Purchasing can be traced as far back as 2800 BC in cuneiform clay tablets purchasing orders. Curiously only during the past two countries has purchasing been addressed in trade books and text books. In 1832 Charles Babbage addressed purchasing in his book “On the Economy, Machinery and Manufacturing” The first book devoted specifically to purchasing, “The Handling of Railway Supplies: The Purchase and Disposition” published in 1887 was authored by Marshall M. Kirkman. The first college textbook on purchasing was authorized by Howard T. Lewis of Harvard University in 1933.
Although interest of purchasing and supply function has been a phenomenon in the 20th, it was recognized as independent and importing function well before 1900. Growth of interest and attention to purchasing was rather uneven in the early 1900’s but by 1915, several books on purchase had appeared and several articles had been published in trade press primarily in the engineering journals.
Yet prior to World War I (1914-1918) most firms regarded the purchase function primarily as a clerical activity. However during the world war, the ability to obtain raw materials supplies ad services needed to keep the factories and mines operating were the 3
key determinates of organizational success. Attention was given to the organization policies and procedures for purchase functions, and so it emerged as a recognized management activity. Historically since management interest has focused on research and development, marketing, finance and operations, purchasing has frequently been subordinated to these functions. Mangers are however becoming aware impact on the bottom line that does any other functions. It is with such insights the purchasing has evolved and evolves through the following four stages.
Passive stage- Purchasing function has no strategic direction and primarily reacts to the requests of other functions,
This stage is characterized by:
a) High proportion and individual communications due to purchasing low visibility
b) Supplier selections based on price and availability.
Independent stage- Purchasing functions adopts the latest purchasing techniques and processes, but its strategic direction is independent of the firms competitive strategic.
In this stage;
a) Performance is based primary on cost reduction and efficiency measures. b) Coordination links are established between purchasing and technical discipline.
c) Top management recognizes the importance of professional development. d)
Top management recognizes the opportunities in purchasing for contribution to profitability
Supportive- Purchasing function support the firm’s competitive strategy by adoption purchasing techniques and products which strengthens the firm’s competitive position
In this stage;
a) Purchase is included in sales proposal teams.
b) Suppliers are considered a resource with emphases on experience motivation and attitude.
c) Market product and suppliers are continuously monitored and analyzed. iv)
Integrative stage- Purchasing strategy is fully integrated into the firm’s competitive strategy and constitutes part of an integrated effort among peers to formulate and implement a strategic plan. In this stage;
a) Cross-functional training of purchasing professionals executive is made available
b) Permanent lines of communication are established among other functional areas.
c) Professional development focuses on strategic elements of the competitive strategy
d) Purchasing performance is measures in terms of contributions to the firm’s success
1.3 The Role of the Purchasing Department
The purchasing department is expected by the management to fulfill the following five rights
Right Price These rights are also referred to as the principles of purchasing. In order to undertake these rights the purchasing department delineates the following as in roles; To support company operations with an uninterrupted flow of materials and services.
ii)To buy competitively- Keep abreast of the forces of demand and supply that regulate prices and material availability on the market; understanding suppliers cost structure and ability to help reduce it further; price negotiation to help reach a fair price.
To buy wisely- Continual search for better vales that yield the best combination of quality service and price; reconciling users needs with suppliers capabilities by use of cross functional teams; To keep inventory investment and inventory losses at a practical minimum. To develop good relationship with suppliers community and good Continuing relationship with active suppliers- good relationship with potential suppliers is invaluable.
To achieve maximum integration with other departments of the firmUnderstanding major needs of user departments and provide such support as; standardization of programmes, future price forecasting, make or buy analysis and providing a repository of information and data from suppliers.
To handle the purchasing and supply management function proactively and in a professional cost effective manner- Continual analysis of activities to eliminate those that only marginally contribute to the effectiveness of the organization and establishing policies and procedures that achieve departments objectives in the most cost effective manner
1.4 The Contribution of Purchasing Department to the Overall Firm’s Performance As a function, purchasing is common to all types of business operations. The purchasing department however is an organizational unit of a firm whose duties may include responsibility for part or all of the purchasing function and additional activities as well. As a matter of fact, the purchasing function is usually performed most effectively and efficiently by a centralized unit made of buying specialist who a time may work in conjunction with a more comprehensive cross-functional team of specialists. Prior to the 1950, the purchasing department was a clerically oriented order placing unit.
In the ensuing years however, managerial emphasis has focused on
specialization of individual buying activities, professionalism and contribution to the firm’s profit. This emphasis by the management on the purchasing department has been borne out to of the realization of the profit potential of purchasing as a function. Every shilling saved in purchasing is equivalent to a new shilling in profit. The profit margin of a firm is usually given as.