CHAPTER ONE
1.0 INTRODUCTION
Successful business management rely mostly on well
co-ordinated function of activities, these include finance, personnel,
production, marketing and purchasing.
All of these functions form this activities that makes up
a business organisation, however if one these functions is weak, it
will definitely affect the overall efficiency of the other functions.
Purchasing which is one of the business activities is as old as the
birth of business enterprise itself and it is considered to be the basic
function of activity in an organisation.
Purchasing is the attempt by business organizations to
acquire goods or services or materials needed in order to accomplish the
goals of the enterprise. This can be viewed from two perspective namely
as a function and as a system.
Purchasing as a function is that aspect of business
enterprise which ensures the uninterrupted flow of needed materials into
the organisation having in mind profitability and economy, while
purchasing as a system involves the acquisition of materials, equipment
goods and services which are essential for the operations of a business
organisation.
Unfortunately, since top management historically had
focus on Marketing, Finance, Research and Development and Production,
purchasing which is a basic function was not given much recognition, it
was seen as a minor function and this led to the recruitment of clerks
who were not skilled in the profession as purchasing officers. These
created a lot of quality problems to the firms and led to the closure of
some, but the Second World War, industrial revolution and the emergence
of competition created a problem of scarce resources, then there was
the need for tactical purchasing, this was when management started given
more recognition to purchasing.
Purchasing simply mean procurement and this include some
processes which are sourcing, preparation of purchase order, expediting,
receiving and inspection of order, invoice audit and invoice
settlement, all of those will depend on the purchase requisition sent by
the needing department to the purchasing department.
The purchasing department is the heaviest spender of the
organisation resources and contributes directly to the profit of the
organisation through purchase discount and efficient buying.
The purchasing department is charged with the purchasing
functions and any purchase made by this department is known as
organizational purchasing.
1.1 DEFINITION OF KEY TERMS
- PURCHASE REQUISITION: This is a precise document generated
by an internal organization to notify the purchasing department of
items needed or the items it need to order.
- PURCHASE ORDER: This is a commercial document issued by a
buyer (i.e Purchasing department) to a seller (i.e Supplier) indicating
types, quantities and agreed prices for products or services the seller
will provide to the buyer.
- SOURCING: This refers to a number of procurement practice
aimed at finding, evaluating and engaging suppliers of goods and
services.
- EXPEDITING: This is a concept in purchasing for securing
the quality and timely delivery of goods and services ordered for.
- PURCHASE DISCOUNT: This is an offer from the supplier to
the purchaser to reduce the selling price if the payment is made within a
certain period of time.
- PROCUREMENT: This concept purchasing mean to obtain or take possession of materials needed for smooth operation.
1.2 STATEMENT OF RESEARCH PROBLEMS
Every organization has the challenge of wanting to meet
up with consumers expectation by making the product available at the
right time and in the right quality while trying to meet up with
consumers demand. Some of the areas in which problem have been sought
include.
i. How the purchasing department makes contribution to the profit goal of the organization.
ii. How the purchasing department acquires input do they make
use of the normal purchasing process or there is a standard set by the
organization.
iii. Keeping a perfect working relationship with the other departments and the suppliers.
iv. Is the purchasing department playing any role in quality control?