In every well established business organisation, there is purchasing and supply unit or department, other address it as procurement unit ,their functions centre around purchasing and supply the right quality and quantity of materials at the right time, un the right quantity from the source at the right place to the right place. They also monitor market prices not only of the product’s materials purchased but also of significant raw materials used in their organisation.
Equally, they monitor suppliers’ prices, providing information or imminent price changes, participate in organisational planning, policy and decision making, supply the company regularly with raw materials to avoid stoppage or product delay and allow continuity, maintaining sound cooperative relationship and developing saff policies, procedures for effective running of an organisation.
Sourcing procedure for purchasing and supply of raw materials, parts or services can be within or outside the country. In selecting a supplier, the buyer is making frantic effort to find the organisation that will meet its need which revolves around reliability in quality, service, terms and price. Other conditions worthy of consideration in purchasing and supply include: delivery term,quality and standard, reliability of supply spoilage and delay in supply, etc. In determining a potential source of purchasing and supply, It is expedient for personnel in charge to take cognizance of the following factors such as technical ability, competency, years of experience, product capacity, financial capability, industrial relations stability, production and quality control.
Sources of purchasing and supply of goods and services include: newspaper or media reports, announcements, trade directories, professional journals and magazines, product catalogues, company newsletters, trade fairs and product exhibition, product show and workshop salesman, sales promotion contracts, etc.
The laws governing purchase and supply of goods and services are as follows:
(a) The higher the price, the lower the quantity purchase and the lower the price the higher the quantity purchase.
(b) The process of adjustment rests at the point where purchase equals to supply.
(c) An increase in supply will lead to decrease in the market price and an increase in purchase.
(d) A decrease in supply will cause an increase and a fall in purchase.
(e) An increase in purchase will bring about an increase in price and a rise in supply.
(f) A decrease in supply may lead to a fall in price and a decrease in supply.
Selling and Bargaining Skills
One of the qualities of good procurement personnel should have is negotiation and bargaining skills which is the art of arriving at a common understanding through the use of deliberations, persuasion and communication on the essentials of purchase such as price, delivery, quality, specifications among other terms.
Bargaining strategy could take the form of what is known as a ” door-knob strategy “. This is when it seems as if the final offer would not be released if an agreement is not reached.
Another strategy is known as compromised concession strategy which is the settlement of differences/disputes in which each of the party gives up or concedes something it has earlier requested. No compromise should be attempted merely to arrive at a quick settlement.
Most established organisations bargained with suppliers through competitive bidding I .e.a process in which they invite potential suppliers to quote prices on proposed purchase or contracts.
It is important to note that bargaining and negotiation skills are not an unreasonable argument, creating unnecessary confusion given to false impression about price, quality quantity, etc.. it is not maligning rival products with a view to winning the contract, it is not a collection of bribe, not to reduce the number of goods so that the procurement officer could collect the leftover, this is immoral, unethical and unprofessional practices.
Fund Management
Fund management can be defined as “the part of overall management devoted to the effective and efficient investment, financing, application and control of an organisation’s resources(finance) and for the attainment of the following specified objectives which are the reasons or motives to hold money:
(a) Transaction motive: This refers to the company’s demand for money for the cost incurred for the day to day running of the business otherwise known as variable costs such as expenses on fuel and raw materials
(b) Precautionary motive: This connotes the money held by a business establishment as a result of unforeseen circumstances that may occur in the production process. Example include money set aside for unexpected breakdown of equipment, repair and serving.
(c) Speculative motive: This is the money held by the business establishment which is meant for investment so as to make profits. An example includes money held for the purpose of buying and selling.
It is important to note the factors that influence the reasons for holding money include: financial strength of the business, rate of inflation, the expected future profit, payment convention, the prevailing interest rates.
Effective management requires that the organisation has a budget for its need and wants. A budget is a detailed plan showing how resources will be acquired and used over some specific period of time. It represents a plan for future purposes in financial and quantitative terms. Budget can be categorized into:
i. Financial budget: This refers to expressed purely in monetary terms such as cash, sales capital and balance sheet budget.
ii. Non-financial budget: This indicates the budget not expressed in monetary terms. They are usually referred to as quantitative budgets. Examples are time, space, material and product budgets.
There is need for budgetary control in which all organisation’s operations are planned ahead and the actual results are usually compared with the pre-determined standards so that the correction could be made on any discovered deviation.
The following are the reasons for a budgeting control system
1. It enables organisation management to conduct business in the most effective and efficient manner.
2. It helps in advance planning of all operational activities
3. It promotes and enables achievements of control by the comparison of actual against set standards
4. It enhances coordination to be achieved.
5. It promotes and increases efficiency through the standards set for production, sales and overheads in relation to internal and external factors.
6. Financial plan is achieved because budgets simply connote financial plan expressed in terms of the currency of a nation.
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