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PURCHASING AND SUPPLY CHAIN MANAGMENT PURCHASING AND SUPPLY CHAIN MANAGEMENTDEFINITIONS AND CLARIFICATIONPURCHASINGPurchasing is the act of buying the goods and services that a company needs to operate and/ormanufacture products.Many people are ignorant of what purchasing is all about. “Purchasing” is the term used inindustries, commerce, public corporations to denote the act of and the financial responsibility forprocuring material, supplies and services. It simply describes the process of buying. However ina broader sense, the term involves determining the needs, selecting the supplier, arriving at aproper price, terms and conditions, issuing the contract or order, and following up to ensureproper delivery. It focus is to purchase or obtain materials in the right quantity, in the rightquality, at the right price, at the right time, and from the right supplier and delivering to the rightplace.SUPPLY CHAIN MANAGEMENTSupply chain management (SCM) is a process used by company’s to ensure that their supplychain is efficient and cost-effective. A supply chain is the collection of steps that a companytakes to transform raw components into the final product. Typically, supply chain management iscomprised of five stages: plan, develop, make, deliver, and return.The first stage in supply chain management is known as Plan. A plan or strategy must bedeveloped to address how a given good or service will meet the needs of the customers. Asignificant portion of the strategy should focus on planning a profitable supply chain.Develop is the next stage in supply chain management. It involves building a strong relationshipwith suppliers of the raw materials needed in making the product the company delivers. This
phase involves not only identifying reliable suppliers but also planning methods for shipping,delivery, and payment.At the third stage, Make, the product is manufactured, tested, packaged, and scheduled fordelivery. Then, at the logistics phase, customer orders are received and delivery of the goods isplanned. This fourth stage of supply chain management stage is aptly named Deliver. The finalstage of supply chain management is called Return. As the name suggests, during this stage,customers may return defective products. The company will also address customer questions inthis stage.STRATEGIC SUPPLY CHAIN MANAGEMENTDevelopment and Evolution of Purchasing and Supply functions:Purchasing and procurement is used to denote the function of and the responsibility for procuringmaterials, supplies, and services. Recently, the term “supply chain management” has increasinglycome to describe this process as it pertains to a professional capacity. Employees who serve inthis function are known as buyers, purchasing agents, or supply managers. Depending on the sizeof the organization, buyers may further be ranked as senior buyers or junior buyers.