Purchasing And Inventory Management
ROLE OF THE PURCHASING AGENT IN INVENTORY MANAGEMENT
ABSTRACT
Inventory ties up the largest amount of cash in companies, and inventory management decisions directly influence the purchasing function. As these activities fall under the supply chain management umbrella, managers cannot act independently pursuing an objective that is going to satisfy one department. Instead, managers foster teamwork and cooperation not only within their own company, but also between their company and the company’s suppliers of goods and services. Purchasing for the sake of taking advantage of a good price is no longer a priority in a company, many companies rather purchase products at a higher price in order to sustain and foster a relationship with their suppliers. As pricing directly affects purchasing, also Purchasing directly affects Inventory Management. Good managers are those who are able to find the delicate balance between when and how much to buy.
AN OVERVIEW OF THE PURCHASING FUNCTION
Purchasing agents strive to obtain the highest quality products at the lowest prices possible in order to help the company realize an increase in profitability. In today’s economy, with all the resources available, the technology advances and the interconnection of business, is important for a company to have top-of-the-line purchasing professionals and supply chain managers. “To increase long-term shareholder value, the company must increase revenue, decrease costs, or both.” (Johnson, Leenders, & Flynn, 2006). The purchasing function plays an important part achieving both activities simultaneously. While most activities of the supply chain play an important role in cost savings, the purchasing function can greatly impact the success of the company. Purchasing low quality, low price products can negatively affect the company’s balance sheet as quality is being compromised. A more effective purchasing strategy is to purchase high quality, low price products from a source that has
ABSTRACT
Inventory ties up the largest amount of cash in companies, and inventory management decisions directly influence the purchasing function. As these activities fall under the supply chain management umbrella, managers cannot act independently pursuing an objective that is going to satisfy one department. Instead, managers foster teamwork and cooperation not only within their own company, but also between their company and the company’s suppliers of goods and services. Purchasing for the sake of taking advantage of a good price is no longer a priority in a company, many companies rather purchase products at a higher price in order to sustain and foster a relationship with their suppliers. As pricing directly affects purchasing, also Purchasing directly affects Inventory Management. Good managers are those who are able to find the delicate balance between when and how much to buy.
AN OVERVIEW OF THE PURCHASING FUNCTION
Purchasing agents strive to obtain the highest quality products at the lowest prices possible in order to help the company realize an increase in profitability. In today’s economy, with all the resources available, the technology advances and the interconnection of business, is important for a company to have top-of-the-line purchasing professionals and supply chain managers. “To increase long-term shareholder value, the company must increase revenue, decrease costs, or both.” (Johnson, Leenders, & Flynn, 2006). The purchasing function plays an important part achieving both activities simultaneously. While most activities of the supply chain play an important role in cost savings, the purchasing function can greatly impact the success of the company. Purchasing low quality, low price products can negatively affect the company’s balance sheet as quality is being compromised. A more effective purchasing strategy is to purchase high quality, low price products from a source that has
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