Supply Service

25.1-THE PURCHASING FUNCTION The word "purchase" means "to obtain by paying money or its equivalent; to buy for a price." This definition is all too simple to properly describe the word "purchase." One should consider the basic objectives of purchasing-to procure the right material, of the right quality, in the right quantity, at the right time, from the right source at the right price. Here it should be noted that in purchasing it is recognized that the best quality or grade of materials may be the only grade to purchase for a specific job. However. there are other jobs where the medium, standard or poor grade of materials is the right quality, as the lesser grade will perform adequately. In some companies the purchasing department makes the decision as to the right quality, while in others this function is shared with other departments. Years ago in business the owners controlled the purchase of required materials and services by performing the task themselves. The owners obtained the type materials and services they needed and paid the price demanded. This function was performed along with all the other duties requisite to the owner of a business, namely, clerical, hiring and firing of personnel, financial management, etc. As companies grew in size, clerical duties were assigned to other personnel and the owner usually retained the purchasing authority. This same division exists today in many small companies. However, in the larger companies, the purchasing function has been assigned to a separate department. Importance of the Purchasing Function-The larger the company the greater the need for a separate department to perform the purchasing function. Today the purchasing agent for most larger progressive companies has policy-making authority. Therefore, it is reasonable for him to report to the president or vice president of his company. Studies of several hundred companies show the purchasing department head reporting to top management 87.5% of the time. This fact in itself is indicative of the importance of recognizing that effective purchasing requires a department staffed with specialists in the field of procurement with knowledge and experience sufficient to perform in today's complicated business atmosphere. In the manufacturing field it is a common axiom that usually half of the company's dollar expenditures are for materials. If a purchasing department functions properly and the right product or service is purchased and a savings accomplished, the contribution to the net profit of the company is much greater, as opposed to sale dollars, where only a small portion is carried forward to net profit. Thus, the importance of the purchasing department and the contribution it can make to the success of the company are obvious. 25.1.1-THE PURCHASING FUNCTION 1. Responsibilities of the Purchasing Function-The purchasing agent in performing his function is acting as an agent for the company and others in the company requiring materials and services. Accordingly, he is committing the company for materials and services subject to certain limitations which the board of directors may stipulate. In view of this, the purchasing agent,'^ position must of necessity he