Purchasing Purchasing is the procurement process a business or organization uses 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 gr ...

is the formal process of buying

goods and services Goods are items that are usually (but not always) tangible, such as pens or Apple, apples. Services are activities provided by other people, such as teachers or barbers. Taken together, it is the Production (economics), production, distributio ...

. The purchasing process can vary from one organization to another, but there are some common key elements. The process usually starts with a

demand In economics, demand is the quantity of a goods, good that consumers are willing and able to purchase at various prices during a given time. In economics "demand" for a commodity is not the same thing as "desire" for it. It refers to both the desi ...

or requirements – this could be for a physical part (

inventory Inventory (British English) or stock (American English) is a quantity of the goods and materials that a business holds for the ultimate goal of resale, production or utilisation. Inventory management is a discipline primarily about specifying ...

) or a

service Service may refer to: Activities * Administrative service, a required part of the workload of university faculty * Civil service, the body of employees of a government * Community service, volunteer service for the benefit of a community or a ...

. A requisition is generated, which details the requirements (in some cases providing a requirements specification) which actions the

procurement Procurement is the process of locating and agreeing to terms and purchasing goods, services, or other works from an external source, often with the use of a tendering or competitive bidding process. The term may also refer to a contractual ...

department. A request for proposal (RFP) or

request for quotation A request for quotation (RfQ) is a business process in which a company or public entity requests a quote from a supplier for the purchase of specific products or services. RfQ generally means the same thing as Call for bids (CfB) and Invitati ...

(RFQ) is then raised. Suppliers send their quotations in response to the RFQ, and a review is undertaken where the best offer (typically based on

price A price is the (usually not negative) quantity of payment or compensation expected, required, or given by one party to another in return for goods or services. In some situations, especially when the product is a service rather than a ph ...

availability In reliability engineering, the term availability has the following meanings: * The degree to which a system, subsystem or equipment is in a specified operable and committable state at the start of a mission, when the mission is called for at ...

and

quality Quality may refer to: Concepts *Quality (business), the ''non-inferiority'' or ''superiority'' of something *Quality (philosophy), an attribute or a property *Quality (physics), in response theory *Energy quality, used in various science discipli ...

) is given the

purchase order A purchase order, often abbreviated to PO, is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services required. It is used to control the purchasing of products and services ...

Purchase orders A purchase order, often abbreviated to PO, is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services required. It is used to control the purchasing of products and services fr ...

(PO) can be of various types,Purchasing Handbook: Standard Reference Book on Purchasing Policies, Practices, Procedures ... By George W. Aljian including: *standard - a one time buy *planned - an agreement on a specific item at an approximate date *

blanket A blanket is a swath of soft textile, cloth large enough either to cover or to enfold most of the user's body and thick enough to keep the body warm by trapping radiant body heat that otherwise would be lost through Thermal conduction, condu ...

- an agreement on specific terms and conditions: date and quantity and amount are not specified. Purchase orders are normally accompanied by

terms and conditions A contractual term is "any provision forming part of a contract". Each term gives rise to a contractual obligation, the breach of which may give rise to litigation. Not all terms are stated expressly and some terms carry less legal gravity as ...

which form the contractual agreement of the transaction. The supplier then delivers the products or service and the customer records the delivery (in some cases this goes through a goods inspection process). An

invoice An invoice, bill, tab, or bill of costs is a commercial document that includes an itemized list of goods or services furnished by a seller to a buyer relating to a sale transaction, that usually specifies the price and terms of sale, quanti ...

is sent by the supplier which is cross-checked with the purchase order and documents specifying which goods have been received. The payment is then made and transferred to the supplier.

Types of purchases

Depending on what type of purchase you are going to make, then the process concerned is not the same. The following examples show the different processes that take place concerning the different purchase types.

Personal purchases

The

consumer A consumer is a person or a group who intends to order, or use purchased goods, products, or services primarily for personal, social, family, household and similar needs, who is not directly related to entrepreneurial or business activities. ...

purchases for the consumption of themselves, then they fall into this very important category class. They are ultimately driving the economy through the purchase of its products. Therefore, the economy becomes dependent on them.

Mercantile purchasing

Facilitated by middlemen for the intention of re-sale to meet others requirements. Agents, wholesalers and retailers come under this category providing their own channels of distribution to the consumer.

Industrial purchasing

The is buying to convert material into

finished goods Finished goods are goods that have completed the manufacturing process but have not yet been sold or distributed to the end user. Manufacturing Manufacturing has three classes of inventory: # Raw material # Work in process # Finished goods A ...

and product. It entails buying

raw materials A raw material, also known as a feedstock, unprocessed material, or primary commodity, is a basic material that is used to produce goods, finished goods, energy, or intermediate materials/Intermediate goods that are feedstock for future finished ...

. Components, supplies and consumable stores, spares and tools, machines and equipment and office appliance.

Institutionalized or government purchasing

Government agencies or institutions are very important, critical, they purchase in bulk for

public utilities A public utility company (usually just utility) is an organization that maintains the infrastructure for a public service (often also providing a service using that infrastructure). Public utilities are subject to forms of public control and r ...

References

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External links

Chartered Institute of Purchasing & Supp
Procurement