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1.3. Eight Rs of Purchasing

The document outlines the Eight R's of Purchasing, which include Right Price, Right Quality, Right Time, Right Source, Right Quantity, Right Attitude, Right Contracts, and Right Material & Transportation. Each 'R' emphasizes the importance of strategic decision-making in procurement processes to ensure efficiency, reliability, and cost-effectiveness. The document highlights the need for purchasing managers to utilize various techniques and considerations to optimize their purchasing strategies.

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Kandasamy Anbu
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16 views10 pages

1.3. Eight Rs of Purchasing

The document outlines the Eight R's of Purchasing, which include Right Price, Right Quality, Right Time, Right Source, Right Quantity, Right Attitude, Right Contracts, and Right Material & Transportation. Each 'R' emphasizes the importance of strategic decision-making in procurement processes to ensure efficiency, reliability, and cost-effectiveness. The document highlights the need for purchasing managers to utilize various techniques and considerations to optimize their purchasing strategies.

Uploaded by

Kandasamy Anbu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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KMBN OM 04: PSM

1.3. Eight R’s of Purchasing


manufacturing organization to get an item at the right
price. Right price is not necessarily to be the lowest
price.

Basically it may be decided on the basis of their cost


structure.

The tender system of buying is normally used in public


sector organizations but the objective should be to
identify the lowest ‘responsible’ bidder and not the
lowest bidder.

The technique of ‘learning curve’ also helps the purchase


agent to determine the price of the items with high labor
content.

Price negotiation also helps to determine the right


2. Right Quality: Right quality implies that the quality
of product/ service offered should be visible and
measurable.

Sampling may be used to determine the quality.

The right quality is determined by the cost of materials


and the technical characteristics as suited to the specific
requirements.

The quality particulars are normally obtained from the


indents.

Since the objective of purchasing is to ensure continuity


of supply to the user departments, the time at which the
material is provided to the user department assumes
3. Right Time: For determining the right time of
purchase, the purchase manager should have lead time
information for all products and analyse its components
for reducing the same.

Lead time is the total time elapsed between the


recognition of the need of an item till the item arrives
and is provided for use. This covers the entire duration
of the materials cycle and consists of pre-contractual
administrative lead time, manufacturing and transporting
lead time and inspection lead time.

Also the purchasing manager has to consider emergency


situations like floods, strikes etc. He should have
contingency plans for situations like floods, strikes, earth
quake, lock-out etc., when material is not available.
4. Right Source: The source from which materials are to
be procured should be reliable and capable of supplying
required quantity of material at desired quality.

The buyer should identify which items are to be procured


directly from the manufacturer and which can be
procured from the open market. For instance in case of
emergency they may decide to buy from market.

Source selection, source development and vendor rating


etc., play important role in buyer seller relationship and
in the purchasing process.
5. Right Quantity: The right quantity is the most
important parameter of buying.

Concepts such as Economic Order Quantity (EOQ),


Economic Purchase Quantity (EPQ), Fixed Period, Fixed
Quantity Systems etc will serve as broad guidelines.

Also, the purchasing manager has to use his knowledge,


experience, common sense to determine the right
quantity of purchase.

He should consider factors such as price structure,


discounts, substitutes available, favorable relationship
etc while making the purchase decisions.
6. Right Attitude: The right purchasing should keep
‘progress’ as its key activity and should be ‘future
oriented’.

The purchase manager should be innovative in his long-


term objective aimed at minimizing the cost of the
purchase.

The purchase manager will be able to achieve this if he


aims himself with techniques such as value analysis,
purchases research, materials intelligence, SWOT
analysis, purchase budget and lead time analysis.
7. Right Contracts: The buyer has to adopt separate
policies and procedures for capital items and consumable
items.

He should be able to distinguish between indigenous and


international purchasing procedures.

Also he should be aware of the legal and contractual


aspects in international practices.
8. Right Material & Transportation: The buyer has to
select right type of material for purchase using
techniques such as value analysis.

The right material purchase should be brought using


right mode of transportation. This forms a critical
segment in the cost profile of an item.

It is an established fact that the cost of the shipping of


ore, gravel, sand etc., is normally more than the cost of
the items itself.
Thank
you

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