The document outlines the purchase cycle process used by companies. It involves 7 main steps: 1) receiving and analyzing purchase requisitions, 2) selecting suppliers and requesting quotations, 3) determining the right price, 4) issuing purchase orders, 5) following up on deliveries, 6) receiving and accepting goods, and 7) approving invoices for payment. The goal of the purchasing process is to obtain the required goods and services at the lowest possible cost, best service, and on time, while maintaining supplier relationships. The case study then provides an example purchase process used by an Indian welded wire mesh manufacturer.

1. Purchase cycle
Presented by
Chandra Prakash
Dewangan

2. Purchase Cycle
Purchasing
“the process of buying”
Requires input from:
– Marketing
– Engineering
– Manufacturing
– Manufacturing Planning and Control
• what materials to order
• when to order them

3.  Purchasing of material ,machinery and
services is done by purchasing department.
 For buying the material company has to pay
up a price, the value that a seller sets on his
goods in the market is called as the price of
that good.
 Price is one of the greatest variables in the
purchasing of material.

4. Requirements for purchase systems
• procurement involves sourcing items:
– At the right price.
– Delivered at the right time.
– Of the right quality.
– Of the right quantity.
– From the right source.

5. Steps in purchase cycle
1. Receive and analyse purchase requisitions
2. Select suppliers, issue quotations
3. Determine the right price
4. Issue purchase orders
5. Follow-up to assure correct delivery
6. Receive and accept the goods
7. Approve invoice for payment

7. Receiving and Analyzing purchase
Requisitions
• The first step in the purchasing cycle is
preparing the purchase request. The
purchase request is
• a document used to inform the purchasing
agent that an office or a department needs to
buy something. It is the basis for preparing a
purchase order.

8. A purchase request usually includes the
following information:
• Department name.
• Date.
• Account code to be charged.
• Requisition number.
• Desired delivery date.
• Description, model number, or specifications of
required purchases.
• Quantity required.
• Unit price.
• Authorized signatures.

10. Selecting Suppliers
 Often from a list of approved suppliers
 For small items:
• internet
• catalogues
• trade journals
 For large items, issue a request for quotation
• telephonic quotations
• written quotations
• scheduled buying

11. Requesting Quotations
• Written inquiries sent to enough suppliers
– to ensure competitive and reliable quotes are
received
• Quotes are analyzed
– price
– compliance to specification
– technical suitability
– often with the involvement of the originator

13. Determining the Right Price
• Usually the lowest
• May involve negotiations
• Responsibility of the Purchasing Department

14. Issuing a Purchase Order
A purchase order authorizes a vendor to ship and invoice the
materials and services as specified. Purchase orders shall be
clear, concise and complete. This will prevent any unnecessary
misunderstanding during correspondence with vendors.
• Legal document
• Forms a contract with the supplier upon acceptance
• Copies to:
• Supplier
• Originator
• Accounting
• Receiving
• Purchasing file

16. Follow-up and Delivery
• Ensure on-time delivery
• Negotiate any changes
• Take corrective action:
– expedite as required
– find alternative sources of supply
– work with suppliers to resolve problems
– reschedule production?

17. Receiving and Accepting Goods
• Receiving inspects goods for correct quantity
and any damage
• Accepts goods and generates a receiving
report
– send to quality for further inspection
– hold goods damaged in transit
• Copies to Accounting, Purchasing

18. Approving Invoice for Payment
An invoice is a document that itemizes charges for the
purchase of supplies, materials, equipment or services
which have been furnished. It is the means by which the
vendor informs the County of its obligations and should
contain the same basis information as the purchase order.
WHAT AN INVOICE SHOULD CONTAIN
1. Purchase order number
2. Date of order (if possible)
3. Date of delivery
4. Itemized list of materials or services rendered

19. 5. Destination of delivery
6. Quantities, prices, (both unit and total), terms and any
other charges contained in the purchase order
7. Delivery charges should be listed separately from the
materials and supplies if they are not included in the unit
price

20. Points to remember while purchasing
•Proper specification
•Invite quotations from reputed firms
•Comparison of offers based on basic price, freight & insurance, taxes and levies
•Quantity & payment discounts
•Payment terms
•Delivery period, guarantee
•Vendor reputation
(reliability, technical capabilities, Convenience, Availability, after-sales service,
sales assistance)
•Short listing for better negotiation terms
•Seek order acknowledgement

21. Objectives of Purchasing
Obtain goods and services:
 of the required quantity and quality
 at the lowest possible cost
 at the best possible service and
delivery
 while maintaining and developing
suppliers

22. Purchasing Functions
• Determining purchasing specifications
– right quality
– right quantity
– right time (delivery)
– right place (delivery)
• Selecting supplier
– right source

23. Purchasing Functions (continued)
• Negotiating terms and conditions
– right price
• Issuing and administering purchase orders

24. Case study
• MM Industries Pvt. Ltd. is one of the largest
manufacturers of Welded Wire Mesh in Central
India. Established in 1995, at Raipur. MM
Industries has served over 100 national and
international clients. Producing varieties of
welded wire mesh and related products.
• M.M. Industries has rate contract with
Chhattisgarh state Govt. for welded wire mesh,
chain link fencing & barbed wire mesh.

25. • The manufacturing plant spreads over 80,000
sq. ft. on the airport bypass, situating us on
the NH-43. The plant is equipped with five
fully automatic fusion welding lines, three
hexagonal mesh lines and eight wire drawing
units. Chain Link and Concertina Coils units
also share the manufacturing space.

26. products
• Punched tape concertina coil
• Hexagonal wire mesh

27. • Vibrating screen
• Chainlink fence

28. • Gabion( crate/ box)

29. Purchasing procedure
• They follow the steps in purchasing are
1. Indent is send by the department.
2. Enquiry form to be send to the vendors.
3. Quotation received the vendors to be evaluated.
4. Comparative statement is prepared supplier is
finalised.
5. Placing the purchase order.
6. Goods receipt is prepared by stores.
7. Invoice authorization & dispatch to finance.

35. Purchasing card