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Facts about Purchasing Management
1. Business English Lessons for Purchasing Management
Levels B1-B2, Speaking Practice
True or false?
Read the statements and decide if they are true or false:
1. All goods, supplies and inventory needed to operate the business
must be ordered and kept in stock.
2. Purchase department buys raw materials, spare parts, services etc. as
required by the company or organisation.
3. Purchase management decides profitability of the company.
4. 1% saved in the purchase function improves the profit of the company
as much as 1%
5. Production companies purchase nowadays about 70% of their
turnover.
6. Purchasing management also covers the areas of outsourcing and
insourcing.
7. Development of good & new vendors (suppliers) is more important
than development of good relation with the existing suppliers.
8. One of the objectives of purchasing management is to take Economic
"MAKE OR BUY" decisions.
9. One of the objectives of purchasing management is to achieve stock-
out situations.
10. Purchase is one of the most important functions in an
organisation.
2. KEY and teacher’s notes:
1. True. The purchasing management department is also responsible
for controlling the cost of the goods ordered, controlling inventory
levels and building strong relationships with suppliers.
2. True.
3. True.
4. False. It is studied that 1% saved in the Purchase function improves
the profit of the company as much as 2 to 3% !
5. True. Production companies purchase nowadays approximately 70%
(even 80%) of their turnover, service companies purchase
approximately 40% of their turnover!
6. True. Insourcing is stopping contracting a business function
externally and starting performing it internally and is widely used in
production to reduce costs of taxes, labor and transportation.
Outsourcing is the contracting of a business process to a third-party
and may involve transferring employees and assets from one firm to
another.
7. False. Both are key objectives of Purchasing Management.
8. True. In a make-or-buy decision, choosing between manufacturing a
product in-house or purchasing it from an external supplier is crucial.
Due to global outsourcing over the past decades, the make-or-buy
decision is one that managers have to deal with very often. (see
“incourcing and outsourcing”)
9. False. One of the objectives of purchasing management is to avoid
stock-out situations.
10. True. Purchase management is one of the most crucial area of
the entire organisation and can be perceived as its most important
function. Purchasing is an important management issue both because
of its immense financial impact and its importance to achieving policy
goals.