Management In A Manufacturing Company

Ordering cost: The herm ordering cost is used in case of raw materials or supplies arid includes the entire cost of acquiring raw materials. They include cost incurred in the following activities, requisitioning transporting purchase ordering receiving inspecting and showing ordering costs increase in proportion to the numbers of orders placed. The staff and clerical cost do not have to vary in proportion to the number of orders placed.
Caring cost: under carrying cost we have the following types of costs:-
Capital cost the amount invested in an item is an amount of capital cost available for other purposes if the money were invested else where a return on investment would be expected Ppelby (2009).
2.9.3 Purchasing objectives and policies
Bailey and farmer (1999) emphasizes the primary objective of purchasing is to obtain the correct equipment, materials, supplies nod services in the right quantity of the right quality lions the right source at the right lime arid cost.
Purchasing officers in choosing the right source make decisions that influence not only the firms economic success but also the supplier and efficiency of the entire economy and having the right source would allow the purchaser’s organization, competitive pricing reliable quality on time delivery, good technical service and continuing relationship between the seller and the buyer i.e. the sever can learn about the buyer’s problems manufacturing inventory receiving and overall operations equally the buyer can assist the sever on how best to produce. The product competitively and do a value analysis purchasing can be centralized or decentralized.
Centralized: This system enables the employment of specialized buying staff who can pin-point the best available products, prices and delivery dates under the centralized procedure bulk buying allows customers to specify minimum quality standards and perhaps even design requirements.
Common administrative procedures and documentation to all buying activities in centralized system Robert (2007).
Decentralized: In this system each department is responsible for obtaining as own supplies, local staff with declared knowledge of immediate requirement place orders without reference to a central control. The method does not allow bulk purchases but it is quick and convenient and higher prices may be paid through ignorance of alternative sources] Bailey and farmer emphasis on the 3 types of purchasing policy by which supplies can be obtained.
1.    Purchasing by Quotation: every significant contract in this method is out for tender as firm will select the best supplier for each order though superficially attractive the technique prevents the establishment of good tam relationships with individual suppliers who in the course of time mighty be willing to offer special discounts or even modify a product’s design to meet the customers particular needs poor quality could mean low price or inadequacies after sale service.
2.    Purchase by Contract: In this case contracts are issued to certain firm to supply all requirements for specific goods for predetermined periods a year for example provided delivers are steady and reliable the purchasing firm need not carry large stocks since contracts bear fixed prices so the firm cannot run around for cheaper sources while existing contracts are in force this a suitable where price fluctuation are not expected.
3.     Speculative Purchasing: When price of externally purchased goods fluctuant significantly large scale purchase, when prices are exceptionally low might be worthwhile not only are inputs obtained cheaply but also any surplus stock can be sold on the open market at a profit whenever, market prices rise obvious problems are that time price could fall and additional stock holding cost arc incurred. Orlickey (2000).