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Asssignment 1 - Purchasing Part 1 Commercial purchasing is that function responsible for obtaining by purchase lease or other legal means equipment materials supplies and services required by an undertaking for use in production Lysons Also through the effective use of purchasing one would hope to add value to an organisation The strategic importance of purchasing in a modern organisation cannot be underestimated Whether an organisation realises it or not purchasing can have a very significant impact To put this simply every pound saved through more effective purchasing strategies is a pound more profit for the company No other activity in an organisation has the potential to saveincrease a companies revenues by as much In order to illustrate this I have provided the following example Total SalesTotal PurchasesProfit 200m 120m 20m If puchasing costs are reduced by a mere 5 600000 these figures become Total SalesTotal PurchasesProfit 200m 114m 26m A 5 reduction in purchasing costs can be equated to a 30 increase in turnover That is not to say that turnover is not important mearly that effective purchasing can reap large rewards Purchasing should not be seen purely in terms of price alone what it really needs to do is add value to the company through effective management of the supplier base and careful consideration of what the consumer the end user of the companies product percieves as value for money What this means is that while the the purchasing department may be able to obtain a good or service at the best possible market price it may not be view by the customer as value for money eg A car company developes a system for washig the side windows of cars purchasing says that they can obtain the
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