Purchase departments help maintain the financial health of organizations by procuring goods and services that meet operational needs while providing the highest value. The procurement policies and procedures they establish ensure that their organizations operate with integrity in the marketplace. Purchase departments keep operations moving smoothly by monitoring supply chains and relieving department heads of tedious tasks such as negotiating contracts with vendors. The role a purchase department plays in an organization depends on the size of the organization. Technological advances and outsourcing have affected the job outlook of the purchasing profession negatively and will continue to do so.
The Role of a Purchase Department
A purchase department, also called procurement department or purchasing department, supports operations by serving as the primary buyer of goods and services in a private sector company, government agency, educational institution or another type of organization.
The purchasing department serves the needs of internal customers by procuring the good and services they need in a timely manner. The purchasing staff also serves the organization’s financial wellness by seeking out and purchasing goods and services that offer the lowest prices and best value.
A purchasing department must understand the complexities of the operation it supports and the markets that provide goods or services to meet its objectives. Today, the duties and responsibilities of a purchasing officer expand far beyond procuring office furniture and supplies to include complex network technology equipment, acquisition of workspaces and international travel needs.
Purchase Department Staff
A purchasing manager supervises the procurement department staff and works closely with organization executives such as the chief operating officer, office manager and chief financial officer to plan and oversee budgets. A purchasing manager must maintain close communications with department heads to understand their needs and the role their purchases play in the organization. For example, a purchasing manager for an online retailer must have a working knowledge of the role network servers play in the company’s operation.
Buyers, purchasing officers and purchasing agents work under the supervision of the purchasing manager. The duties and responsibilities of a purchasing officer may vary, depending on the size of the organization and its priorities. For example, the duties of purchasing agent for a pharmaceutical company might center on procuring chemicals used in manufacturing specific drugs. A purchasing agent for a mortgage broker might handle procuring goods and services that range from copy paper to automobile rentals.
Procurement Policies and Procedures
Typically, a procurement department establishes its organization’s purchasing policies and procedures. The rules it sets in place often define spending limits and authorized vendors from which staff must purchase items such as office supplies or catering services.
For example, an information technology department might have the leeway to purchase external hard drives that cost under $200 from any vendor, but if the need is for high-capacity hard drives that cost more than $200, a purchase order number must be attained from the purchasing department to buy the goods. The purchase order process, established between a purchasing department and a vendor, usually applies to specific goods or services sold at a previously negotiated price.
Purchasing agents frequently negotiate contracts that employees who travel on business must patronize with airlines, hotels and car rental companies. Policies might also apply when seeking services such as carpet cleaning, catering and filling temporary positions through an employment agency.
Local or state purchase departments often establish rules regarding purchases from local and out-of-town vendors. For instance, a local government might require its departments to buy office supplies from a vendor that operates within the city limits. Purchasing departments in government and private sector organizations might define a preference for buying goods and services from women-owned or minority-owned businesses.
Typically, local, state and federal purchase departments work under strict guidelines established by law. In government agencies and organizations, individual departments usually must purchase the majority of their goods and services through a procurement department process. This prevents conflicts of interest such as purchasing from suppliers that have evaded paying property taxes or patronizing businesses owned by elected officials or their family members.
Competitive Procurement Duties
Often, state, local or federal laws require government agencies to make certain purchases through a competitive bidding process. Some private companies follow the same practice and task their procurement department with soliciting and evaluating bids and selecting the best business to supply the goods or services.
For example, a county government’s purchasing department might solicit bids from automobile dealers to replace police cars. A growing tech company might petition bids from furniture companies to furnish a new department. A distribution company may ask local contractors to bid on the construction of a new warehouse complex.
In a competitive bidding process, a procurement department opens the process to all eligible vendors and typically selects the bid based on the lowest cost. At times, an organization restricts the bidding pool in a noncompetitive bidding process. For example, a television station might open a noncompetitive bidding process to buy new cameras, including only vendors who sell a particular brand of equipment.
Purchasing departments handle competitive and noncompetitive bidding processes. They must collect information from stakeholders regarding the types of goods and services required, contact vendors who might be interested in bidding, and purchase advertisements to announce the bidding process. In a noncompetitive bidding process, the task of selecting qualified vendors might fall on the procurement department.
Noncompetitive, Sole-Source Procurement Duties
Procurement departments often buy certain types of goods and services directly from a vendor. This type of noncompetitive or sole-source purchasing requires purchasing agents to carefully research vendors and evaluate products before making a purchase. Buyers must evaluate the quality of the goods or service, prices, and the vendor’s ability to deliver the goods or services in a timely manner.
In large organizations, purchasing agents may need to conduct extensive research on a vendor by evaluating financial reports or references to determine its ability to perform in a long-term contract. Finding the right supplier may involve visiting vendors’ manufacturing plants or distribution centers to understand their products and fulfillment capabilities. Purchasing staff might attend trade shows to stay abreast of new products and vendors or go to industry conferences to learn more about the goods and services critical to supporting their operation.
In some cases, a purchasing department must negotiate a contract between an organization and a vendor for service to a single or multiple locations. For example, a procurement department for a nationwide bank might negotiate a contract with a national beverage vendor to deliver soft drinks each week to office locations across the country. Such contracts often include location-specific quantities and delivery times.
After contracts are in place, the purchase department monitors vendors’ performance to make sure they comply with established terms and conditions. Purchasing agents may handle the return of defective goods and the processing of refund or replacement requests. In some organizations, purchasing staff manage critical operating inventories or manage year-end inventory reporting of property such as office furniture, company vehicles and computer hardware.
During a company expansion, procurement staff may work closely with construction contractors to oversee the costs of building materials and furnishings. Purchasing agents might scout and negotiate leases for satellite office spaces or temporary worker housing units.
Purchase agents often seek out new technologies that streamline operations. For example, a purchasing agent might research expense report applications that speed up the process of reimbursing personnel for out-of-pocket travel expenses. A purchasing department for a car manufacturer might research automation that reduces the number of employees needed on a production line.
Benefits of Having a Purchasing Department
The role a purchasing department benefits the overall financial health of its organization. Establishing purchasing strategies and procedures can ensure the organization procures goods and services with the highest value. By monitoring internal supplies and external supply markets, a purchasing agent prevents shortages in vital materials, over-purchasing and waste.
Purchasing departments establish and implement transparent procurement processes, which can prevent ethics violations or corruption. Procurement professionals help organizations avoid operational shutdowns by creating contingency plans that account for supply shortages or loss of vendors.
Purchasing agents cut costs by taking advantage of discounts and rebates that other people in their organization might miss. They identify technological trends that might streamline and reduce costs in areas such as production or distribution.
Procurement professionals help their organization avoid scams and unnecessary commitments offered by unscrupulous salespeople. They relieve department heads of the time-consuming task of maintaining long-term relationships with suppliers.
Purchasing Department Jobs and Salaries
Purchasing departments employ agents, buyers, managers and support staff such as assistants and receptionists. Purchasing department personnel typically work full time and some work more than 40 hours per week.
Typically, purchasing department employees have bachelor’s degrees in areas such as supply management, finance or business. However, some small companies or organizations employ purchasing staff who have not earned a college degree.
Although not commonly required by employers, purchasing department staff can earn certification offered by several organizations, including the Certified Purchasing Professional, Certified Supply Chain Professional, and Senior Professional in Supply Management certifications. Some certifying authorities offer credentials specifically for government-employed purchasing staff. Certification programs often involve written and oral exams and may limit applicants based on work experience and education.
According to the U.S. Bureau of Labor Statistics (BLS), purchasing managers earned a median salary of nearly $116,000 in 2017. A median salary represents the wage in the center of an occupation’s income scale. In the same year, purchasing agents and buyers took home a median wage of around $62,000. Purchasing staff working in federal government agencies earned the highest incomes, while their counterparts working in retail trade made the lowest salaries.
In the private sector, outsourcing and automation are replacing many purchasing department personnel. Increasingly, state and local governments are consolidating the purchasing process through cooperative purchasing agreements, which typically encompasses numerous government agencies. The practice has created purchasing cooperatives, eliminating the need for each agency to maintain its own purchasing department. The BLS projects the need for buyers, purchasing agents and purchasing managers to decrease by around 3 percent through 2026.