Examine the role and tasks of purchasing in assuring product quality from suppliers, with reference to: a) specification of quality requirements b) supplier quality audit c) contractual terms

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Introduction

Purchasing is critical to the effective management of material logistics (Ford, 2002). Positioned at the interface between the customer and the supplier, responsibility often falls on this function for managing the relationship between the customers and suppliers in the supply chain. The role of purchasing is a gateway to suppliers so that other business functions can communicate with counterpart within the supplier organizations (Leenders et al., 1994)

Product quality is rapidly becoming an important competitive issue (Garvin, 1984). According to Garvin (1984), there are eight basic elements of product quality. They are performance, features, reliability, conformance, durability, serviceability, aesthetics and perceived quality. What is quality? Quality is defined as "conformance to requirements" (Crosby, 1979). To maintain a high quality standard of goods, supplier quality is of paramount importance.

This article put emphasis on the role and tasks of purchasing in assuring product quality from suppliers, with reference to:

(1)Specification of quality requirements

(2)Supplier quality audit

(3)The use of appropriate contractual terms in a purchase order

Purchasing has different meaning in different industries. This article first introduces different perspectives of purchasing in different industries. Then, the role and task of purchasing in the abovementioned areas will be analyzed respectively. Examples are given in each area in the article.

Objectives of purchasing

Purchasing has four objectives. They are right quality, competitive price, economic quantity and on-time delivery. Right quality refers to conforming specification requirement (Crosby, 1979). For competitive price, there are two aspects. One is internal competition, the other is external competition. The former can be achieved by reducing the production cost. The latter is due to highly competitive market, with reference to price comparison, historical price, shipping and payment terms etc. Third, economic quantity is crystal clear that buying quantity must lead to a lower cost of the purchase. Cost of holding inventories and cost of not holding inventories are essential consideration. Last, on-time delivery is vital to a company as there are cost and price consequence. Normally, urgent order placement is more expensive than the regular placement as late delivery for urgent one might hold up production and incur cost penalty.

Purchasing in different industries

The aim of purchasing varies in different industries. In manufacturing firms, purchasing of raw materials and components is for supporting production. For original equipment manufacturer (OEM), high cost in purchasing raw materials means it should transfer the burden to its customers or cut the production cost. Besides, quality of components counts. Quality-in-quality-out is of paramount importance. If there is defect in one lot of components and it is not discovered by the staff responsible for quality control, it would be disastrous. Quality of components affects the quality of production, and hence affects customer satisfaction. In government or public organization, purchasing is used to support user's need. For example, stationery is essential for every department in government. Purchasing, in this sense, means buying at a satisfactory quality with the lowest price. This can be achieved by formal tendering. According to Government Procurement Agreement, Hong Kong government has to go for an open tender for a purchase order of approximately over $1.3 million. In service sector, purchases have to match corporate image and business strategies. For a five-star hotel, the quality of commodity purchased is indispensable for its image. For example, the quality of light, mirror, water tab etc. should conform to the requirement and meet the standard. In retail sector, the purpose of purchasing is for re-sale. The concept of "quality-in-quality-out" is crucial for...
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