ORGANIZATION FOR

PURCHASING,
STOREKEEPING,
AND
TRANSPORTATION
Reporter: Abisado, Jona E. BSHM 4B
 Objectives

1 To define the importance of purchasing, storekeeping, and

transportation in an organization.

2 To understand the different types of transportation.

3 To distinguish the functions of purchasing in

an organization.

4 To understand the function and purposes

of stores and control.
 Purchasing
The Place of Purchasing - The function of purchasing is as old as selling, for the two
acts are complimentary, and one cannot take place without the other. Purchasing has
inevitably developed as a part of large-scale business and a department of the
specialized functional organization. It has attained ever-increasing importance with
the recognition of the fact that mass production operation depends on a steady and
reliable flow of materials and supplies and the cost of these purchased components
constitute a major factor of product cost. The term purchasing describes the process
of buying, learning of the need, selecting a supplier, negotiating price and other
pertinent terms, and following up to insure delivery. When this is expanded to include
production is control, often used traffic, and shipping, the term "materials
management"
Objectives of Purchasing
In industrial management, there has been during the last decade a steady increasing
pressure to reduce production cost. Competition between industries is one of the
strongest factors for such urge. 

To avoid duplication, To maintain standards of

waste, and obsolescence quality in materials, based
with respect to materials on suitability for use;
To do so with the minimum
investment in materials  To procure materials at the
inventory consistent with lowest cost consistent with
safety and economic
advantage; 3 4 the quality and service
required;

To maintain continuity of
supply to support the
2 5 To maintain the company's
competitive position in the
manufacturing schedule;
industry and to conserve
its profit position, insofar
1 6 as material costs are
concerned.
Organization of the Purchasing
Department
The purchasing department is headed by the purchasing agent, and assisting him are the
assistant purchasing agent, the procurement officer, the license and marine insurance officer, the
canvassing, shipping and correspondence personnel. As could be noted in the chart, the
procurement division and the license and marine insurance division are related under one
department.

The purchasing agent is assisted by a group of men known as "buyers". These are the men
who do the actual buying. They review the requisitions, interview salesmen, determine price,
arrange for delivery, and sign the purchase orders. Each. buyer is commonly assigned a. particular
commodity or group of commodities.
 Functions of Purchasing
The purchasing department is expected to perform the 6. To be on the look out for new products or desirable
following or some of the following tasks: substitutes.
7. To interview salesmen, even when what they sell is not
1. To secure necessary raw materials, equipment, facilities, needed at the time and help them see company's
supplies, and other items according to the specifications executives.
earlier arrived at, at the time fixed by a schedule or when 8. To study markets and the best time to buy.
they are needed. 9. To count and inspect purchases.
2. To buy at prices according to the standards demanded, 10. To approve invoices for payment.
within current market prices but taking advantages of 11. To keep informed on government regulations and
discounts that may be availed of. inform other executives about them.
3. To ask for quotations or bids on major items and to 12. Keep records on supplies, materials, and other
purchase items not requiring bids. To canvass for prices purchases.
when the --- need arises. 13. To study the company needs and requirements.
4. To cultivate sources of supply. 14. To attend to the routing of purchases.
5. To participate in the formulation of specifications for 15. To look after the disposal of surplus or obsolete
purchases and in conferences where purchasing is related. materials, equipment, supplies, and merchandise.
Organization of the Purchasing
Department
First, The purchase requisition is prepared and signed by the department head needing the material. Specifications, quantity,
known sources of supply and the time when needed are stipulated in the requisition.

Second, The requisition is coursed through the accounting department for indication of funds available, after which it signed by
the Treasurer or the head of the company, or the manager, or whoever is authorized to act in their stead.
Third, The purchase requisition is then forwarded to the purchasing department. The procurement officer assigns it to the
canvasser concerned, who in turn makes a canvassing as to source, availability and price. When a big amount is involved,
bidding is resorted to. After a final decision is arrived at whether through direct buying or bidding, the purchase order is
prepared by the purchasing department.
Fourth, The purchase order (P.O.) is signed by the purchasing agent, the requisitioner, the treasurer, and the general manager.
Copies are prepared for the supplier, the department or unit which needs the supplies, the receiving unit, the accounting unit,
and the inspection unit
Fifth, The purchase order is then forwarded to the supplier or to the winning bidder in case of bidding. Incase the order is not
met on time or if there is a materials shortage. situation, follow-up may be made either personally, by telephone, or other
means.
Sixth, Upon delivery of the purchased goods, they are checked by the requisitioner and the representative of the inspector or
auditor to find out whether requirements as to specifications are complied with. Arrangements for payment are made and
records of the transaction, for future guide, are kept.
Purchasing and Production
Historically, purchasing is allied to the production function which embraces a wide
variety of activities that are subject to specialized and independent administration in
more highly functionalized organizations of large industry. The relation is in the form
of a well-defined cooperation which involves, first of all, a complete inter-change of
information.
On the other hand, it is the responsibility of the purchasing department to see that
actual delivery requirements are met, and that the production department is advised
as to when orders are issued, and delivery promised by the supplier.
Purchasing and Engineering
In many ways, cooperation between the purchasing and engineering departments is
comparable to that between the purchasing and production departments, except that
engineering is chiefly concerned with matters of product design and specifications
preliminary to actual production requirements.
Traditionally, the purchasing agent and the engineer differ in their approach to the
materials problems, in the sense that the latter tends to specify wide margins of
quality, safety, and performance, whereas the buyer tends to narrow down such
margins to minimum requirements. The gap created by the divergent view-points has,
been bridged in recent years by the increasing number of men with engineering
training and experience joining the purchasing staff, and who usually occupy the
position of adviser to the purchasing agent.
Purchasing and Accounting
 Purchasing an expenditure and Accounting: against Every purchase made represents
an expenditure against the company budget, and sets in motion a series of accounting
operations, such as charging the expense to the proper account, the verification and
approval of the invoices, final auditing, and payments.
The relationship between the purchasing and accounting departments is considered a
vital one which frequently starts before the purchase is actually made. All
transactions should be accounted for within a reasonable limit of time so that
payment could be expedited within discount period.
Purchasing and Sales

The sales department should keep the purchasing department informed of the sales
quotas and expectations as guides to probable quantity requirements of materials.
When special contracts or new products are contemplated, the purchasing
department should likewise be advised in order that the necessary preliminaries of
the purchasing program may be undertaken intelligently, in advance of the actual
needs.
 Stores and Control
Function - The function of storekeeping is concerned with providing of materials a and place
supplies or places for the safe and convenient storing of materials and supplies that are needed for
immediate use, for disbursing such materials as required, and for seeing to it that supplies do not
run out before additional quantities are ordered and received. One man is usually assigned to take
charge and is responsible for all aspects of storekeeping.

Purposes - The purposes of storekeeping and control may be stated into two categories, to wit:
First- from the viewpoint of operation-
1. to assure an adequate supply of materials when needed, in balance with the requirements, and
turning over at a reasonable rate.
2. to assure that they are readily accessible, and safe from fire, floods, theft, and other hazards.
Second - from the financial viewpoint –
1. to minimize inventory investment at any given time, thus reducing cost of handling and storage,
insurance and interest.
2. to avoid losses from deterioration, obsolescence, and falling prices.
Location of Storerooms: - The location of storerooms is an important consideration. It is logical and
obvious that the storerooms should be conveniently near to the departments being served, so that
no unnecessary time may be lost in getting the items needed. Likewise, the storerooms should be
located in such a way that deliveries, from an outside source or sources could be facilitated, in
order to avoid much handling and transportation. Unnecessary handling of materials adds to the
costs but not to the value.

Stock-keeping: Any system of stock-keeping or stores controls is predicated on the orderly storage
of materials and their accounting while in storage. Attention must be paid to 1) facilities, 2)
supervision, and 3) records.

Storage Facilities: Storage facilities must be adapted to the types of materials handled, and which
include racks, bins, shelving, trays, platforms and floor space, all numbered or otherwise identified
as to specific location. The arrangement must follow as closely as possible the order of the
commodity classification. Such arrangement will facilitate both the physical handling of stock, when
putting them in the stores or finding them as needed; and accounting for the stock by counting or
reconciling them with the records.
The layout of the storeroom likewise facilitates efficient handling of materials, with adequate
lighting and aisle space for. the use of hand and lift trucks and similar mechanical devices.
Records
The basic record of the stores department is the stock record or the perpetual inventory.
The records of course, must be periodically verified, say monthly, semi-annually, or annually.
Stock records are useful because:
They reveal slow moving They form a basis for
stocks and the order of adjustments in the event of
preferred priorities in fire, theft, or calamity
They are needed in the getting stocks.
preparation of periodic They minimize the
financial statements such commission of acts of
as profit and loss or
income statements. 3 4 dishonesty and carelessness.

They reduce physical

inventories to reasonable
2 5 They enable the enterprise
and economic but to keep delivery dates as
sufficient levels. promised to customers.

1 6
 Transportation
Importance of Transportation
The importance of transportation, as a facilitating function of business, cannot be emphasized enough. Its effect on the entire
economy is pervasive. Thus, a state-of-the-nation address of the President of the Philippines stresses that "the transport
sector cannot be neglected for long without the economy suffering adverse consequences.
All functions of business, but most especially production and sales, are dependent on a properly managed transportation
system.
Modes of Transportation: A business firm may depend on outside sources of transportation. In addition, it may operate its
own internal transportation facilities. In both instances, the department charged with this function must be staffed by
specialists and must make maximum use of planning, scheduling, specialization, and cost controls.
Outside transportation may be by truck and bus, by rail, by water, and by air. Trucks and buses are extensively used by
business firms in the Philippines. Passenger traffic is also quite heavy. Around this mode of transportation has grown a vast
complex involving not only those who work directly in this transportation business but also those engaged in assembling or
repairing motor vehicles, the sales and servicing of vehicles, the refining and marketing of motor fuels and lubricants, and the
maintenance or construction of highways, roads, and bridges.
Kinds of Transportation
The railroad is an inexpensive method of transporting raw materials and heavy equipment over relatively long
distances. There are two railway systems in the Philippines, one in Panay Island and the other extending from La Union
in Northern Luzon to Albay in the Bicol peninsula. There are also special railways for sugar plantations and other
enterprises.
Water transportation is even more inexpensive. Because the Philippines heavily is an on archipelago inter-island of
many islands, Both trade rail and industry water depend transportation or require port to terminal the firm's handling
shipping premises to and from the railway station.
Air transportation is speedy and efficient but expensive. Business is fast realizing the advantages of air cargo for certain
types of merchandise. For instance, fishing magnates regularly fly .plane loads of fresh fish from Mindanao to Manila.
Newspapers must be delivered by air transport. Internal transportation fleets are maintained by manufacturing or
marketing organizations. Usually the supervision and control of the transportation unit are handled by either
production or sales, depending upon which function is being serviced.
THANK YOU
FOR
WATCHING!
Any Questions?