In manufacturing and engineering industries, the major proportion of operating costs is composed of raw materials, accessories and other miscellaneous items, generally clubbed as bill of materials. The basic purpose of businesses is to satisfy customers by adding value to these materials. Purchasing is the link between these processes. Just as marketing is the face of a firm to customers, purchasing is to suppliers. In spite of purchasing being the face to suppliers, it has not played a major role in the strategies of a firm as marketing. Purchasing has been a tactical part in the operations of a business. The role of purchasing is to identify suppliers, negotiate and finalize contracts for a specified period of time. As the end users have a major say in the selection of suppliers, purchasing is seen as a clerical job. With the globalization and the resultant competition, pervasive presence of IT in every aspect of a business, firms realized the cost saving potential of purchasing. Firms have always realized cost savings from suppliers by strong negotiating skills, which was resultant of the power of that firm. But the new realization came from the opportunities provided by IT and globalization. Globalization made companies look for synergies with the suppliers, those who can work long term and provide considerable value as a result of collaboration. The role of IT in purchasing has been to automate the process such as proposals, contracts, order management and financial settlement. As many businesses have already ERP systems to manage production schedule, inventory and sales forecast, the purchasing software can be integrated to gain greater efficiencies. Purchasing has also been extended to involve suppliers to mange inventory from the supply side by regularly replacing supplies. Purchasing at a higher level of interaction has been made possible by web based technologies. Ecommerce allows companies to conduct auctions through the virtual medium. Web solutions obviate the need for separate infrastructure for purchasing software. Purchasing software is provided by many ERP vendors as an integrated package. But this is affordable to large organizations due to cost. Small organizations avail of stand alone software for their purchasing needs. |
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