As discussed previously, purchasing systems for organization procurement have several elements
which include the following:
1. Recognition of need
2. Evaluation of alternatives
3. Placement of order
4. Follow up and expediting
5. Invoice handling
6. Receipt and inspection
1. Recognition of need – the purchasing system cannot be started until a need is recognized
in some form of document authorizing purchase. There should be a clear request by a
user unit to procure an item, and also authority to spend. In government institutions,
someone with authority to incur expenditure must authorize the expense. In doing so he
relies on evidence of supporting documents such as quotations unit be attached.
Equipment and other materials to be purchased need to be clearly planned for and
budgeted annually, in what is called a procurement plan. This should specify the item
will be procured, number of units required, and the expected cost. In some cases, the
procurement plan must be approved before procurements are made
2. Evaluation alternatives – this involves considering the various bids or quotations on the
basis of quality, service and price. Many manufacturing firms may even consider
producing the needed items themselves. Getting bids is a common practice among many
industrial buyers and requires the firm to invite bids from capable supplies who meet
certain conditions. Quotations are used for less expensive procurements. Some firms
that depend on materials or equipment or unusual properties or design properties
sometimes manufacture them to avoid interruption in supply or variation in quality. In
relating the best supplies, the characteristics to look for indeed.
(i) Honesty – priority is given to those with evidence of honesty, and a firm evidence
of dishonesty a ranked low.
(ii) Capacity to meet the buyer’s requirements with respect to quality, quantity and
(iii) Sound financial condition in order to be able to supply without difficulties
(iv) Experience in manufacturing
(v) Location – the supplier should be located in an accessible place, which is also
3. Order placement. This requires use of order forms or requisition forms giving details of
what is needed in terms of quantity and what price as per the quotations abstained earlier.
Sometimes an arrangement may be made for automatic supply whenever the stock levels
falls to an established recorder point, until an agreement of payments at regular intervals.
4. Follow up and expediting. Follow up is necessary to ensure that suppliers remain
committed to honor the orders. Some suppliers are uncooperative and unless followed up
disruption of operations may occur. Specialized personnel (expediters) may be given the
responsibility of occasionally visiting the supplier’s plant to investigate deliveries and
keep shipments moving.
5. Invoice handling. Invoice handling should be handled with care and verified against the
items received, so that payments are done on time. It is the purchasing department that
authorized payments and must be satisfied that the item of purchase agreement have been
6. Receipt and inspection – all materials received must be checked again, the order to
ensure that the materials supplied are the same ones ordered, in items of quality, quantity
and specifications. Stores receiving notes should be daily filled upon inspection and
filled with the relevant departments in the organization