Purchasing refers to a business or organization attempting to acquire goods or services to accomplish its goals. Although there are several organizations that attempt to set standards in the purchasing process, processes can vary greatly between organizations. Typically the word ãpurchasingä is not used interchangeably with the word ãprocurementä, since procurement typically includes expediting, supplier quality, and transportation and logistics (T&L) in addition to purchasing.
When the receiving department is not involved, it is typically called a two-way check or two-way purchase order. In this situation, the purchasing department issues the purchase order receipt not required. When an invoice arrives against the order, the accounts payable department will then go directly to the requestor of the purchase order to verify that the goods or services were received. This is typically what is done for goods and services that will bypass the receiving department. A few examples are software delivered electronically, NRE work (non-reoccurring engineering services), consulting hours, etc.
his trend away from the daily procurement function (tactical purchasing) resulted in several changes in the industry. The first was the reduction of personnel. Purchasing departments were now smaller. There was no need for the army of clerks processing orders for individual parts as in the past. Another change was the focus on negotiating contracts and procurement of large capital equipment. Both of these functions permitted purchasing departments to make the biggest financial contribution to the organization. A new term and job title emerged – Strategic sourcing and Sourcing Managers. These professionals not only focused on the bidding process and negotiating with suppliers, but the entire supply function. In these roles they were able to add value and maximize savings for organizations. This value was manifested in lower inventories, less personnel, and getting the end product to the consumer quicker. Purchasing managers' success in these roles resulted in new assignments outside to the traditional purchasing function – logistics, materials management, distribution, and warehousing. More and more purchasing managers were becoming Supply Chain Managers handling additional functions of their organization's operation. Purchasing managers were not the only ones to become Supply Chain Managers. Logistic managers, material managers, distribution managers, etc. all rose to the broader function and some had responsibility for the purchasing functions now.
This is the process where the organization identifies potential suppliers for specified supplies, services or equipment. These suppliers' credentials and history are analyzed, with the products or services they offer. The bidder selection process varies from organization to organization, but can include running credit reports, interviewing management, testing products, and touring facilities. This process is not always done in order of importance, but rather in order of expense. Often purchasing managers research potential bidders obtaining information on the organizations and products from media sources and their own industry contacts. Additionally, purchasing might send Request for Information (RFI) to potential suppliers to help gather information. Engineering would also inspect sample products to determine if the company or organisation can produce products they need. If the bidder passes both of these stages engineering may decide to do some testing on the materials to further verify quality standards. These tests can be expensive and involve significant time of multiple technicians and engineers. Engineering management must make this decision based on the cost of the products they are likely to procure, the importance of the bidders’ product to production, and other factors. Credit checks, interviewing management, touring plants as well as other steps could all be utilized if engineering, manufacturing, and supply chain managers decide they could help their decision and the cost is justifiable.
Other organizations might have minority procurement goals to consider in selection of bidders. Organizations identify goals in the use of companies owned and operated by certain ethnicities or women owned business enterprises. Significant utilizing of minority suppliers may qualify the firm as a potential bidder for a contract with a company or governmental entity looking to increase their minority supplier programs.