Policies Defining the Role of Purchasing
This set of policies defines purchasing’s authority. It usually addresses the objectives of the purchasing function and defines the responsibilities of the various buying levels. These policies often serve as a general or broad policy statement from which more detailed or specific policies evolve.
Origin and Scope of Purchasing Authority
Personnel at all levels must be aware of purchasing’s authority to conduct business and to represent organizational interests. An executive committee usually grants this authority and develops this policy. This policy may also detail the authority of purchasing to delegate certain tasks or assignments to other departments or functions.
An important section of this policy describes the areas where purchasing authority does or does not exist. The policy may exclude the purchasing function from any responsibility for purchasing real estate, medical insurance policies, or other areas where purchasing may not have direct expertise. (However, purchasing is increasingly becoming involved in all types of purchases, including these nontraditional areas.) This policy outlines the overall authority of purchasing as granted by the executive committee while describing the limits to that authority.
Objectives of the Purchasing Function
As noted in Chapter 2, purchasing generally has the final authority over a certain spending area. This is typically set forth in a policy describing the general objectives or principles guiding the purchasing process. The following describes one company’s purchasing objectives or principles:
- To select suppliers that meet purchase and performance requirements
- To purchase materials and services that comply with engineering and quality standards
- To promote buyer-seller relations and to encourage supplier contribution
- To treat all suppliers fairly and ethically
- To work closely with other departments
- To conduct purchasing operations so they enhance community and employee relations
- To support all corporate objectives and policies
- To maintain a qualified purchasing staff and to develop the professional capabilities of that staff
Although these objectives or principles appear broad, they are important because they set forth, in writing, management’s commitment to achieving a professional level of purchasing behavior. These principles are also important because they give rise to other policies that directly support purchasing activities.
Corporate Purchasing Office Responsibilities
It is also useful to understand the duties and responsibilities of the central or corporate purchasing office (if a central office exists). This policy may also detail the relationship of the corporate office to purchasing centers located at the divisional, business unit, or plant level. The corporate purchasing office is usually a staff position directing, supporting, and coordinating the purchasing effort. This policy can provide guidance concerning the role of the corporate purchasing staff in the following areas:
- Carry out executive policies
- Develop and publish functional purchasing and material policies and procedures to support efficient and effective purchasing operations at all levels
- Coordinate strategy development between purchasing departments or centers to maximize purchasing leverage of critical commodities
- Evaluate the effectiveness of purchasing operations
- Provide expert support to purchasing departments (e.g., international sourcing assistance, contract negotiations, systems development)
- Perform other tasks typically associated with a corporate support staff Exhibit 3.1 illustrates a policy detailing corporate purchasing office responsibilities.