Assignment: Purchasing Process
Introduction
Purchasing is an important business activity that involves buying goods and services needed by an individual or
organization. Every company, school, hospital, factory, or government organization needs purchasing to operate
effectively. Without purchasing, organizations cannot obtain the materials, equipment, or services required for daily
operations.
Meaning of Purchasing Process
The purchasing process is the series of activities involved in buying goods and services for an organization or
individual. It begins when a need is identified and ends when payment is made and records are kept.
Objectives of Purchasing
1. To obtain quality goods and services
2. To buy at the best possible price
3. To ensure timely delivery
4. To maintain continuous supply of materials
5. To build good relationships with suppliers
6. To reduce costs and maximize profit
7. To ensure proper record keeping
The Purchasing Process
1. Identification of Need – recognizing goods or services required.
2. Purchase Requisition – preparing a formal request to buy.
3. Approval of Request – management approves the request.
4. Supplier Search – identifying suitable suppliers.
5. Request for Quotation (RFQ) – asking suppliers for prices and terms.
6. Supplier Selection – choosing the best supplier.
7. Negotiation – discussing price, delivery, and payment terms.
8. Purchase Order (PO) – official order sent to supplier.
9. Delivery of Goods – supplier delivers items ordered.
10. Inspection and Receiving – checking quality and quantity.
11. Invoice Processing – verifying supplier invoice.
12. Payment – paying the supplier.
13. Record Keeping – storing documents for future reference.
Types of Purchasing
• Direct Purchasing – buying raw materials for production.
• Indirect Purchasing – buying office and operational supplies.
• Service Purchasing – buying services such as cleaning and security.
• Capital Purchasing – buying long-term assets such as machines and vehicles.
Importance of Purchasing
• Ensures smooth business operations
• Helps control costs
• Improves product quality
• Prevents shortages
• Maintains supplier relationships
• Increases efficiency
Advantages of Good Purchasing
1. Cost reduction
2. Better quality goods
3. Timely delivery
4. Improved efficiency
5. Reduced waste
6. Good supplier relationships
Problems of Poor Purchasing
1. Delayed production
2. High costs
3. Poor quality products
4. Fraud and corruption
5. Loss of customers
6. Material shortages
Purchasing and Procurement
Purchasing mainly focuses on buying goods and services, while procurement covers the entire process of sourcing,
supplier management, and strategic planning. Purchasing is therefore a part of procurement.
Qualities of a Good Purchasing Officer
• Honesty
• Good negotiation skills
• Organization skills
• Knowledge of market prices
• Effective communication
Modern Purchasing Methods
Many organizations now use electronic purchasing systems such as SAP, Oracle ERP, and Odoo. These systems
improve speed, transparency, and record keeping.
Conclusion
The purchasing process is an essential activity in every organization. It involves identifying needs, selecting suppliers,
buying goods or services, receiving them, and making payment. Effective purchasing helps organizations reduce
costs, maintain quality, and ensure smooth operations.
Purchasing Process Flow Chart
Identification of Need
↓
Purchase Requisition
↓
Approval
↓
Supplier Search
↓
Request for Quotation
↓
Supplier Selection
↓
Negotiation
↓
Purchase Order
↓
Delivery
↓
Inspection
↓
Invoice Processing
↓
Payment
↓
Record Keeping
Documents Used in Purchasing
Document Function
Purchase Requisition Requests approval to buy
Quotation Shows supplier prices
Purchase Order Official order document
Delivery Note Confirms delivery
Invoice Requests payment
Receipt Confirms payment