Purchasing has come to stay as the most important function of materials management. The moment purchasing department places an order, it commits a considerable portion of the finance of the organisation which affects the working capital and cash flow position. The basic purpose of the purchasing and procurement function is to ensure continuity of supply of raw materials, sub-contracted items and spare parts of equipment and at the same time reduce the overall cost of the project. In other words, the objective is not so much to procure the raw materials at the lowest price but to reduce the cost of final product.
After purchasing and procuring the materials, the question of effective storing comes. Stores play a vital role in the materials management operations of the organisation. The most important purpose served by the stores is to ensure uninterrupted service to the user departments of the organisation.
In this unit, we will study the various aspects involved in material purchasing and procurement activity. We will also see how to evolve effective stores systems and procedures for an efficient stores management.
Objectives
After studying this unit, you should be able to
- describe the various parameters of purchasing,
- discuss complete materials procurement cycle from indent to issue,
- explain stores systems and procedures, and
- use stock valuation methodologies effectively.
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