Role of Purchasing Department in Business


Every organization has predefined objectives. There are many functions across an organization responsible for performing specific tasks. The purchase department forms an essential part of any organization’s business operations. The purchase department is entrusted with the responsibility of purchasing goods and services required to carry out various business activities.

The purchase department is required to assist all the functions of an organization by arranging required material and supplies which can be relevant to the core business process or routine office work. Let us suppose you decide to buy a new television. Generally, all of us would follow specific steps in sequence before we proceed ahead with the purchase decision. We would consider our budget, brand we wish to buy, quality, warranty period, features, and so on. In today’s competitive environment, we often see different dealers/distributors, selling the same product at different prices.

We go to different showrooms to obtain the best bargain. Many times we have to negotiate with the seller to get the product within our budget. The purchase department performs a similar kind of function for an organization but on a larger scale. Their main objective is to keep costs under control while ensuring quality and timeliness and you saw the big working organizations on Movies, Shows gears TV and Pubfilm but you don’t know how it’s work. But after reading this article you know how it works.

Vendor Selection And Negotiation

Purchase department is involved in the selection of vendors, obtaining quotes from various vendors, negotiating with vendors to get the best possible prices, catering to requisitions from multiple internal departments, placing orders for materials and supplies and ensuring that orders are delivered as expected.

Issuance And Maintenance Of Documents

For any purchase transaction, a purchase order is required to be generated. The purchase department handles entire paperwork that can range from maintaining copies of purchase orders, requisitions, vendor quotes, and so on. It assists other departments in ensuring that supplies were delivered as desired and as per the terms and conditions laid down in the purchase order. It further helps the payment department (if separate) to make payments to different vendors on time and as per the amount, criteria defined. It ensures proper tracking of what has been received and what is yet to be secured against what was ordered.

Cost Control

An essential function of the purchasing department is to utilize the allocated budget for different items efficiently. The purchase department can help in reducing the cost of production by selecting vendors with reasonable prices. The purchase department should take decisions in line with the overall policy of the organization. Since it is directly involved in a process that will ultimately result in an outflow of funds, its responsibility increases manifold.

It should further take into consideration available capital before placing an order. By continuously monitoring and following up with the production and stores department, it can keep track of available supplies and ensure that there is no shortfall of essential items shortly.

Compliance With Internal Policies And Procedures

The purchase department should not act or be biased in favor of a particular vendor. The purchase department is frequently looked at by many vendors as a quick means of gaining access to a company. It is a common approach adopted by vendors to offer extra incentive or commission to purchase managers or executives of the purchasing department. The purchase department should act in the best interest of the organization and should avoid engaging itself in such unethical and illegal business practices. To ensure that such activities do not take place within the department, strict internal controls should be in place.