses resources to achieve specific goals effectively; basic management functions including planning, organising, coordinating, directing and controlling. The term of manager can be appointed to the person to plan, organise, coordinate, supervise, negotiate, evaluate and use resources available in the best way possible to achieve the best service. Alternativ...
When setting their price, Hasbro first needs to know the cost to manufacture the toy, including the design and development costs, raw materials, production and third party manufacturing costs, storage, delivery and lastly quality and safety costs. Once Hasbro has gathered the necessary data to calculate the actual per unit cost of producing the toy they can set a price that will return a
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).
Another important aspect of obtaining an efficient supplier is to mitigate any delays in the shipping process from the supplier to Space Age Furniture Company. The level of supply and demand is critical to the organizations profits and satisfaction rates to its consumer demands.
‘Supply chain management integrates supply and demand management within and across companies. It encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, thir- party service providers, and customers’. (Web: Council for Supply Chain Management Pr...
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
In order to survive in the competitive environment of today’s business world, it is imperative for organisations to cope with uncertainty and unrest. The strategies pertaining to survival /coping are the result of accumulated/ acquisition of new knowledge that occurs through learning (Bhaskar & Mishra, 2014). An organisation’s ability in learning, applying and spreading new insight has been persuaded as the fundamental strategic capability (Fiol & Lyles, 1985). Bontis et al. (2002) noted that in order to continue to exist in today’s complex environment, organisations must learn efficiently and effectively. The rate at which individuals and organisations learn is the leading source of competitive advantage (Stata, 1989). Thus, learning is pondered
Previous researchers have shown that there is a positive relationship between cooperation and satisfaction (e.g. Mallen, 1963; Dwyer, 1980; Schmitz Whipple and Gentry, 2000). The cooperative efforts of channel members should results in greater trust, commitment, channel efficiency and the achievement goals, thus leading to higher levels of satisfaction. (Jonsson and Zineldin, 2003).
In business, management can be defined as (1) the pursuit of organizational goals efficiently and effectively by (2) integrating the work of people through (3) planning, organizing, leading and controlling the organization's resources. Management is a theory and a way of doing business. It is a process that is exercised in order for an organization to be successful. This process is generally broken down into four established functions: planning, organizing, leading, and controlling. Management is the function that determines how the organizations human, financi...
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.
Step 1, need recognition: the organizational buying process is a form of problem solving resulting from a buying situation that is created when someone (the purchasing manager, the consulting manager or as regulatory requirement) in the organization recognizes a problem that can be solved through some buying action so that the discrepancy between a desired outcome and the prevailing situation can be resolved.