There are four different groups of buyers, viz. (a) consumers, (b) middlemen, (c) government agencies and (d) manufacturers. Consumers buy various items for their own consumption and they constitute the single largest group of buyers. In fact, the whole economy is dependent on this group for survival. The second group comprises such a motley collection of traders as wholesalers, retailers, and distributors who buy not for their own consumption, but to sell to others. They act as the link between the primary producers and the ultimate consumers. Government agencies consisting the third category of purchasers, buy â€œtins pins to giant aero planesâ€? for use in government departments. The fourth category of purchases include manufacturers who convert raw materials and other inputs into saleable products. They buy raw materials. Components, consumables and packing materials for use in industrial establishments where, saleable products are produced. The subject of purchasing is discussed here as it applies to the buying, made by manufacturers.
In its narrow sense, the term â€˜purchasingâ€™ refers merely to the act of buying an item at a price. This very narrow conception of purchasing has been gradually widened during the last 70 years.
A broader meaning of purchasing makes it a managerial, activity which goes beyond the simple act of buying and includes the planning and policy activities covering a wide range of related and complementary activities. Included in such activities are the research and development strategies required for the proper selection of materials and sources from which those materials may be bought , the follow-up to insure proper delivery, the development of proper procedures, methods and forms to enable the purchasing department to carry out the established policies; the co-ordination of the activities of the purchasing department with such other internal divisions of the concern as traffic, receiving, store-keeping, and accounting, so as to facilitate smooth operations and the development of a technique of effective communication with the top management of the company so that, a true picture of the performance of the purchasing function is presented.
Some writers use the term â€˜procurementâ€™ instead of purchasing. The term procurement is broad in its meaning and covers the duties performed by the purchasing department as well as such additional functions of materials supervision and management as inventory control, receiving , incoming inspection and salvage operations.
The terms procurement is too broad and hence is not used by many writers on the subject and by people who practice the profession. The term purchasing is most appropriate and hence is in popular usage.
The buyers or purchasing officers are the people responsible for discharging purchasing functions. They are the full time staff of the company. The head of the section or department is the purchasing agent, also variously known as the purchasing officer, purchasing manager or simply buyer. The department where all the purchases operate is called the purchasing department.
The purchasing department is often called the supply department when the former is also responsible for storing things bought and stock control of what is stored.
We prefer to use the term purchasing department to supply department.. For us storing and stock or inventory control are independent functions to be handled by separate staff. They cannot, therefore, be attached to purchasing department.