The buyers in a purchasing function of any business hold great power as they
buy all the materials required for the business. Buyer-supplier relationships
are vital for both sides, buyers will aim to achieve buying materials at the
lowest possible cost, whilst suppliers aim to sell as much materials as possible
to attain the highest levels of profit.
The traditional purchasing process will still take place using telephone
communication, where a buyer telephones the supplier and requests a delivery of
material. The more modern approach centres on the actual types of orders placed
and using the internet to place orders. Examples of order types are discussed
below:
CONSIGNMENT ORDERS - This is an old method of ordering where the
buyers agree to buy a large volume of material at the lowest cost, it is a
very old method of ordering as it needs a large warehouse to hold the stock
often consignment stocks would be held in food industries and any industry
where there is a common material across the product range.
BUFFER STOCK ORDERING - This is where the business agrees to hold a
small buffer stock of material to ensure that has enough material to
maintain production as the buffer stock reaches it's minimum level, the
buyer will be triggered to bring in more material from the supplier.
BLANKET ORDERS - These are very common orders where a buyer based
on production rate usage determines a figure of how much of a material will
be used over a 3, 6 12 month period. Once usage rates have been determined
the buyer will contact the supplier to place a single order, where the
supplier should be able to offer lower prices as a bulk quantity of a part
will be produced, the supplier will then hold the stocks of the finished
materials until the buying organisation keeps calling in and consuming the
material. Blanket orders help buyers with less paperwork and lower costs as
well as helping the suppliers with cost reduction. The only problem is when
a product sees a reduction in demand and as a result the buying organisation
will have to buy material they have committed to.
AD-HOC ORDERS - Put quite simply one off orders for a particular
part, buyers will tend to avoid this type of ordering as it hinders cost
reduction.
APPROVED SUPPLIERS - This is where the business will only buy
certain products and services from approved suppliers in return for preferential
help and support from the the supplier.