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Purchasing Process Methods

Buyers can generate purchase orders in several ways. The criteria guiding their choice are the volume and value amount of the products or services to be purchased, availability of computerized technology, nature of the buy (one-time or continuous), and authority of the buyer.

Discrete Purchase order

In this method, the buyer generates a single purchase order to buy goods or services. Often, the process begins with a requisition. After research, sourcing, and price negotiation, the buyer generates a one-time-buy purchase order that is sent to the selected supplier.

Online Requisitioning System

In this method, all authorized company employees have access through the company’s business system to an online requisition screen. The requisition is entered into the system and is automatically presented to the buyer. The buyer, in turn, reviews the requisition, performs sourcing and pricing, rejects or accepts the requisition, and releases the purchase order to the supplier.

Procurement Cards (P-cards)

In this method of purchasing, authorized employees are presented with a purchasing card similar to a personal credit card. The card owner makes the buying decision, bypassing the purchasing department altogether. This method works well for low-volume, inexpensive purchases.

Automated Ordering Systems

In this method, the inventory planning system automatically generates purchase orders for items based on a flag set in the item’s master file record. Usually, direct electronic links are established between the buyer and seller through electronic data interchange (EDI), auto fax, or the Internet. The process is normally used with a blanket or contracted agreement or for low-value, high volume items, such as fasteners and lubricants. The ordering system enables buyers to place orders directly into a supplier’s customer order system.

Direct-ship Purchase Order

Often customers wish to purchase specific products or large quantities the seller does not inventory. Instead of turning the order away, the products are ordered from an outside supplier, who, in turn, ships directly to the customer, bypassing normal in-house receiving, material handling, and shipping of the prime seller.

Capacity Buying

A purchasing practice whereby a company commits to a supplier for a given amount of its capacity per unit of time. Subsequently, schedules for individual items are given to the supplier in quantities to match the committed level of capacity.

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