COMMON PROBLEMS IN PURCHASING COMMON PROBLEMS IN PURCHASING

COMMON PROBLEMS IN PURCHASING

COMMON PROBLEMS IN PURCHASING Common problems associated to purchasing of merchandise are associated to such buying activities as: how much to buy, where to buy, and what to buy.

HOW MUCH TO BUY This is determined by some factors like, funds available, credit line, storage facilities, and the volume of merchandise the customers can absorb. The availability of funds is based on cash on hand. Credit line is maintained through goodwill plus the ability of the creditors to pay back the merchandise which was purchased on credit.

The storage facilities may be under the control of the entrepreneur for he knows how much goods his storage can hold, while the volume of merchandise the customers can absorb is determined through a market research.

WHERE TO BUY This is determined primarily by the availability of goods, quality of goods subscribing to the demands of the customers, regularity of supply, reasonability of pricing, and timeliness of the delivery to the demand.

Any source of the supply meeting all the requirements as stated above is suitable to be regular supplier of the merchandise for the store the entry in the invoice with what are listed in the purchase order. While checking the delivery, be able to look for the (a) breakage (b) damage (c) coverage (d) shortage, and (e) substitution

Any of these if included in the delivery should not be accepted, except for the substitution which is actually the substitution is made in favor of another merchandise article which is the demand article. This should not be readily accepted without also changing the terms which is antecedent to the purchase order. In short, no delivery of substitution will be accepted without previous arrangement. Any substitution should not be higher in price than the price of the product being substituted.

After the product or merchandise has been checked and delivered to the department where this must be displayed or sold, the next step is to mark them with the appropriate pricing. Pricing is done with use of price tickets, gummed stickers, or an automatic printing system. This is done before placing them on sale.

According to G. J. Duncan (1977) there are rules to follow in marking a merchandise and these are: 1. Merchandise should be marked legibly, neatly and permanently as possible without damage to the goods. 2. All necessary information should be placed on the price ticket at the time the goods are marked.

3. Merchandise should be so marked as to minimize the manipulation of prices either by the employees of the store or by the customers. 4. When a record of goods sold daily is desired for control prices, price tickets with perforated status should be used.

5. Certain items should be marked in the same manner, usually in addition to the price ticket, which will present their wear or use by the customer before they are returned. In the case of machinery, most retail stores do not allow the removal of cellophane wrapper. 6. Merchandise should be marked as quickly and economically as possible consistent with accuracy and the type of merchandise handled.

TERMS AND DATINGS Terms refers to the schedule and arrangement of paying debts. In retail business it means the arrangement made between the buyer and the seller concerning the payments of merchandises. Dating refer to the schedule or time when debt is paid.

To be able to take advantage of datings and terms the entrepreneur must at least recognize some conditions such as: 1. Purchasing goods at a reasonable price to be able to sell at reasonable price. 2. Transporting goods from supplier to the store fastest and most economical possible. 3. Making arrangement to pay the bill at a reasonable time. 4. Paying the bill at installment terms most convenment to the buyer.

These factors are called terms of an order. In the file of a retail entrepreneur should be a number of terms of an order. These will make him compare the advantages of each term, from which he can choose the most easy term convenment to his particular funding and operation system. Terms may be affected by different factors.

For example, when the retail entrepreneur buys in bulk he usually gets the best terms. When the order is placed much ahead of the actual need, the buyer may also get the best term. Another factor, which can affect a term is the self-life of a merchandise, that is perishable goods usually gets shorter payment terms.

Discounts. There at least three common types of discount, and these are cash discount, quantity discount and trade discount.

Cash discount is a discount extended to the buyer if he pays in cash. For example in 2/10 net 30 , the amount of 10, 000 pesos is payable in full in 30 days from the date of purchase of a merchandise. However if the buyer pays cash in 10 days, he gets a 2% discount, that is he pays only P 9, 800 pesos.

A quantity discount is given to the buyer if he purchases in bulk. This form of discount is not in cash; this is in the form of goods given free for which the customer is not billed.

A trade discount is a form of a special discount given to a retail entrepreneur who is a member of a trade group or association. Members of the association of wholesalers or retailers patronizing a certain supplier usually get special discounts from a supplier for a consideration related to trade patronage. Such consideration may reach to as much as 35%.

DATINGS. This is an important arrangement between the supplier and the retailer to give the retailer enough time to pay his account especially when the term is by installment. There are different types of dating, and the most common are: C. O. D. , 2/10 net 30, advance dating or 3/10, E. O. M. , extra dating 2/10 -60 extra, R. O. G. (receipt of goods) 2/10 R. O. G. , E. O. M. -R. O. G. , anticipation, and consignment dating.