Purchasing Department — Everything a Procurement Professional Should Know

Have you ever wondered how the purchasing department works? How does it get in touch with the suppliers? Or how do they negotiate with the suppliers to acquire the materials or supplies they need to operate?

The purchasing department’s duties may be evident by its name. But there are much deeper functions and roles that make it important to a company. 

After reading this article, you will be able to grasp the basics of the purchasing department. 

What is the Purchasing Department?

As we all know, the purchasing department is responsible for acquiring goods or services that the company needs to operate. 

The purchasing department is where the procurement process starts and ends. 

This department ensures that the supply, production, and equipment are available to make the process smooth from start to finish. 

It keeps the financial condition healthy as it dwells in the marketplace to acquire goods and services. It also maintains the financial condition of the company as it needs to acquire the right amount of materials to use efficiently.

Having too many materials will surely spoil it and that adds more cost. Having less supply of materials will also contribute to more expenses. 

That is why the purchasing department has to keep in mind if it has sufficient supply to meet the customer’s demand. 

The Function of the Purchasing Department

As we have discussed, the main function of the purchasing department is the procurement process. The purchasing department supports the company as the main buyer of goods and services that it will need. 

The purchasing department is essential to the growth of a company.

Acquiring enough materials in a cost-efficient manner will enable the company to attain its growth. It can also raise more profits for the company and lower some expenditures it has.

The purchasing department also ensures that the businesses it assists are well-served. It needs to make sure that the businesses have all the materials to start their project.

Editor's note:

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Other Functions and Roles of the Purchasing Department

  • Assess the company’s needs

The purchasing department must know if the supplies in the company are enough to cover its operation before purchasing.

It is also important to know that they can provide what is required of the company. 

The purchasing department can check the historical records of their purchases to track the needs of the company. This is to evaluate if there are changes in the company’s plans to effectively manage the supplies. 

  • Check the Deliveries

The purchasing department negotiates with the supplier the schedule of the deliveries. They do this to make sure that all deliveries will arrive on time. 

It also checks the inventory to know if the materials will be enough to use in the company. Because if they run out of materials, they may incur losses as they cannot meet the demands of the customers. 

Coordinating the arrival of the deliveries guarantees fewer obstacles to the procurement process. 

  • Budgeting

The purchasing department must guarantee that the requested amount of the budget will be enough to cover the expenses. It must achieve the goal to lessen the cost while ensuring the quality of the company’s growth. 

Developing a budgeting plan will make the company’s resources efficient. As the purchasing department works together with the finance team, they can ensure that costs will be maximized. 

  • Compare Prices

When the purchasing department was given a budget, they must source out which supplier is better for the company. They must select the supplier with the best price without sacrificing the quality of goods or services. 

The purchasing department must find the best rates that will benefit the company and also their supplier in the process.

They can use the traditional or smart procurement method to find the best rates for the company. 

  • Maintaining Supplier Relationships

Having a harmonious relationship will benefit one another. This can be the instance with the purchasing department. 

It must maintain a healthy relationship with the supplier because of the benefits it has. The supplier may give discounts or extra materials if you have a long-term relationship with them. 

The purchasing department can also build relationships with other suppliers it deems beneficial. Especially if the contract with the primary supplier is ending and may raise the prices of its goods or services. 

  • Complying with the Agreements

When a contract is made between the purchasing department and the supplier, they must abide by it. They must follow thoroughly what has been negotiated to avoid breach of contracts and other problems that may arise. 

They must also follow all the government regulations when it comes to the procurement process to carry out the project. 

  • Carry out Research

The purchasing department must develop research to achieve its long-term goals like every other company. Research helps strengthen the company’s future plan for growth. It ensures a clearer view of what should be done to achieve growth. 

Moreover, carrying out research will ensure that your supplier can match the standards of your company. It will help you to find the best supplier for your company. 

  • Enhance Procurement Strategies

Enhancing procurement strategies will ensure the development of the company. The purchasing department may collaborate with other departments in planning to attain its growth. 

This can be done by ensuring that suppliers match your requirements and crafting new ways to improve the procurement process. 

  • Records all Transactions

The purchasing department must record all their transactions so that they can easily find them if the need arises.

Records of purchases, invoices, contracts, and documentation of refunds are important to know if both fulfill their obligations diligently. 

They can also monitor the records of their inventory to see if it is enough to complete their operations. 

Key personnel in the Purchasing Department

  • Chief of Procurement

The chief of Procurement leads the procurement team. He or she oversees the procurement process.

  • Director of Procurement

The director of procurement has knowledge of the supplies prices, analyzes potential suppliers, and oversees sources for purchasing supplies. He or she also maintains the budget and streamlines costs.

  • Procurement Manager

Its role is to identify, negotiate, and manage the contract of a potential supplier of the company. 

  • Procurement Analyst

The role of the procurement analyst is to have meetings with the vendors and test the products. Also, its role includes negotiating supply contracts and creating cost reports. 

  • Procurement Specialist

One of its jobs is to supervise budget estimation and sourcing operations

  • Contract Specialist

From its name itself, its role is to manage the contract development from start to end. 

  • Legal Counselor

The legal counselor of a company ensures compliance with the law.

  • Business Controller

Its role is to maintain control and forecast the impact of procurement activities in the company. 

Significance of Purchasing Department

The purchasing department helps identify the needs of the company besides its main function of acquiring goods and services.

It knows the crucial needs of the company to secure its supply. The supply chain at its core ensures effective and efficient procurement of goods or services that the company needs. 

Planned budgets and minimizing costs cannot be attained without the help of the procurement department

Frequently asked questions

What is a purchasing department?

The purchasing department is in charge of acquiring the goods or services needed by the company.

How many team members does a purchasing department have?

A purchasing department team has 8 key personnel. But generally, it depends on the decision of the company.

What skills are necessary for a purchasing department?

One of the skills that are necessary for a purchasing department to have is clerical skills. Other skills include communication and math skills. 

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