The functions and responsibilities of the purchasing department can be broadly outlined as below:
- To make the materials, supplies and equipment available for the organization at minimal costs, such that it leads to maximum productivity and subsequent profitability of business operations.
- To make sure that there is continual flow of production with undisrupted supply of raw materials, component parts, supplies, tools, equipment, etc. with repairs and maintenance services.
- To enhance the asset turnover ratio, such that the investments made in fixed assets as well as inventories are minimal with respect to the corresponding volume of sales. This will also increase the profitability of the organization.
- To identify alternate sources of supply, increase the bargaining power of the buyer and ensure cost minimization and increased ability to meet the emergencies.
- To establish good relations with the suppliers, which helps in communicating a favourable image in the business circles, and these are often useful when it comes to changing reasonable prices, preferential material allocation during shortages, intimation about foreseen shortages, details about the newly established substitute, outstanding payments during temporary liquidity crisis, etc.
- To attain maximum integrity with other organizational departments, including production department or material specs, flow and recommended supplies of certain items, etc., engineering department for purchasing tools, machines and equipment, marketing department for sales forecasts and impact of input quality on output quality, finance department to maintain levels of materials, scheduling investments, etc., and personnel department to man and develop personnel, maintain supplier relationships, etc.
- To train personnel and develop them and ensure management succession with contented workforce.
- To ensure efficient recordkeeping and management reporting, such that paper processing is standardized and recordkeeping is maintained.
- In addition to the above, the management is also concerned if the following aspects are in place to give the key policies a concrete shape
- Quantity and value of the items purchased, segregated by raw materials, spares, component parts, machines and equipment, supplies, etc
- Departmental costs under the relevant heads of the expenditure
- Work analysis of the purchase department
- Details about cash discount and quantity discount earned and lost
- Price trend in the ensuing period and its impact on inventory costs
- Planning on material availability and strategy development as planned
- Details about new materials and processes that can reduce manufacturing costs
- Identification of new alternate sources of supply