TermiKnowledge - Supply Chain, Procurement and Inventory Terminologies
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The main objectives of buying are to (1} preserve the quality and cost of a business's goods, (2) reduce cash tied up in inventory and (3) improve the production efficiency by reducing cycle time. Buying also implies that inventory is not used to supply merchandise that will be sold or simply to meet customer orders. In today's market, purchasing is more than just a shopping habit it is an investment practice. For most businesses, buying has become more than just a one-time expense but an investment that increases over time, especially when the price of raw materials is rising. Thus, it is imperative to consider inventory costs throughout the whole supply chain and evaluate how purchasing decisions affect productivity, operating profit and bottom line.

In supply chains, the five functions of supply chain management are management of transportation, marketing, processing, storage and distribution. These functions support each other and work together in a coordinated manner to provide maximum benefit to the business. If any of these functions are not functioning efficiently, there will be a negative impact on overall business performance and the bottom line will be negatively affected. This can result in poor quality and lower sales and profits.

To improve the quality of the finished goods, manufacturers should implement a variety of strategies to enhance the efficiency of their production facilities including improving process management, standardized purchasing practices, quality improvement and reduction of waste in all phases of the supply chain. This will increase sales and profits, which will then lead to expansion in marketing and manufacturing operations. When companies want to ensure that they are meeting all of their supply chain needs and are able to service the demands of the marketplace, then they must have the ability to purchase the required raw materials from a reliable supplier that will perform the work to manufacture the product. There are several suppliers that meet all of the aforementioned criteria, which allow the company to purchase its required components at a fair price and be assured of consistent supplies.

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