WHAT ARE THE PURCHASING ADDING VALUES TO A COMPANY AND WHAT CORE Assignment

WHAT ARE THE PURCHASING ADDING VALUES TO A COMPANY AND WHAT CORE PURCHASING ACTIVITIES CAN BE DONE TO MAXMIZE COMPANY'S PROFITABLITY - Assignment Example In the manufacturing sector, it is generally accepted that the value of inputs materials forms a high percentage of the ultimate product price – to the extent of as much as 60% and even more in highly competitive industries. In companies that execute major construction projects in the different engineering fields like civil, metallurgical/other process plants, power plants etc. the value of inputs will be equally high. In this background, the importance of economizing and strategizing procurement can not be over-emphasized. This essay examines the various aspects of procurement, developments in this professional activity and the scope for maximizing profits. In a regular manufacturing company, depending upon sales forecast, production plans and budgets are drawn up and these help the Procurement to anticipate and plan the routine as well as non-recurring purchases. Purchasing activities can be broadly identified as tendering, bid evaluation, negotiations, vendor selection, ordering and follow up. Make or buy decisions are taken at strategic management meetings and once a decision is taken to procure an item from vendors, Procurement receives the requests for purchase along with quantities and specifications. Tendering for non-standard purchases is more time consuming and involves calling for quotations based on buyer’s specifications and terms like quantities, delivery schedule, supply conditions, payment terms, guarantees and warranties etc. Quotations are evaluated for technical and commercial comparison and to identify the preliminary list of suppliers for further discussions. Negotiations cover the technical specifications as well as other terms that differ from tender documents and to arrive at mutually acceptable terms of supply. Based on the success of such negotiations, one or more suppliers are selected and the purchase orders for going ahead with the supplies are issued. Regular follow up is part of the