Procurement involves obtaining goods and services from external suppliers. In small organizations, procurement is centralized under one person, while in larger organizations it can be centralized or decentralized across departments. Key procurement staff include the Chief Buyer who oversees major purchasing decisions. The procurement department determines items to purchase based on business needs, liaises with other departments on their requirements, and manages inventory levels to avoid stockouts and maximize storage space. Maintaining accurate inventory records allows the business to track market trends and order replacement stock efficiently.

1. PROCUREMENT AND
INVENTORY
MANAGEMENT
By Mrs. G Flanders-Hinds

2. SECTION 10
OBJECTIVE 1(A)

3. WHAT IS PROCUREMENT?
Procurement involves the sourcing and
obtaining goods and services from external
sources (suppliers) to carry on the
productive activities of a business. Thus,
during the procurement process the
purchaser seeks to acquire quality goods at
a reasonable price in the quantity and at
the time it is required.

4. CENTRALIZATION AND
DECENTRALIZATION OF THE
PROCUREMENT PROCESS?In a small organization the process of
procurement is centralized, that is, it is carried
out by the proprietor or he/she assigns a
member of staff to do the purchasing.
However, in a medium-sized or large
organization the process of procurement may be
both centralized or decentralized. When
procurement is decentralized in an organization,
it means that each department will handle its
own purchasing needs. If procurement is
centralized, it means that one department, the
Procurement Office, will be responsible for
taking care of the purchasing needs of the entire
organization.

5. KEY PERSONS RESPONSIBLE FOR
CARRYING OUT THE PROCUREMENT
PROCESS
In a meduim-sized or large organization, the
head of the procurement office may be known as
the Chief Buyer, the Purchasing Director or the
Chief Procurement Officer. This individual is
accountable to the upper-level managers and
will have a number of important purchasing
decisions to make, such as what to purchase;
how much to purchase; when to purchase; and
who to purchase from. A Purchasing Clerk is also
employed to assist the head of the procurement

6. FUNCTIONS OF THE PROCUREMENT AND
INVENTORY MANAGEMENT OFFICE
 Determining the items to purchase;
 Liaising with other departments; and
 Manage inventory.
i.

7. DETERMINING ITEMS TO
PURCHASED
One of the function of the purchasing office is to
determine what items to be purchased. These items
will depend on the business activities the business are
engage in, for example, items are purchased by
organizations to carry on the day-to-day activities of
the business, a retail business buys stock for resale
whilst a manufacturing organization buys raw
materials to make a product. Therefore, when
deciding on the goods and/or services to be
purchased, the procurement office must decide:
1. What to purchase?
2. How much to purchase?
3. When to purchase?
4. Who to purchase from?

8. TYPES OF ITEMS THAT ARE
PURCHASED BY BUSINESS
ORGANIZATIONS
Assets/Capital items – items of a permanent nature
that a business owns, e.g. motor vehicles, office
furniture, office equipment and buildings.
Consumable – expense items that are consumed or
used in a business, e.g. electricity for the factory, ink
and paper for the printer, stationery for the office,
fuel, tyres and oil for the vehicles, cleaning materials
Finished goods – goods resold to customer at a
higher price in order to make a profit, e.g. office
equipment, books, furniture and household items.

9. Raw materials – essential items are converted
into finished products for sale, e.g. cloth to
make clothing, leather to make shoes,
lumber to make furniture, or flour to bake
bread and cakes
Components – parts of products for resale,
e.g. parts for motor vehicles or monitors,
motherboards, memory and keyboards for
computers.

10. All the departments of the organization depends on
and must liaise with the procurement office to
purchase their supplies, so each department keeps
procurement office informed of its requirements.
Figure I depicts the relationship that exist between
the various departments.
 Operations or Factory Department – Procurement
department needs to liaise with this department to
order the necessary raw materials, supplies and
equipment needed to carry out the production
LIAISING WITH OTHER
DEPARTMENTS

11.  Sales and Marketing Department – the procurement
department needs to liaise with this department in
order to provide all the supplies and equipment
needed to carry on the day to day operations of the
department.
 Accounts Department – It is important for the
procurement department to establish a close
relationship with the accounts departments, as this
department is responsible for all the financial
allocation in the business. It is ultimately the accounts
department that will be responsible for paying the bills
for all the purchase made by the procurement

12.  Despatch and Transport Department – there needs to
be a close relationship between the procurement
department and the Despatch and Transport
department as it may be necessary for the department
to transport the goods purchased by the procurement
department to the business’s warehouse. The
Procurement Department will also be responsible for
purchasing equipment and supplies necessary for the
operations of the Despatch and Transport Department.
 Human Resource department – the procurement
department will need to liaise with this whenever there
are vacancies within the procurement department that
need to be filled. The HR department also deals with
training and appraisal of the Procurement Department
staff as well as dealing with aspects of general staff

13. Despatch and
Transport
department or
office
Accounts
department
or office
Procureme
nt
Departmen
t or office Operations
or Factory
department
or officeSales and
Marketing
department or
office
Human resource
department or
office
RELATIONSHIPS OF THE
PURCHASING OFFICE OTHER
DEPARTMENTS
Figure I

14. MANAGING
INVENTORY/STOCK
Inventory is a list of goods and
materials held in stock by a business.
Hence, Inventory management is the
process of recording stocked gods
and materials, ensuring that the
records are accurate, ensuring that
further stock is ordered when
necessary and supervising the cost of
items held in stock.

15. ADVANTAGES OF INVENTORY
MANAGEMENT
Setting up a good inventory management
system (also referred to stock control) gives a
business an indication of market trends.
Thus, it is important that an effective stock-
control system should be set up and
maintained as it helps to:
(i) ensure that stock does not run out
(ii) it indicates the reorder level
(iii) keeps production units supplied
(iv) reduce the likelihood of stock becoming
obsolete
(v) identify when pilferage and spoilage occurs
(vi) maximize use of storage space

16. REFERENCES
Carysforth, C., Neid, M., Maxime, C. & Metz, Y. (2012). Office
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Finisterre, S., Payne, L., & Reid, J. (2004). Longman Office
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Gartenstein, D. (2018). The Main Function of Inventory. Chron.com.
Retrieved from https://smallbusiness.chron.com/main-function-
inventory-16156.html.
Trendfield-Newsome, A. & Walker, C. (2011). Office Administration
for CSEC Examinations. Macmillan Publisher Limited.
What Are the Functions of a Purchasing Department in an
Organization? I Chron.com. (2018). Retrieved from
https://smallbusiness.chron.com/functions-purchasing-department-
organization-158.html.
Whitcomb, A. (2012). Heinemann Office Administration for CSEC.