- Sourcing: This is a high value adding activity that is concerned with matching purchasing requirements with sources of supply, ensuring continuity of supply, exploring alternatives sources of supply and validating the supplier compliance necessary to meet or exceed buyer criteria for quality, delivery, quantity, and price. The purpose of sourcing is to find right suppliers that improve the overall supply chain
- Value Analysis: This set of functions is concerned with increasing the value added elements of the purchasing process. Value analysis can consist of such components as price for quality received, financing, and delivery. An example would be identifying less expensive goods and services that could be used as substitutes at comparable quality and value.
- Contracting: Critical functions in this area are the development and analysis of request for quotation (RFQ); negotiating on pricing, volume, length of contract, specifications, supplier selection and monitoring of performance measurements.
- Supplier development: In today‟s environment, increasing collaboration with suppliers has become a requirement for doing business. Pursuing capabilities that promote supplier partnering require buyers to be knowledgeable of supplier‟s capacities, resources, product lines, and delivery and information system capabilities. A key component in the strengthening of this partnership is the development of pricing, technology, and information-sharing agreements that link supplier and buyer together and provide for a continuous win-win environment.
- Internal Integration: Purchasing needs to be closely integrated with other enterprise business areas such as marketing, sales, inventory planning, transportation, and quality management. By providing key information and streamlining the acquisition process, the purchasing function can assist the enterprise to synchronize replenishment requirements with the overall capacities of the supply network.
- Research: Purchasing department conduct market research to gather diligence on sources of supply, prevailing market prices. Other research activities include value analysis, economic and market studies, special cost analysis, sourcing and system research.
- Supplier scheduling: One of the keys to effective purchasing is a valid schedule of when inventory is required either for customer orders or value added processing. By sharing the time phased schedule of demand, firms can provide detailed visibility of future requirement as to the supplier, who in turn can plan the necessary material and capacity resources to support the schedule.
- Purchasing and Receiving: These includes day to day purchasing activities associated with order preparation, order entry, order transmission, status reporting, receiving, quantity checking and stock put away, invoice and discount review and order close out.
- Cost management: A critical function of purchasing is the continuous search for ways to reduce administrative costs, purchasing prices, and inventory carrying costs while increasing value. Improvement activities include purchasing costs reduction programs, price change management Programs, volume and stockless purchasing contracts, cash-flow forecasting and strategic planning.
- Performance measurement: Monitoring the quality and delivery performance of suppliers is an integral part function of purchasing department. This is usually done in supplier evaluation and vendor rating. It is important to measure supplier performance since it is essential when evaluating the capabilities of competing suppliers and ensuring that costs, delivery and collaborative targets are being attained.
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