How to Set Up a Purchasing Department


If you're passionate about comparison shopping and love saving money, your decision to launch a career in purchasing is the perfect fit. Of course, schmoozing with vendors, drafting purchase orders and negotiating for low prices is the easy part—now, you’re challenged with setting up your own department, so a lot will ride on your ability to make policy while organizing an efficient division. Use your education and experience--plus suggestions in this article--to prove to management that you've got what it takes to set up this important department.

Things You'll Need

  • Purchasing experience
  • College degree
  • Computer
  • Purchasing software
  • Business forms
  • Policy manual
  • Filing and flagging system
  • Attorney

Know the lingo before you set up shop. Compare your understanding of purchasing terminology with those of management so everyone agrees on the definitions of unit cost, extended cost, cost acquisitions, lead times, carrying inventory (interest charged on investment, cost of storing inventory, insurance and property tax plus merchandise obsolescence), back ordering, shipment extensions and terms unique to your industry.

Review existing purchasing protocols. Obtain lists of approved vendors currently under contract plus copies of forms used to handle the firm’s bidding process. Make certain purchase order language meets legal guidelines so you never find yourself defending against a badly written PO in court.

Order computer software written specifically for purchasing departments so resources you use most are integrated and sortable, including inventory tracking, vendor data and invoice storage. Make sure the program is capable of comparative analyses to routinely audit suppliers, goods and pricing.

Write a policy manual that spells out vendor bidding and fulfillment requirements as outlined by company regulations. Install a system of checks and balances to avoid the most common purchasing pitfall: duplication. Stipulate the names of those who have purchasing authority and flag corporate vendor sanctions (e.g., “only use vendors supplying recycled paper for office use”), outline conflict of interest issues, confidential purchasing guidelines and make certain an attorney vets your manual.

Communicate your department’s purchasing vision, policies and deadlines to all employees. Process requests for supplies in a uniform fashion, double-checking stock numbers and quantities. Inspect arriving merchandise against manifests, pull defective or damaged goods and handle returns. Close out orders once received and forward invoicing to your accounting department if your job description doesn’t include issuing payment.

Maintain meticulous records. Store documents related to every shipment by vendor name or number, date or product. Avoid relying upon just one vendor—no matter how good the relationship—should they go belly up and leave you scrambling for new suppliers. Evaluate all of your suppliers regularly and explore new relationships often, so your purchasing department runs as efficiently as the company that chose you to head it up.

Tips & Warnings

  • Join an organization like the Association for Operations Management to network with other purchasing department managers, find out what purchasing software programs are worth the investment (and which aren't) and learn more about your profession.

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