The Objectives of Purchasing. (Cost Accounting)
Progressive organisations recognize purchasing as an important function and establish a separate purchase department to look after this function. Objectives of purchasing should be clearly laid down by the organisation for the justification of the functioning of the purchase department. It should be seen that objective of purchasing should match with the overall objectives of the organisation.
The objectives of purchasing can be outlined as follows:
- Maintaining continuity of supply: The purchasing function must ensure the continuous availability of material, supplies and equipments to maintain production schedule or to avoid disruption in production. The purchasing function also requires investments in reserve inventories. The efficiency of purchasing function lies in proper balancing of these factors which require experience, judgment of future activities and trends and various other activities on the part of purchasing authority.
- Maintenance standards quality: The purchasing function must ensure that the material purchased must be of required quality in order to produce the goods according to specifications and to maintain quality standards.
- Avoidance of duplication, waste and obsolescence: The purchasing authority must have the accurate knowledge of the items in hand and the requirements of materials for a particular period in order to have proper decision in view of long range and short range plans. This is necessary to avoid duplication, waste and obsolescence with respect to various items purchased.
- Maintenance of company’s competitive position: The purchasing authority must constantly examine his specifications for the purchase of right material. This is necessary to make sure that his company’s quality standards are neither higher nor lower than those of close competitors and to maintain his company’s position in the industry.
- Maintenance of company’s good image: The purchasing agent must create a good image in the minds of suppliers. This will help him in purchasing operation and to discover new ideas and materials besides lowering its cost or improving products.
- Developing alternative sources of supply: Alternative sources of supply should be exposed for increasing the bargaining power of the buyer and minimizing the cost of purchases. Purchases can be made from alternative sources if a particular supplier fails to supply the required items.