Archive for March 30th, 2012
The basic ingredient of an efficient purchasing process is the rational selection of the source of supply, i.e. To find capable and willing vendors and to conclude an agreement with them on the pertinent factors of quality, service and prices. In most businesses, it is quite possible to purchase products from several vendors. This raises two important questions:
1. Whether purchasing from several vendors is profitable
2. What type of vendor is the most satisfactory source of supply
Number of Vendors
The question of whether the company should have a number of vendors from whom it should procure most of the materials it requires should be given careful consideration, failing which the entire production process may run into difficulties. In regard to the number of vendors, the policies of companies vary considerably. For instance, a medium-size chemical manufacturing company for a number of years followed the policy of procuring materials from a number of vendors. Since it is used to make small purchases from a variety of vendors, it did not get any credit facility. Instead, each vendor pressed for urgent and immediate payment.