The important methods of purchasing (procurement) of materials
· Market purchasing
· Purchasing for a specific period
· Centralised purchasing
· Rate contract purchasing
· Purchasing through Director General of Supplies and Disposals
· Purchasing according to requirement
Market purchasing
In this method the requirement of the material in the organisation is first ascertained. After the requirements are known the market trends are studied. As far as possible, an order for the purchase of material is placed in bulk. The main advantage of bulk purchase is that it ensures the economy of the large scale purchase. The expenditure on transport is also saved. The only disadvantages of this method are that, it requires more space for storing the material and that it locks up funds of the construction organisation perhaps for a longer period.
Purchasing for a specific period
When the items to the purchased are standardised and are required regularly during the construction period, orders can be placed from time to time as per the requirement of the organisation. One need not to go in for the purchase in one lot.
The advantage of such purchase is that it requires less space and needs less amount of working capital. Cost analysis also becomes easier.
Centralised purchasing
The question of centralised and decentralised purchases arises only when the construction organisation has several projects under its control.
Advantages of centralised purchasing
· It gains greater bargaining strength because of large quantity of purchasing at a time.
· It is more efficient and economical.
· It helps in procuring uniform material.
· It simplifies the purchasing procedure.
· It facilitates the payment.
· It can establish direct contact with the manufactures. Hence, the cost of purchase would be less.
· It reduces malpractices on the part of suppliers because of constant contacts.
Disadvantages of Centralised Purchasing
· Small quantity of purchases may not get all the discounts and therefore uneconomical.
· Sometimes, duplication may take place. The material purchased may not, therefore, be uniform in quality.
Rate Contract Purchasing
When the material is required regularly as well as in large quantities, particularly raw material, then the method of rate contract is preferred. In this case, the requirement of the organisation for the next two or three years is given by calling in quotations.
Advantages of rate contract purchasing
· There is no need to keep unnecessary stock with the organisation.
· Purchases are not influenced by price fluctuations.
· No time is wasted in calling quotations.
· It reduces further clerical work and accounting.
· Record keeping improves.
· Blocking up of capital is avoided.
Disadvantages of rate contract purchasing
· In case the supply is not made in time, the working of the organisation get disturbed.
Director General of Supplies and Disposals
The State and Central Government have established their own organisation for purchasing material for their various departments. This relieves individual departments of a lot of tiresome and detailed activities.
Purchasing according to requirement
This is also known as “hand to mouth purchasing”. Purchases are affected only when the material is required.
Advantages of Purchasing according to requirement
· This method is advantageous to small construction organisations. The main intention behind such a method is to save working capital.
· Storage space is not required.
Disadvantages of Purchasing according to requirement
· Less bargaining strength.
· Sudden demand cannot be met with.
· Costs are high.
