The Purchasing Function: Tasks and Legal Considerations

The purchasing function plays a vital role in managing an organization’s procurement processes and optimizing its spending on goods and services. This function encompasses various tasks and responsibilities, including:

Supplier Identification and Selection

The purchasing function is responsible for identifying and selecting reliable suppliers who can meet the organization’s requirements. This involves evaluating potential suppliers based on factors such as quality, price, delivery capabilities, and financial stability.

Negotiation of Prices, Quality, and Delivery Terms

Purchasing professionals negotiate with suppliers to secure favorable pricing, ensure the desired quality of goods or services, and establish delivery terms that meet the organization’s needs. Effective negotiation skills are crucial in obtaining the best possible terms and conditions for the organization.

Order Quantity Determination and Bid Requests

Purchasing professionals determine the appropriate order quantities based on demand and inventory levels. They also manage the process of requesting bids from suppliers for supply contracts. This involves preparing bid specifications, evaluating bids, and selecting the most suitable supplier.

Coordination of Delivery and Storage Operations

The purchasing function is responsible for ensuring timely delivery of goods and coordinating storage operations to ensure efficient inventory management. This includes tracking orders, expediting shipments, and managing inventory levels to minimize storage costs and avoid stockouts.

Legal Considerations in the Purchasing Function

The purchasing function is subject to various legal issues that must be carefully considered to ensure compliance and mitigate risks. These legal considerations include:

Compliance with Procurement Laws and Regulations

Purchasing professionals must ensure that their procurement activities comply with applicable laws and regulations, such as public procurement laws or industry-specific regulations. These laws and regulations may impose specific requirements on the procurement process, such as competitive bidding or conflict of interest rules.

Contract Management and Enforcement

Purchasing professionals need to effectively manage contracts with suppliers, including ensuring that contract terms are properly documented, monitored, and enforced. This involves reviewing and negotiating contracts, ensuring compliance with contract terms, and resolving any disputes that may arise.

Intellectual Property Rights

Purchasing professionals should be aware of intellectual property rights and ensure that the organization’s procurement activities do not infringe upon the rights of others. This includes considering the intellectual property rights associated with goods or services being procured and ensuring that the organization has the necessary licenses or permissions to use or distribute these items.

By understanding and addressing these legal considerations, purchasing professionals can help their organizations mitigate risks, ensure compliance, and maintain ethical and responsible procurement practices.

Sources:

• Purchasing Department in Organizational Structure: Functions and Benefits
• The Complete Guide to Procurement Management

FAQs

Question: What are the primary tasks allocated to the purchasing function?

The purchasing function encompasses various tasks, including identifying and selecting suppliers, negotiating prices and terms, determining order quantities, coordinating delivery and storage operations, and managing contracts.

Question: Why is compliance with procurement laws and regulations important in the purchasing function?

Compliance with procurement laws and regulations ensures that the organization’s procurement activities are conducted ethically, transparently, and in accordance with applicable legal requirements.

Question: What are some common legal issues associated with contract management in the purchasing function?

Common legal issues in contract management include ensuring proper documentation and execution of contracts, monitoring compliance with contract terms, and resolving disputes that may arise during the contract period.

Question: How can purchasing professionals mitigate risks related to intellectual property rights?

Purchasing professionals can mitigate risks related to intellectual property rights by being aware of IP laws and regulations, conducting due diligence to identify potential IP issues, and obtaining the necessary licenses or permissions to use or distribute goods or services.

Question: What are some best practices for ethical and responsible procurement?

Best practices for ethical and responsible procurement include conducting thorough supplier due diligence, implementing conflict of interest policies, and ensuring transparency and accountability in the procurement process.

Question: How can organizations ensure compliance with sustainability and environmental regulations in the purchasing function?

Organizations can ensure compliance with sustainability and environmental regulations by considering factors such as the environmental impact of goods and services, implementing green procurement policies, and working with suppliers who share their commitment to sustainability.

Question: What are the potential consequences of non-compliance with procurement laws and regulations?

Non-compliance with procurement laws and regulations can lead to legal liabilities, reputational damage, financial penalties, and even criminal charges in severe cases.

Question: How can organizations stay updated on changes in procurement laws and regulations?

Organizations can stay updated on changes in procurement laws and regulations by monitoring relevant government websites, subscribing to industry publications, and attending conferences and workshops on procurement-related topics.