Approaches to Purchasing Department

The purchasing department can be further structured into three general approaches according to Commodity or function, project or product and matrix.

Commodity Approach

The commodity approach is the most commonly used by companies. In this approach, the purchasing function is divided into spheres of buying responsibility such as production inventories, maintenance, repair and operating (MRO) inventory and services, and capital and construction equipment. In addition, other non buying areas such as acquisition research, administrative support and technical liaison can be integrated in the model. The buyer within each commodity group is responsible for all sourcing, negotiating, and purchase order releasing activities for that commodity area. The advantage of this method of organization is that focused members of the purchasing team are able to acquire specialized knowledge about products and suppliers, serve as the communication point for purchase order requisition, and reduced cost of operation due to specialization.

Project or Product Approach

Project or product approach is used in firms whose products and services are focused on long- term projects. In such organization, the goal of the purchasing group is the acquisition of the required materials and services required to meet project requirements. The advantage of this form of organization is that certain buyers can be linked to specific project segments, thereby ensuring that purchasing requirements are kept within budget targets and scheduled time frames are met.

Matrix Approach

In this structure, buyers are organized into project teams with responsibility of meeting the acquisition needs of the entire project. Essentially, these buyer-teams are part of each project or project segment. This organizational structure streamlines the purchasing process and eliminates possible redundancies.

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