METHODS OF

PURCHASING
1. Bulk Purchasing
2. Hand to Mouth Purchasing
3. Speculative Purchasing
4. Blanket Purchasing
5. Reciprocate Purchasing

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 BULK PURCHASING
 Under this type of purchasing large
quantity of purchase for the future. Such a
method is followed when it is felt that
material will be regular through out the
year. Discounts & concessions are enjoyed
when the bulk purchase is made. The
transportation cost is very much reduce in
this type of purchasing.

Continuous… 2
Thus we can say that bulk purchasing
is an economical purchasing. On the
other hand it involve more
investment of capital possibility of
over stocking & high cost storage of
less due to damages.

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 HAND TO MOUTH
PURCHASING
 Thistype of purchasing is also known as
purchasing by ZERO stock buying. It
means that no purchase is made until a
need arise and buying only the quantity
which necessary to meet the current need.
This method applies principally to
emergency requirements or to the goods
used to infrequently that they should not
be carried into stock.

Continuous….. 4
Whenever the material is bought under this
method there will be zero stock for that
type of materials. The main advantage of
this purchasing is that there is no blockage
of capital in the material, no carrying cost,
no wastages and no fear of obsoleteness.
But the basic disadvantage of this type
of purchasing is always fear of stoppage of
production due to shortage of material &
sometimes during the period of shortage
materials are purchased at high cost.
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 SPECULATING
PURCHASING
Some time manufactures prefer to buy the
material in more quantity as compared to
required in production. The purpose is to
resell the surplus material at a high price
to earn the profit. Such type of purchasing
is done when the prices are very low and
there is expectations that in future the
price of that vary material will definitely
rise.

Continuous…
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It has only single advantage of
having the possibility of huge
speculative profit but
disadvantages include blockage of
large amount of capital, requirement
of large storage space and risk of
obsolesces etc.

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 BLANKET PURCHASING
In this type of purchasing the items of
same group order in one category.

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 RECIPROCATE
PURCHASING
In this type of purchasing sell to others
and buy from them that is called
reciprocate purchasing.

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PURCHASE PROCESS

Specification & Requirement

Requisition

Check Specification Price& Vendors

Purchase Plan

Source of Selection 10
 Finalization of Terms & Conditions

Purchase Order

Supplier Acceptance

Delivery Of Materials

Receipt of Materials & Incoming Inspection

Maintaining The Records

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 SPECIFICATION &
REQUIREMENTS
Specifications are a detailed description or
listing of the characteristics of materials,
parts & components used in making a
product. Specifications described the
quality of the product desired in
quantitative terms through specification.
Proper specification result is increased
sales, decreased costs, stronger
competitive position.

Continuous…
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In some cases, an order is placed only
there is some need for the product.
This method is appropriate for those
items which are not of regular &
common use in the production
process. Purchasing department
consolidates the requirements from
various departments to know the
local requirements for each item.
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 REQUISITION
The departments of the organization
communicate to the purchase
department their requirement for
various items through requisition
form. The format of requisition form
contains the details of the quality
and other necessary specification
about the item to be purchased. The
requisition is to be signed by the
competent authority. 14
 CHECK SPECIFICATIONS
PRICE & VENDORS
The suppliers are rated on the basis of their
past performance with the company.
Purchasing is a repetitive and a continuous
process. The suppliers one selected should
be continued or dropped is a matter of
judgment. The evaluation of supplier is
known as vendor rating provides valuable
information helps in improving the quality
of decision. The 3 basic aspects which are
considered are QUALITY, PRICE &
SERVICE.

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Continuous….
Negotiation strive to develop our fix
point on those ranges which is
considered satisfactory by both the
parties. Price fixing is some time
qualified by the quantity of purchase
sustained buying from negotiating
supplier, transportation and other
allied costs & insurance etc.

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 PURCHASE PLAN
Specification files and purchase
records are consider while making
the purchase plan. Specification files
are those files in which proper data
regarding the requirements which
are used in making a product is
mentioned.

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 SELECTION OF SOURCE
After the purchase plan the purchasing
department proceeds to select the
source of supply. Register of
suppliers are mentioned by the
purchasing departments. A right
supplier is one delivers materials of
the correct specifications on the
stipulated delivery dates.

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 FINAL ISATI ON O F T ERMS
& CO NDITI ONS
Before placing an order following
terms & conditions should be
considered:-
 Warranty
 Cancellation Provision
 Public Liability & Workmen
Compensation Protection
 Patent Protection
 Federal Law & Reputation 19
 PURCHASE ORDER
All purchases should be made through
a purchase order in a specified form
a duly signed by some authorized
person. The purchase order must
contain the details the suppliers,
description of the items required
corresponding prices & amount
required.

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 SUPPLIERS ACCEPTANCE
As late deliveries can close the
enterprise for this follow up &
expediting. The purchase order after
waiting for reasonable time is
essential. The priority of follow-up
operations should be given according
to the importance or classification of
items.

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 DELIVERY OF MATERIALS
After suppliers acceptance the delivery
of materials is done. The goods
delivered are of desired
specifications both in quality &
quantity. If some goods delivered
does not confirm with the
specifications or are damaged during
transshipment then steps are taken
for adjustments on claims.
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 RECEIPT OF MATERIALS &
INCOMING INSPECTION
The receiving department receives the
materials supplied by the vendors. The
quantity is verified & tallied with the
purchase order. The purchase department
is informed immediately about the receipt
of the materials. If the materials require
any quality control or inspection, they are
sent for such testing. The inspection
department tries to verify that the
incoming materials comply with the
standard, quality as specified in the 23

purchase order.
 PAYMENT OF SUPPLIER
When the goods are received in satisfactory
condition, the invoice is checked before it
is approved for the payment.
Generally the invoice is checked to see that
the goods were dully authorized to
purchase, they were properly ordered,
they are priced as per the agreed terms,
the quantity & quality conform to the
order, the calculations are arithmetically
correct etc.
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MAINTAING THE RECORDS

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