The Meaning of Purchasing. (Cost Accounting)
Purchasing is a service function but it is an independent activity of an organisation. In popular sense, it refers to an act of buying at a price. But now-a-days it is treated as a managerial activity which goes beyond the simple act of buying and includes the planning and policy activities covering a wide range of related and complementary activities besides research and scientific development. Thus it is a fundamental function in the operations of a firm, charged with the responsibility of having the correct quantity and quality of material in hand when it is needed at a price that is consistent with the reducing investment, variety and value of material with an ultimate motive of facilitating standardization and competitive marketability of the product. Purchasing has acquired the status of a dynamic management activity which includes able administration, accurate forecasting, effective planning, developed capacity to organize effective coordinating efforts, better controlled machinery and above all judicious timely decisions. Few definitions of purchasing are quoted here for the benefit of the readers.
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According to Lewis: Purchasing is “the acquisition by a manufacturer of any necessary primary materials, supplies, equipments and so forth by any method, whatsoever.”
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According to K.S. Menon: “Purchasing involves the activity directed to securing the materials, supplies and equipment required in the operations of an enterprise. It is a much broader concept than buying and covers a wide range of managerial function right from participation in corporate planning and policy activities to product improvement, working capital management and profit improvement.”
According to Walter: “Scientific purchasing is the procurement by purchase of the proper materials, machinery, equipment and supplies or stores used in the manufacture of a product, adopted to marketing in the proper quantity and quality at the proper time, and at the lowest price, consistent with the quality desired.”