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06 SCM Purchase Process

Updated: Nov 12, 2020

AFMI -SCM -BL01M02-Day06-12Nov20

AFMI -SCM -BL01M02-Day06-12Nov20


  1. What is the main objective of purchasing?

  2. What is difference between procurement and purchasing?

  3. The Purchasing Process

  4. Steps in Purchase process

  5. What is the purchase cycle?

  6. What is the purchase order?

  7. Procurement Process

  8. Major Principles of Purchasing

  9. methods of procurement?

  10. successful vendor selection

  11. What is effective purchasing?

What is the main objective of purchasing?

  1. Purchasing is to obtain the 'inputs' required by an organisation for its operations.

  2. Lower costs. This is by far the primary function of the purchasing department. ...

  3. Reduce risk and ensure the security of supply. ...

  4. Manage relationships. ...

  5. Improve quality. ...

  6. Pursue innovation. ...

  7. Leverage technology.

What is difference between procurement and purchasing?

Procurement concentrates on the strategic process of product or service sourcing, for example researching, negotiation and planning, whilst the purchasing process focuses on how products and services are acquired and ordered, such as raising purchase orders and arranging payment

The Purchasing Process

  1. Needs of Org - Analysis. ...

  2. Purchase Requisition to Purchase Order. ...

  3. Purchase Order Review and Approval. ...

  4. Requests for Proposal. ...

  5. Contract Negotiation and Approval. ...

  6. Shipping and Receiving. ...

  7. Three-Way Matching. ...

  8. Invoice Approval and Payment.

Steps in Purchase process

  1. Problem/need recognition.

  2. Information search. ...

  3. Evaluation of alternatives. ...

  4. Purchase decision. ...

  5. Post-purchase behavior.

What is the purchase cycle?

The buying cycle (also known as a purchase cycle) is the process a customer goes through when purchasing a product or service. Customers move through a series of purchasing stages in the cycle as they educate themselves and move closer to making a final purchasing decision.

What is purchase order?

A purchase order, or PO, is an official document issued by a buyer committing to pay the seller for the sale of specific products or services to be delivered in the future. ... Each PO has a unique number associated with it that helps both buyer and seller track delivery and payment.

What are the 3 main documents used in the purchasing process?

The three most common types of procurement process documents are

  1. Request for Information (RFI),

  2. Request for Proposal (RFP), and

  3. Request for Quotation (RFQ).

The 7 Key Steps of a Procurement Process

Step 1 – Identify Goods or Services Needed. ...

Step 2 – Consider a List of Suppliers. ...

Step 3 – Negotiate Contract Terms with Selected Supplier. ...

Step 4 – Finalize the Purchase Order. ...

Step 5 – Receive Invoice and Process Payment. ...

Step 6 – Delivery and Audit of the Order. ...

Step 7 – Maintain Accurate Record of Invoices.

What are three types of buying?

Types of Buyers and their Characteristics. Buyer types fall into three main categories –

  1. spendthrifts,

  2. average spenders, and

  3. frugalists.

there are four types of consumer buying behavior:

  1. Routine response: ...

  2. Limited decision making: ...

  3. Extensive decision making: ...

  4. Impulsive buying:

4 Types of Purchase Orders

  1. Standard Purchase Order. .

  2. Blanket Purchase Order. ...

  3. Contract Purchase Order. ...

  4. Planned Purchase Order.

Purchasing: 6 Major Principles of Purchasing –

  1. Right Quality: The term right quality refers to a suitability of an item for the purpose it is required. ...

  2. Right Quantity: Materials purchased should be of right quantity. ...

  3. Right Time: The time at which the purchases are to be made is of vital importance. ...

  4. Right Source: ...

  5. Right Price: ...

  6. Right Place:

Stages in purchasing

Stage 1. Need Recognition

Stage 2. Search for Information

Stage 3. Product Evaluation

Stage 4. Product Choice and Purchase

Stage 5. Post purchase Use and Evaluation

Methods of procurement?

successful vendor selection

What is effective purchasing?

What are the methods of procurement?

Procurement methods include competitive bidding, competitive proposals, requests for qualifications, and direct purchases. Competitive bidding is typically used for procurement of materials, supplies and equipment, maintenance and non-professional services, and construction.

Below are steps to successful vendor selection:

Step 1: Define and Analyze Business Requirements. ...

Step 2: Identify Third Party Vendor Candidates. ...

Step 3: Develop Evaluation Criteria (with weighting) ...

Step 4: Conduct Vendor Briefings. ...

Step 5: Evaluate Vendors and Schedule Demos. ...

Step 6: Complete Vendor Selection.

The four primary customer types are:

  1. Price buyers. These customers want to buy products and services only at the lowest possible price. ...

  2. Relationship buyers. ...

  3. Value buyers. ...

  4. Poker player buyers.

What is effective purchasing?

Effective purchasing involves evaluating all available suppliers for performance, financial stability and efficiency, and identifying two or more preferred suppliers. Such suppliers quote consistent low prices, and the way they process orders doesn't generate extra costs for your company.

Case Scenario for Class Discussion

You are the purchase manager of Triveni Farms and Produces. Which produces Corn based products. The company has its own corn farms but other required inputs need to be procured. You need to identify a new vendor for your products. What are the criteria for selecting your Vendor ( Answer in bullet points, not more than 50 words )

Students Response

  1. Quality of the product that vendor sold previously the next is price where we should get more profit at less cost, then check whether they are professional

  2. Identify a trustworthy vendor and negotiate the terms beforehand

  3. Quality, cost, review from others

  4. 1)His publicity in the market 2)quality of his products 3)customer service 4)his ethics and integrity 5)references

  5. Good in communication skills , Experience in the field and knowledge about the products

  6. 1Accontability for quality issue.2Ease of communication.3production capabilities.4co-operation with third party etc

  7. 1. Check price 2. Check references 3. Check Customer service 4. Recommendations from others

  8. he should promise us the timely delivery of our products to destination and a man with proper ethics and good communication with us and also with the 3 rd party

  9. Must have enough production capabilities, and must have good communication skills

  10. Ability to constantly supply services and Ability to supply all the products required

  11. Vendor should be nearer to the company and should supply good quality of corns

  12. The criteria for selecting the vendor, he must have the knowledge of SCM, farming, transportation and the work of the vendor should be efficient and effective way.

  13. Ability to constantly supply services and Ability to supply all the products required

  14. selecting a good vendor , its should maintain the quality of procurement service and the ability to provide product with expected quality and provide all required items to the customers..

  15. based on vendor previous product quality and based on price he comes with.

  16. Who can provide other products for productions. Who provide the product at the time

  17. Checked the quality of property and proper maintaining of that product


Internet, Quora

Lakshminarasimman V Rao | SCM| Class notes | Study Material | AFMI | Corporate Neeti Consulting | Mysuru

All data above is a combination of data from Internet, purpose of this doc is for research and education only and responses received from Class students and interaction.

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