Describe the organization of a purchasing department.

Organization in the Purchasing Department

In each industry and in different works within an industry the detailed organization will vary according to particular conditions and ideas, but the general procedure and principles outlined in this unit may be regarded as typical, although particularly suitable for an engineering or similar factory. The forms used as illustrations are based on some actually in use, but again will vary in ruling and wording to suit particular needs.

[blur color=blue]A large engineering firm will require an efficient purchasing department, while, on the other hand, a small concern may have all functions, including purchasing, carried out by the owner. However, it is essential that in any company, whether large or small, only one person or one department should be authorized to place orders with suppliers, otherwise purchase orders may be duplicated.[/blur]

[blur color=purple]The head of the department is usually designated as chief buyer or purchasing agent. In a large manufacturing business he has considerable responsibility, because much money can be lost or saved by his department. He requires a good technical knowledge of the industry and a large measure of administrative and organizing ability; he must keep in constant touch with market prices, reports, and market tendencies, and have a working knowledge of contract law and procedure, together with a practical understanding of the principles of economic laws.[/blur]

In some large businesses buying has been decentralized; in other words, each department is responsible for its own purchasing. However, most businesses operate one buying department, which is usually a very satisfactory arrangement.

Centralized Buying

The advantages of centralized buying are:

(a) [blur]a firm policy can be initiated with regard to conditions of purchasing, e.g. terms of payment[/blur]
(b) [blur]standardization of articles is facilitated[/blur]
(c) [blur]expert buying staff is concentrated in one department[/blur]
(d) [blur]the number of people authorized to make purchase commitments is reduced[/blur]
(e) combined purchasing power may result in reduced prices of commodities.
The disadvantages are:
(a) [blur]the creation of a special department may lead to high administration costs[/blur]
(b) [blur]the purchasing procedure is much less flexible than that geared to special departments.[/blur]

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