Understanding About Purchase Order Management

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In the supply chain industry and manufacturing, Purchase Order Management is also called the Purchasing Management. Purchase Order is a process and activity to search for the source of raw materials and order goods or services to manufacture the production process. The part that is authorized to purchase such raw materials is the Purchasing Department or commonly called the Procurement Department.

The purchase activity is one of the basic functions of activity in a company, this purchase function is referred to as basic function because a company will not be able to run properly without any good purchase function.

This purchase function is very important to be managed in earnest because the scope of the purchase is not only limited how the management managed to implement a mechanism of procurement of goods promptly and following the target price has been defined, but furthermore, it is how to effectively and mutually benefit the partnership strategy between companies.

Purchase order management is very important for the business continuity of a company. For manufacturing industry according to the experts count, the average spent more than 65% of its goods manufactured for the cost of purchasing and procurement of materials (either raw materials or supporting materials).

Increased efficiency and effectiveness in material handling will greatly affect the production cost of companies that will ultimately increase the profitability and competitive advantage of companies in the era of globalization as it is today.

The business advantage is the main target of all business activities, where one of the most instrumental components is the procurement sector of goods. Many ways are done and implemented by the company to increase profit margins, such as increasing sales volumes, raising product selling prices, lowering overhead costs, lowering material purchase costs, and so on.

According to the research results, the cost of material procurement can be lowered to 7.1%. In percentages, it seems small, but the effort needed to achieve it is not as popular if you want to increase profits by increasing the sales volume.

Material procurement activities not only choose suppliers and then make material orders, but the process is more than just that.

Continuing to learn concepts and theories so that the cost of procurement of materials can be lowered is very important to be done also with supporting methods such as techniques in negotiating effectively, the correct supplier selection and evaluation techniques and techniques Improve your supplier's performance.

Principles Of Purchase Order Management

Principles or guidelines in purchasing are the principal things in the implementation of the purchasing function that needs to be used as a reference.

The principles of purchase order management are as follows:

The Right Price, One of the principles of purchasing management is the right price. The right price is the value of an item expressed in a currency that is generally valid at the time and condition of the purchase.
The Right Quantity, The exact amount can be said as an amount that is required by a company at any given time. Meaning the number of items is not excessive and not lacking.
The Right Time, The Right time contains The understanding that goods are always available whenever needed. In this case, the goods should be taken into account because if there is a stock of goods, there are maintenance costs. A place to store the goods – the inventory is in the warehouse.
The Right Place, The right place contains the sense that the goods purchased are delivered according to the desired place by the buyer.
The Right Quality, The right quality is the quality of goods required by a company under the provisions that have been set by the authorized part and certainly the most profitable for the company.
The Right Source, The right source contains the sense that the goods are bought from the right source. The source can be said precisely if it meets other principles of the right price, the right quantity, the right time, the right place, and the right quality above.

That's the article on Understanding About Purchase Order Management, hopefully, this article is useful for you.