Global Purchasing Essay Example | Topics and Well Written Essays - 1000 words

Global Purchasing - Essay Example Purchasing is central to any organization’s activity. They need to purchase raw materials, components and machinery in order to produce or manufacture products. It is stated by Williams (1975, 1985) that an organization’s primary purpose is to reduce negotiations around transactions and to reduce the scrutiny of the same later on. This means that good bargaining and settlement of beneficial terms and conditions ensure that problems do not surface later during delivery or the manufacturing process. It is clear that the profits that will be made on the sale of the product will be largely determined through the effective purchase itself. It is the responsibility of the purchasing department to make what is known as an effective purchase. A purchase is effective when the best price is obtained subject to best delivery schedule and in conformity to the quality parameters that have been explained and accepted by both the supplier and the purchaser. Apart from this, the terms and conditions must also be suitable and not detrimental to the purchaser. There are three types of purchase. One is purchase of Routine Products that are of low financial value not complex and their nature, quality, consistency and value can be determined easily. They are readily available and purchase departments do not spend too much time on their procurement as otherwise the procurement can become more costly than the product itself. Here the relationship with the supplier is nominal. The other type is purchase of Bottleneck Products that are products with a low financial risk and a high complexity. Professional purchasers spend time and money in their determination and in simplifying the relationship with the supplier in order to reduce their complexity. The supplier has the power in this relationship (Five Force Analysis: Porter M.E) and the purchaser is