Purchasing organizations are responsible for all purchasing activities that include the negotiation with vendors and suppliers. They develop the strategies to obtain discounts from vendors. The purchasing strategies vary from industry to industry therefore; the purchasing organizations must develop the strategies accordingly.
It is important that the purchasing strategy in linked with the organizational objectives and make sure that those strategies support the supply chain objectives. All the people in the organization must be well aware of the strategies being implemented by the organization so that a formal procedure is used which will result in a successful business. (Day, Pg 389, 2002)
• One of the major goals of a purchasing organization is to improve quality in order to get customer loyalty and a good reputation in the market. Good quality service will help the organization to compete well in the market. Quality can be improved by hiring the best professionals with good negotiable skills, legal knowledge and a better understanding of the business.
• The purchasing organizations have a goal to reduce the inventory maintenance cost. If the organization gets hold of a huge amount of inventory for a long period of time then it might have to bear the spoilage cost. Inventory sometimes starts depreciating if stored for a long period of time, which will require maintenance. The purchasing organizations can avoid inventory maintenance cost by using just-in-time inventory system, which means that the inventory is delivered once they get a contract for a supply.
• Managing inventory is also an important goal of a purchasing organization. In order to keep the clients satisfied the purchasing organizations need to manage their inventory effectively. They need to make sure that the order from the clients is delivered on time and in order to do so the organization should have a sufficient inventory available or in case of just-in-time inventory system the organization need to have vendors available who can deliver good on time. The organizations have to make sure they choose the best vendor available in the market keeping in view the national, local and international suppliers.
• The purchasing organizations have a goal to manage good relationship with the vendors/suppliers in order to get good discounts on supplies. Healthy relation with the suppliers is important as they have an agreement to deal with them for a year at least. In such a case bad relationship will result in the loss for the organization as the supplier might not cooperate anymore and there might me delays in delivery of order. They not only need to build relationship with the sales department of the suppliers but with the whole company so that they know the purchasing organization well.
• The purchasing organizations need to reduce administrative costs in order to increase profit for the organization. It should be technology oriented so that emails should be used instead of fax and telephones, lights should be switched off during lunch hours to save electricity bills.
• Having an uninterrupted flow of material is also a major goal of a purchasing organization so that the business does not stop and the clients get their orders on time without any hassle.
• The purchasing organization need to have an efficient use of raw material and parts provided by the suppliers by sharing ideas.
Marc Day, (2002), Gower handbook of purchasing management, Gower Publishing, Ltd, Page389