IMPORTANCE OF PURCHASING DEPARTMENT TOWARDS ORGANIZATIONAL PROFITABILITY

CHAPTER ONE

1. INTRODUCTION

Purchasing refers to the process of ordering and receiving goods and services. It is a subset of the wider procurement process. Purchasing refers to the process involved in ordering goods such as request, approval, creation of purchase order record (P.O) and the receipting of goods. Purchasing is the function that describes the activities and process to acquire goods and services. It involves the activities involved in establishing fundamental requirements, sourcing activities such as market research and vendor evaluation and negotiation of contracts.

            The purchasing function is a supporting activity that during the last few years has been gaining recognition as a strategic activity for the company. It is therefore to know and understand how this function can provide value for the organization. The purchasing function has three interactions that can be identified: the interaction that exists between purchasing department itself, the interaction that exists between purchasing department and other departments in the organization and the interaction between purchasing department and the suppliers.

            Although the relationship between purchasing department and the supplier is currently subject to research and proposals for improvement, the relationship buyer-internal customer are not commonly addressed by researchers.

1. STATEMENT OF THE PROBLEM

The purpose of an organization is to achieve its objectives, and to achieve this, not has to have effective and efficient purchasing department. This however is not the case in most organization, what we see are purchasing departments that are not well equipped, slow to act unconcerned about their job. They are said to lack the zeal, the brightness and the motivation of hardworking people, and they dislike hearing anybody talk about efficiency, dedication, honesty, competence and productivity, all which characterize achievement of people in an organization (the guardian, 2004).

1. OBJECTIVES OF THE STUDY

      The objectives of the students are as follows:

1. To analyse and explain how the purchasing department regarding factors of value creation coincides with the perception of internal customers.
2. Identify which factor influence the value added by purchasing department to the internal organization.
3. Evaluate the internal customer’s satisfaction level for these factors at the purchasing department of the organization.
4. Suggest improvement options for the purchasing department of the organization.
5. Perform a gap analysis for the organization subject of the empirical study.
   1. SIGNIFICANCE OF THE STUDY

This project work will serve as a study to those who have no knowledge of purchasing department and its importance in an organization. It will also help to know how important the purchasing department is in achieving organizational profitability.

At the end of this project work, the readers will be able to understand the meaning and concept of purchasing as well as be able to know how important the purchasing department is in an organization towards their profit maximization objective.