MM/U1 Topic 6 General Corporate Policy of Materials Management
A policy is a general guideline for decision-making- An objective is the end; policy is the means to that end. An objective involves a target; a policy involves the procedure to be followed to reach the target. A policy is essentially a statement relating to those principles or procedure by which a company seeks to realise its objectives.
Procedure is a series of step-by-step actions needed for the implementation of a policy decision.
There is hardly any standard purchasing policy and procedure which can be applied to all industries. These policies may vary from company to company depending on the size and type of business, products and services produced and various other factors.
An organisation may have several policies regarding purchasing.
The most important aspects of purchasing policy are
(i) Centralization or Decentralization.
(ii) Method of purchase of materials:
(a) Volume of purchase large or small,
(b) Seasonal purchase or annual rate contract,
(c) Sub-contracting or ancillarization and so on.
(iii) The delegation of power relating to purchase whether the purchase department alone should undertake the responsibilities for all types of purchases or some purchases can be also done by the user department or not.
(iv) Policies in regard to procurement of materials through foreign collaborators from government undertakings, etc.
(v) Communication — all communication with suppliers should necessarily be done by the purchasing department. The user department may send feed back to the purchase department as and when required.
(vi) Authorization of the purchase department to seek clarification about requirement, specification, delivery schedule, brand-name, trademark etc. in the best interest of the organization.
(vii) Responsibilities and accountability of purchase personnel.
(viii) Purchase ethics — code of conduct.-
(ix) Public relations.