The purchasing process, procedures and methods of purchasing
Purchasing runs from need to payment: indent, specification, quotations, supplier choice, purchase order, follow-up, receiving, storage and payment. Methods range from informal buying to formal tenders.
The purchasing process
- 1Recognise the need: the storekeeper or cook raises an indent (purchase requisition) from the menu, standard recipes, number of covers and stock levels.
- 2Write a specification for each item: name, grade, size, variety, market form, packing, quantity and delivery terms.
- 3Identify suppliers and invite quotations or tenders.
- 4Compare offers on price, quality, reliability and terms, and select the supplier.
- 5★Place a purchase order: a written order with items, quantity, specification, price, delivery date and terms; copies go to the supplier, receiving, stores and accounts.
- 6Follow up so the goods arrive on time.
- 7Receive and inspect the goods against the purchase order, specification and invoice; accept or reject.
- 8Store the goods and update the stock records.
- 9Check the invoice and pay the supplier; file the papers and review the supplier's performance.
★ one-way, controls the pace
Methods of purchasing
| Method | How it works | Best for |
|---|---|---|
| Informal (open market) | Buyer gets prices from a few suppliers by phone, visit or online and orders from the best; few documents | Small units; perishables bought daily |
| Formal (competitive bidding, tender) | A tender notice with written specifications; suppliers send sealed bids, opened together; the lowest acceptable bid wins | Government hospitals and hostels; staples for long periods |
| Negotiated | Buyer bargains price and terms with one or a few suppliers | Special items or items with few suppliers |
| Contract (fixed price) | Supplier agrees to deliver at a fixed price for a set period | Milk, bread, eggs, LPG for a hostel |
| Cost-plus | Supplier is paid his cost plus an agreed percentage or fee | Items whose prices change often |
| Standing order | The same quantity is delivered regularly without a fresh order | Daily milk, bread and curd |
| Centralised | One office buys for all branches or kitchens | Hotel chains, railway catering, hospital groups |
| Group (cooperative) | Several institutions pool orders to buy in bulk | Colleges or hospitals buying together |
| Cash-and-carry | Buyer pays cash and transports the goods | Small canteens and caterers |
| Just-in-time (prime vendor) | Most items from one main supplier, delivered as needed; little stock held | Kitchens with little storage space |
Informal vs formal purchasing
Writing a specification
A specification is a precise written description of an item to be bought. It tells the supplier exactly what is wanted and is used to check goods at receiving. Example: 'Tomatoes, local, red-ripe, firm, medium (50-70 g each), free from cracks and rot, in plastic crates, 50 kg, delivered by 7 a.m. daily.' A specification names the item and its use, grade or brand, size or count, variety, market form, packing unit, quantity, delivery time and any tests.
A government hospital buys rice, dal and oil for long periods through a tender with written specifications, but buys vegetables and fish daily in the open market, so staples are cheap and perishables stay fresh.
2 marks: “What is a purchase order?” A written order from the buyer to the supplier stating the items, quantity, specification, price, delivery date and terms; it is the legal basis of the purchase.
5 marks: “Compare formal and informal methods of purchasing.” Informal: quick, flexible, few documents, for perishables. Formal: tender with sealed bids, transparent, lowest price for bulk, but slow and paper-heavy.
10 marks: “Explain the steps in the purchasing process and the different methods of purchasing.” Draw the flow from indent to payment and explain each step; then informal, formal and other methods with where each suits.
I-S-Q-S-O-F-R-S-P: 'I See Quite Several Oranges Falling; Rush, Save, Pack': Indent, Specification, Quotation, Selection, Order, Follow-up, Receive, Store, Pay.