Company Functions: Purchasing, Procurement, and Supply Chain
The Company: An Economic Unit
A company is an economic unit created to generate profit through business activities. Companies can be classified into:
- Extractive Companies (Primary Sector): Extract raw materials (e.g., fishing).
- Industrial Enterprises (Secondary Sector): Transform raw materials into finished products (e.g., furniture).
- Service Companies (Tertiary Sector): Provide goods and services from the primary and secondary sectors to consumers (e.g., transportation).
Functions of a Company
The functions of a company include:
- Technical Role: Activities necessary for manufacturing or processing products, including raw material supply.
- Commercial Function: Activities related to product sales (e.g., advertising).
- Finance Function: Activities related to capital flows, such as analyzing return on investment.
- Social Function: Related to social and labor aspects of staff, including human resources activities like payroll.
- Managerial Role: Manages administration and control of operations across different company sections through accounting and administrative records of receipts, payments, sales, and correspondence.
The Purchasing Department
The purchasing department manages the procurement of products and services necessary for the company’s proper functioning and objective achievement.
Procurement Planning
Procurement planning and scheduling are coordinated with the objectives and strategies of other functional areas, considering:
- Budgets prepared by the finance department.
- Raw material and service needs from the production department.
- Staff management and warehouse stock levels.
- Sales forecasts from the commercial department head.
Purchasing Staff
The Purchasing Manager
The purchasing manager organizes, coordinates, and controls all activities related to the service management office. Their functions include:
- Setting achievable targets for each period.
- Organizing department activities for effectiveness and efficiency.
- Applying and communicating purchase information, transferring documentation to the administration department.
- Reporting changes affecting quality, price, or service continuity, and ensuring suppliers meet deadlines.
Buyers
Buyers are responsible for procuring necessary materials and services, reporting to the purchasing manager.
Provisioning and Procurement
Supply Management
Supply management encompasses operations to procure necessary materials for manufacturing or marketing. This includes planning, procurement management, product storage, and techniques to maintain minimum stock levels under optimal conditions and at the lowest cost.
Functions of Supply Management:
- Buying necessary materials for manufacturing or marketing.
- Managing product storage, implementing techniques to maintain minimum stock levels.
- Controlling inventories and associated costs using appropriate handling and storage techniques.
Purchasing Management
Purchasing management receives requests for necessary materials, searches for providers, and takes steps to ensure the company has the required products in inventory.
Functions of the Purchasing Department:
- Analyzing market trends, anticipating price changes, trends, new products, or competitive techniques.
- Studying business shipments from suppliers.
- Maintaining relationships with suppliers to obtain fast, efficient service, payment facilities, or employee benefits.
- Developing transport system solutions to improve costs, acting in coordination with other company departments.