Five Reasons to write SOP's for Purchase Department

In any business organization, its successful run is dependent on the nature of its daily business processes and activities. A well planned and structured SOP's and its subsequent implementation strengthens the flow of the business processes and activities. Ultimately, the final outcome is a collective effect of the business processes and decisions taken. Out of the several departments, Purchase department is very much essential to be equipped with SOP's. In order to have a good transparency and accountability, the SOP's should be definitely developed for the Purchase Department. Today, purchasing is often referred to as “supply chain management” and the purchasing department has taken on a larger and more vital business role.

A purchasing department is a company unit of a firm whose duties include some part or all of the purchasing function. This interruption between function and, the department is not always valued or understood by top management. The purchasing function is typically performed most carefully and professionally by a specialized, centralized purchasing department, directed by an accomplished purchasing manager. However, the buying function does not have to be achieved in such a manner. In theory, it can be performed, and in practice, it sometimes is performed by any number of different company officers or departments.

The functions of purchasing department are varied and wide which are based upon different approaches. The purchasing activities may be divided into those that are always assigned to the purchasing department and those that are sometimes assigned to some other department

In this post, we look at a few reasons as to why you should be writing SOP's for the Purchase Department

1. Make a planned Purchase: Purchasing and procurement of the raw materials or necessary items required for the organization should be well planned and understood. Different factors such as cost, quality, and quantity, warranty etc should be considered while deciding on the dealer to acquire the goods. In order to make this process easier, SOP should be developed and successfully implemented. While designing the SOP's, you must give accurate and equal weight to factors such as timely delivery, durability, additional services, discounts, and quality. It will help you to evaluate the positive and negative side of the purchasing process and will eventually help you to make the best purchase. Remember:

• Work with planned purchase order
• Accept goods as per the purchase order

2. Avoid Out of Stock Situation: When the demand is high in the market, the supply should be equally high. If the high demand requirements of your customers are not met, your customer base will soon start switching to your competitors and will eventually fade. It will also have a significant impact on your revenue collection. Hence, when you incorporate SOP's in your Purchase Department, you can easily keep a track of the incoming and outgoing products. It will help you analyze which products are saleable and which of them are lying unused. It will help you to optimize the buying process and strengthen the overall process. Ultimately, Out Of Stock situations can be avoided. Understand that in case you are selling on numerous channels or running a busy storeroom, out of stocks tends to take place, but if you have planned things properly they don’t have to.

Take appropriate steps to stop out of stocks situations and to reduce customer service costs, to support brand and clients trust, and besides these to make your life just far more simple and easy.

3. Avoiding over Purchasing: Sometimes, purchasing becomes enormously high for products, wherein the sale of the product remains stagnant and redundant. Over purchasing will heavily burden your revenue and thus the inventory will be filled with excessive goods. Moreover, these excessive goods may not attract customers and thus incur losses to your finances. Hence, make a habit of implementing the SOP to keep a track of whether you are purchasing in the correct proportion. Over purchasing will block your funds and will be extremely difficult to deal with the unsold goods.

4. Accountability: Purchase Department should always be transparent and thoroughly reviewed on periodic time. Sometimes, the middle managers and the other employees can act unlawfully against the interest of the company. Hence, accountability comes in the picture here. With SOP's, you can easily manage the funds and keep track of the overall processes conducted. You can monitor the processes, examine the bills and receipts, check the taxes payable, verify the quantity of the goods and evaluate the financial aspect of the company.

5. Quality and Quantity: With SOP's, you can better understand the quality of the procured products. Whether the goods are meeting with the expected quality standards, can also be checked. The quantity of goods for the amount paid can also be evaluated easily. Hence, it will be much easier to understand the real time accountability and the actual scenario of the Purchase Department. It will ensure transparency and alienate unethical practices which go against the interest of the business organization.

Ultimately, it will strengthen the Finance Department when the purchasing and selling are absolutely perfect and transparent. 

About YRC: YRC is a Management Consulting Firm with its presence across India & Dubai. We help our clients build robust management systems which shall help to reduce their involvement in daily operations. We act as "Growth Partners" to our clients and help our clients grow in an organized manner. We have served more than 100 brands till date and are associated with 85% of them.