Goals and responsibilities of the purchasing department

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Why do we need a purchasing department? In every organization, this department is represented in one form or another. And his work directly affects the efficiency of the entire organization as a whole. Let's take a closer look at how the work of the department affects the results of the organization.

Department Objectives

Purchasing department is a department that specializes in purchasing goods from a supplier on the most favorable terms for the company.

The work of the department has a direct impact on all the activities of the company. For the assortment, for sales, the fullness of warehouses, the availability of the necessary goods, the effective use of working capital.

Purchasing goals can be ranked based on a company's global goals, but the overall list often looks something like this:

• determine the company's need for a particular product;
• purchase goods at the best possible price;
• promote high turnover;
• create conditions for receiving goods on time;



• evaluateproduct quality and purchase the highest quality;
• maintain a relationship with a supplier or suppliers;
• work effectively with the rest of the company;
• Effectively keep track of purchased goods;
• monitor the turnover, getting the maximum benefit for the company.

Main Functions

In different organizations, the functions of the purchasing department can differ significantly from each other. Yet there are functions and responsibilities that will characterize a department in almost every company:

• Supplier market monitoring;
• monitoring the availability of goods in stock;
• timely replenishment of the assortment;
• search for the best suppliers and prices;
• negotiations with suppliers;
• control of delivery and cargo transportation of goods;



• receipt of goods;
• quality control of purchased goods;
• complaints, if necessary.

Additional functions of the purchasing department, which may or may not be present in the organization - depending on its specifics and structure:

• assortment management;
• gathering information about competitors;
• involving suppliers in the marketing organization.

Structure

The structure of the purchasing department is built depending on:

• organization size;
• industries;
• number of assortment units in turnover;
• number of suppliers;
• their geographic location.

Depending on the type of organization, the purchasing department may be managed centrally or regionally.

As a rule, this is a matrix structure consisting of the head (head, director) of the procurement department and managers (specialists) for procurement.

The average number of items or categories per manager is about 7, but it may vary depending on the volume of production or turnover.

Duties of the department and its employees

For the effective work of the purchasing department, a clear distribution of responsibilities of the purchasing department between its employees is necessary.

The main responsibility of the head of the department is to ensure the continuity and stability of the supply of the necessary goods by optimizing the work of the department and coordinating the activities of employees. Also, the purchasing manager must have an idea of all concluded contracts and categories in order to organize and continue the effective work of the department even in the absence of any of the employees.

The duties of purchasing managers or ordinary specialists of the department include organizing the supply of goods, tracking cargo transportation, controlling payment for purchased lots, and planning purchases.

An effective model will be where each buyer has his own area of responsibility, consisting of a list of articles or product categories.

Employee Requirements

Given the responsibilities of employees and the functions of the department, you can make a list of requirements forideal candidate for the position of buyer.

Purchasing department employees should respectively have the following skills, knowledge and personal qualities:

• Ability to analyze information. The choice of supplier should be based on many criteria. This is the best price, and a geographical advantage, and the alignment of the logistics of the supplier company and your organization.
• Knowledge of pricing principles.
• Knowledge of the legal framework for procurement.
• The ability to draw up and conclude contracts.
• The ability to negotiate. Sometimes it is very important to draw up individual conditions with a supplier for your company. Reducing the supplier's price or using the supplier's resources for promotions, product-specific training for their staff, product installments and post-payment systems can all serve as a good competitive advantage among similar companies.
• The ability to maintain business relationships.
• The ability to plan your activities.

Motivation of buyers and purchasing manager

The motivation system of the purchasing department should be built in such a way that the employee works with maximum efficiency. But at the same time, conflicting requirements and requirements that exceed the capabilities of the employee should not be put forward.

To implement a monthly motivation system, you need:

• Create a KPI model for the department. These are indicators such as the fulfillment of the procurement plan, the turnover ratio, the profitability of salesgoods, the presence and absence of stale goods.
• Create a model of key performance indicators for each employee based on criteria such as the organization's price delta compared to competitors, the availability of the required product, the quality of the purchased product, the launch of new brands, the individual conditions of suppliers and more.
• Based on the KPI model, the premium is calculated. Moreover, it will be effective to pay a bonus consisting of two parts: a bonus for department performance and a bonus for personal fulfillment of plans.

At the same time, each KPI criterion must have properties such as:

• measurability;
• transparency;
• planning criterion should be created taking into account market trends.

That is, the buyer can, if desired, independently calculate the amount of his premium.

The bonus of the head of the department can be based on the indicators of the entire department, and also include the performance indicators of each employee individually.

At the same time, the bonus part of an ordinary employee of the procurement department should be about 50% of the entire salary, and the bonus of the head of the department should be about 30-40%. The rest is salary, because not all departmental performance indicators can be tied to the activities of a specific employee.

Do sales fall under the buyer's responsibility

In the calculations of the KPI of the purchasing department, you can use such a criterion as the turnover of purchased goods - the ratio of sales to its assets.

It seems like the buyer shoulddeal only with the purchase of goods, but still the quality of the purchased goods, its price attractiveness for the end consumer or the company's client significantly affects the implementation of the sales plan.

Therefore, the quantity and quality of sales half depends on well-conducted purchases.

Place of the purchasing department in the structure of the organization

The tasks that are solved by the purchasing department, in accordance with modern marketing trends, should be solved in this order:

• First, a sales strategy is built (finished product or purchased goods).
• Then, if the purchasing department is in the enterprise, the issue of production strategy is decided.
• And only then is a procurement strategy for the necessary goods, raw materials or components developed.

The head of purchasing often reports directly to the CEO of the company.

There must also be effective communication between the purchasing department and the marketing and sales department. Without this, many efforts to create a purchasing department, improve its structure and motivation will remain without the proper result.

If a category management system is implemented in a holding or organization, then the buyer must work in conjunction with the category manager. At the same time, it is necessary to delimit the area of responsibility of each specialist so that the motivation system remains transparent and understandable to everyone.