The meaning of purchasing
Doesn’t everyone know the meaning of purchasing? We all do it every day: purchasing food, newspapers, clothes, petrol, life assurance, transport services and a thousand other things. What’s more, many readers of this Course Book will already be doing it in a professional capacity in the course of their jobs: purchasing materials, components, services and other requirements for the organisation that employs them.
All this may be true – but it skims over an important point. There is a big difference between doing something in everyday life and doing it as a professional. And there is even a difference between doing something as a professional and understanding it in the way that professional education requires.
Organisational purchasing is a professional discipline based on a foundation of study and research, and proceeding according to systematic guidelines on best practice. To do well in your purchasing exams, it will not be sufficient to have a general awareness of what purchasing is – or even what purchasing involves in your own day-to-day work. You must be prepared to look critically and in depth at the conceptual and best practice foundations of the subject.
In simple terms, organisational buying involves the following activities.
- The use of resources which belong to the owners (or shareholders) of the organisation. Buyers are accountable to the owners, and those who manage the organisation on their behalf, for the efficient and effective use of resources: they can’t simply spend or risk them according to their own whims, as we can do in our personal spending.
- The acquisition of items that will satisfy the requirements of other people and be suitable inputs for defined processes and systems. Buyers must purchase the right items for these people, processes and systems: they can’t simply choose items according to their own preferences. The people who actually use the items and services obtained by buyers are often referred to as users or user departments. For example, purchasing may obtain computer hardware for use by the finance department; in this case, the finance department is the user.
- Working together with others in a complex network of relationships, work flows and accountabilities. Buyers must adhere to schedules, budgets, policies, plans and procedures, in order for their work to be properly co-ordinated with the general flow of work in and through the organisation: they can’t simply make decisions by their own criteria, in their own time, in their own way.
- Developing and maintaining constructive working relations with suppliers who provide the items the organisation needs. Buyers must consider the impact of their decisions and actions on suppliers’ ability to fulfil their part of the purchase contract effectively and (b) on suppliers’ motivation and commitment to ongoing relationship.
In other words, purchasing is a discipline. It operates according to a framework of principle and best practice, designed to help purchasers to fulfil their role in a properly responsible, professional, effective and efficient way.
- Responsible: purchasers are accountable for their decisions, and they make those decisions rationally, ethically, and in the best interests of the organisation.
- Professional: purchasers reflect and uphold the educational, technical and ethical standards of the purchasing profession.
- Effective: purchasers achieve the objectives set for their work, implementing purchasing plans and projects successfully.
- Efficient: purchasers achieve their objectives with the least possible waste of resources – money, physical resources, time and effort.