TermiKnowledge - Supply Chain, Procurement and Inventory Terminologies
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In every business, there is the purchasing department. There is a need to make purchases in order to make a profit. It is important for businesses to not only purchase items that are used in the production process but they must also purchase products that are new and do not have any associated costs such as shipping and delivery. Also it is important to know how much inventory you have in order to determine what type of inventory control you need in order to keep your costs down and to ensure that you have adequate inventory levels to meet demand.

In purchasing the inventory, the planning department first creates a production schedule to produce the required products to meet the customers orders. The planning department then obtains raw material and materials needed from suppliers to complete the production of the requested products. The purchasing department then obtains a list of suppliers that provide the raw material and/or materials needed to complete the requested product(s). The suppliers are identified through a process of evaluating the vendors relationship with the customer and the vendors sales support system. The Purchasing Department then finds the best vendors and arranges for them to ship the requested materials to the customer.

In a Supply Chain Management System (SCMS), the Purchasing Department establishes a chain of sources for all of the products that they purchase to fill their inventory needs. In addition, the SCMS will also determine the quantity of inventory that they need to maintain in their warehouse to hold the raw materials and/or materials needed to complete their product(s). This inventory is established by the amount of inventory that the purchasing department is able to purchase and the type of vendors they have established a relationship with. Once the inventory is in the warehouse, it is managed by the supply chain management software.

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