Purchasing and Supply Chain Management Purchasing:
*Importance of Purchasing:- Purchasing is important because...... 1. Purchasing cost account for 60 to 70 % of the total cost i.e (any saving in purchasing cost can be directly increase profit of the firm).
This can be seen with the help of the Page | 1 following table.

Items | Firm A | Firm B | Firm C | Raw Material | 60 | 70 | 80 | Overheads | 10 | 10 | 10 | Profit | 30 | 20 | 10 | TOTAL | 100 | 100 | 100 | It can be seen from the above table that ‘A’ is best firm making 30% profit and ‘C’ is below average firm making only 10% profit.

2. Purchasing is important because purchasing function affects the entire organisation such as production process, marketing, sales etc.
Thus purchasing is the most important function of the management.

*steps in purchasing or purchasing cycle:-

The steps involved in purchasing....

* Demand forecasting / Sales forecasting. * Purchase requisition (requirement). * Inviting Quotations. * Selection of supplier purchase order. * Receiving of materials / inspection / payment. * 1. Demand Forecasting / Sales Forecasting:-
The first step in the purchasing is demand forecasting and sales forecasting. Demand forecasting is done at macro level i.e(All India Level).while sales forecasting is done at micro level i.e(Company Level).
For example:
Demand for car is 12 lack car and if maruti has 50% market share then sales will be 6 lacks car. i.e the company must plan, production, raw material requirement, labour requirement on the basis of 6 lacks cars. 2. Purchase Requisition (Requirement).
The next step in purchasing is to invite purchase requisition from different departments.
For example:
Production department wants 1000 shirts for which they