Purchasing is the formal process of buying
goods and services
Goods are items that are usually (but not always) tangible, such as pens or Apple, apples. Services are activities provided by other people, such as teachers or barbers. Taken together, it is the Production (economics), production, distributio ...
. The purchasing process can vary from one organization to another, but there are some common key elements.
The process usually starts with a
demand
In economics, demand is the quantity of a goods, good that consumers are willing and able to purchase at various prices during a given time. In economics "demand" for a commodity is not the same thing as "desire" for it. It refers to both the desi ...
or requirements – this could be for a physical part (
inventory
Inventory (British English) or stock (American English) is a quantity of the goods and materials that a business holds for the ultimate goal of resale, production or utilisation.
Inventory management is a discipline primarily about specifying ...
) or a
service. A
requisition is generated, which details the requirements (in some cases providing a requirements specification) which actions the
procurement
Procurement is the process of locating and agreeing to terms and purchasing goods, services, or other works from an external source, often with the use of a tendering or competitive bidding process. The term may also refer to a contractual ...
department. A
request for proposal (RFP) or
request for quotation
A request for quotation (RfQ) is a business process in which a company or public entity requests a quote from a supplier for the purchase of specific products or services. RfQ generally means the same thing as Call for bids (CfB) and Invitati ...
(RFQ) is then raised. Suppliers send their quotations in response to the RFQ, and a review is undertaken where the best offer (typically based on
price
A price is the (usually not negative) quantity of payment or compensation expected, required, or given by one party to another in return for goods or services. In some situations, especially when the product is a service rather than a ph ...
,
availability and
quality
Quality may refer to:
Concepts
*Quality (business), the ''non-inferiority'' or ''superiority'' of something
*Quality (philosophy), an attribute or a property
*Quality (physics), in response theory
*Energy quality, used in various science discipli ...
) is given the
purchase order.
Purchase orders (PO) can be of various types,
[Purchasing Handbook: Standard Reference Book on Purchasing Policies, Practices, Procedures ... By George W. Aljian] including:
*standard - a one time buy
*planned - an agreement on a specific item at an approximate date
*
blanket - an agreement on specific terms and conditions: date and quantity and amount are not specified.
Purchase orders are normally accompanied by
terms and conditions which form the contractual agreement of the transaction. The supplier then delivers the products or service and the customer records the delivery (in some cases this goes through a goods inspection process). An
invoice
An invoice, bill, tab, or bill of costs is a commercial document that includes an itemized list of goods or services furnished by a seller to a buyer relating to a sale transaction, that usually specifies the price and terms of sale, quanti ...
is sent by the supplier which is cross-checked with the purchase order and documents specifying which goods have been received. The payment is then made and transferred to the supplier.
Types of purchases
Depending on what type of purchase you are going to make, then the process concerned is not the same. The following examples show the different processes that take place concerning the different purchase types.
Personal purchases
The
consumer
A consumer is a person or a group who intends to order, or use purchased goods, products, or services primarily for personal, social, family, household and similar needs, who is not directly related to entrepreneurial or business activities. ...
purchases for the consumption of themselves, then they fall into this very important category class. They are ultimately driving the economy through the purchase of its products. Therefore, the economy becomes dependent on them.
Mercantile purchasing
Facilitated by middlemen for the intention of re-sale to meet others requirements. Agents, wholesalers and retailers come under this category providing their own channels of distribution to the consumer.
Industrial purchasing
The is buying to convert material into
finished goods and
product. It entails buying
raw materials. Components, supplies and consumable stores, spares and tools, machines and equipment and office appliance.
Institutionalized or government purchasing
Government agencies or institutions are very important, critical, they purchase in bulk for
public utilities.
References
{{reflist
External links
Chartered Institute of Purchasing & Supp
Procurement