Activities Of The Purchasing Function
What are activities of the "purchasing function" in business?
Activities of the “purchasing function” in business include acquiring inventory (finished goods for resale) or materials for production. In a retail business, the purchasing department is responsible for buying the merchandise needed to stock the shelves of a bricks and mortar outlet or the warehouse of an eCommerce operation. In a manufacturing business, the purchasing department sources the materials required to create a product that will eventually hit the marketplace for sale.
The purchasing department is vital to an organization. In a retail business, this department has to use its funds wisely. This means buying the right products (based on customer demand), at the right time, in the right quantities, at the right price. Foresight and planning are the hallmarks of a properly run purchasing department. Having enough product on hand to satisfy consumer demand is essential. However, a business does not want to purchase too much inventory that may sit in storerooms or on store shelves for far too long without turning over and bringing in dollars (cash flow).
It’s important that the purchasing department understand their market niche so that they don’t spend money on products the marketplace no longer demands. In addition, the department must be able to read marketplace headwinds properly. For example, a certain product may be selling, but be losing popularity. In a few months the ‘sheen’ may have worn off this product with consumers demanding something else.
The purchasing department must study trends and consumer behaviour to understand how consumers are thinking, as they consistently demand new and improved products. When the popularity of a product fades, a business does not want to be stocked with a warehouse full of stock that is no longer ‘hot’ on...
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