Material : Purchasing Organization and Control 25

Introduction

The introduction to 'Material: Purchasing Organization and Control' sets the stage for understanding the importance of materials in cost and management accounting. Materials form a significant portion of the total cost of production in most manufacturing organizations. Efficient management of materials is crucial for ensuring uninterrupted production, minimizing wastage, and controlling costs. The section explains that material management involves a systematic approach to planning, organizing, and controlling the flow of materials from purchase to consumption. It emphasizes that purchasing is not just about buying goods but also about ensuring quality, quantity, timely delivery, and cost-effectiveness. The section also highlights the role of the purchasing department in maintaining a balance between carrying too much inventory (which increases costs) and too little (which can halt production). The introduction further outlines the objectives of material control, such as ensuring continuous supply, avoiding overstocking or understocking, and achieving economies in purchasing. It sets the foundation for the subsequent sections, which delve deeper into the organization of the purchasing function, procedures, documentation, and control mechanisms.

• Materials constitute a major part of production cost.
• Efficient material management is essential for cost control.
• Purchasing involves quality, quantity, timing, and price considerations.
• Material control aims to ensure continuous supply and avoid excess or shortage.
• Purchasing department plays a key role in material management.
• Introduction provides the basis for understanding subsequent material control processes.
• 📌 Material: All substances used in the production process.
• 📌 Material Management: Planning, organizing, and controlling material flow.
• 📌 Purchasing: The process of acquiring materials needed for production.

Organisation of the Purchasing Function

This section explains the organizational structure of the purchasing function within a manufacturing enterprise. It describes how the purchasing department is typically headed by a Purchase Manager, who is responsible for all procurement activities. The section outlines the roles and responsibilities of the purchasing department, which include identifying material requirements, selecting suppliers, negotiating prices, placing orders, and ensuring timely delivery. The organization of the purchasing function can vary depending on the size and nature of the business. In large organizations, the purchasing department may be divided into sections such as purchase planning, vendor development, and quality assurance. The section also discusses the importance of coordination between the purchasing department and other departments like production, stores, and accounts. Proper organization ensures clarity in roles, accountability, and efficient workflow. The section further highlights the need for a clear purchasing policy and procedures to guide the department's activities.

• Purchasing department is headed by a Purchase Manager.
• Responsibilities include procurement, supplier selection, and order placement.
• Large organizations may have specialized sections within the purchasing department.
• Coordination with production, stores, and accounts is essential.
• Clear policies and procedures are necessary for efficient functioning.
• Proper organization ensures accountability and efficiency.
• 📌 Purchase Manager: The head of the purchasing department.
• 📌 Vendor: A supplier of goods or services.
• 📌 Purchase Policy: Guidelines governing purchasing activities.