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Old 14-06-2011, 01:02 PM
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Join Date: Jun 2010
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Exclamation Making Goods and Services Available

Making Goods and Services Available


Producers or manufacturers purchase raw materials to be fabricated into products that are needed in the market. These products may be purchased by industrial customers for further processing, or by distributors for eventual sale to ultimate consumers. Purchasing, as such, is a major task of a businessman. For producers, such purchases should be sufficient enough and timely to ensure uninterrupted production, and for distributors it should be at a reasonable level to avoid the risk of under or overstocking. High degree of skill, therefore, is required in making purchases.
Steps in Purchasing

1. Establishing Specification and Determining the Need For Goods

The first step in purchasing is to determine exactly the goods that are to be acquired. It is done in the light of specifications that are received by purchase office from departments concerned. For non-repetitive goods, endorsement is also obtained from engineering or technical department to determine their exactness. For repetitive goods, confirmation as obtained from production department in case of manufacturers or assemblers, and sales manager in case of distributors or middleman.

2. Investigating the Supply Market

After determining the requirements, the next step is to search out all possible sources of the supply market. Purchase officer must find out all the suppliers, their products, their prices, the quality of their wares, their terms and conditions, their reputation in the trade and other related things that would help him in deciding the list of potential suppliers.

3. Starting Purchasing Negotiations

After searching or investigating the market and picking up the names of potential suppliers the purchase officer carries negotiation with them. Through letters of inquiry, information is collected about the goods. Letters of quotation provide him facts regarding price, mode of packing, terms of sales, and the time of delivery. Purchase officer through such negotiation tries to obtain maximum facility that a supplier could give and comes in a position to decide to which he should place the order.

4. Placing the Order

Soon after deciding about the supplier, the purchase officer places the order to him for supply of the goods on terms and conditions already settled. Such order is usually placed in writing to have evidence in case of any dispute that may arise later on. Order in writing carries an exact description of the goods required, the prices, the quantities desired, the delivery date, the discount terms, shipping or dispatch instructions, billing instructions, and mode of packing etc. A copy of the purchase order is always maintained by the purchase officer.

5. Following Up the Order

In order to make sure that the order is executed by the supplier in time, following up the order becomes the usual step in purchasing. Purchase officer, therefore, monitors the progress of this order and finds out whether it is being executed by the supplier in time and as desired. This involves frequent contacts with suppliers and efforts to make certain that there are no delays in dispatch of the goods on their part and the goods so ordered will be received in time.

6. Receiving the Goods

On receiving the goods, the purchase officer immediately makes them to be compared with order form to see whether these are correctly sent by the supplier and meet the requirements as per order form. If the shipment is correct in both quality and quantity, the goods are sent to stock. If there is any differences in the order and the shipment, the matter is immediately brought to the knowledge of the supplier. Till the settlement of the discrepancy, the goods so received are held in the receiving room.
Inventory Control

Need of Inventory Control

With few exceptions, most businesses have a considerable financial investment in materials of all kinds. Inventories are maintained in stock rooms, in process and in transit to and from the company. Such inventories really constitutes life blood of the business organization.
It is very important that this stream of materials be properly maintained without gaps and without overflows. Too little means that production will stop or those customers cannot be served. Too much means excessive storage, and investment costs, with possibilities excessive deterioration or obsolescence.

The right solution lies in steering between two disasters. It is therefore necessary to take steps to see that flow and amount material supplies throughout the operations are properly adjusted. Th steps taken are termed inventory control.
Importance of Inventory control
Such controls serve the following purpose:
1. Provide opportunities to save money and eliminate wastes in the quality of goods selected, in the quantities ordered and used and in the expenditures for transportation, storage, and distrubution to markets.

2. Replenish supplies before they are dangerously depleted.

3. Prevent accumulation of excessive supplies.

4. Allocate materials to specific needs.

5. Provide proper accounting of inventory positions.

a) Provide written record of transfer of materials from one department to another.

b) provide record of the manufacturing processes through which the materials pass.

c) Serves as an authority for such movement.

d) Serves as a source of cost data for the cost accounting department.
Control Procedure
The details of materials control procedure vary from company to company. The basic philosophy of the operation however is much the same in all concerns.

1. When the goods are first received and placed in stock, records are made of all pertinent data.

2. All subsequent movements of the materials are accompanied by such paper work as is necessary to inform the management of their exact location at all times.

3. Periodic counts are made to e certain that cone of the items have been lost in the production process.

4. Whenever materials move from one place to another within the plenty, records are adjusted to reflect this transfer and to fix the responsibility for their custody.

5. Identifying tags accompany all goods to facilitate accurate checking.

6. As a means of providing information on the number of items of each kind in the stock room, perpetual inventory records are kept.

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