Assignment Help | Purchasing and Profit Leverage As discussed in our reading this week, on average 50% of sales revenue is used for:

Raw materials
Components
Supplies
In a three to four page paper discuss how purchasing effects overall profit. Your paper should include the objectives and functions of purchasing, the purchasing cycle, selecting suppliers, and determining the right price, issuing a purchase order, and delivery procedures.

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Submit to your instructor your two to three page (not including title and reference pages). Your paper should be formatted according to APA style as outlined in the approved APA style guide, and should cite at least two scholarly sources in addition to the textbook.

MODEL ANSWER

Introduction

Purchasing is the acquisition of products and services from a supplier. A purchase department arranges for the supply of raw materials, incomplete products, equipment parts and maintenance services. Therefore, purchasing is the process of exploring the market to procure services and goods of the preferred quality, quantity, at the least price, and within the stipulated time. The effect of leveraging profit posits that it is more efficient to reduce operating expenses than to increase sales (Kwitko, 2018). As such the purchasing stage is better placed to reduce overall costs since it is the first step in the procurement process. In the short-term, reducing operating expenses is a faster way of making an impact on profitability (Kwitko, 2018).

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In most organizations, the purchasing function has become specialized where the firm can obtain greater economies of scale through managing its purchases. Moreover, purchasing accounts for more than half of the company’s capital expenditures and as such, organizations need to optimize their purchasing decisions through their negotiating abilities and having good relations with their suppliers.

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Companies should consider the purchasing function as a managerial responsibility that is beyond the mere act of buying. It is a complex process that involves research and development in order to select the correct materials and establishe reliable | PLACE YOUR ORDER NOW AT writtask.com | manage the process efficiently, they will reduce costs associated with goods or services acquisition, which has a direct impact on | PLACE YOUR ORDER NOW AT writtask.com | company that aims at maximizing their profits must establish proper procedures for procurement, which will enhance the efficiency of processes and minimize costs and leverage profits from purchases. Any resources the company saves during the purchasing cycle translates to higher profits.

Functions and Objectives of Purchasing

The most important function of purchasing is to efficiently avail necessary goods and services to the | PLACE YOUR ORDER NOW AT writtask.com | to recognize that, since the purchasing department accounts for 50% of the company’s budget, any costs that they save directly contributes to the profitability of | PLACE YOUR ORDER NOW AT writtask.com | stated in the definition, is to achieve the best possible prices through an evaluation of suppliers and choosing a supplier who best fits with the | PLACE YOUR ORDER NOW AT writtask.com | may include documentation, accounting, and ensuring compliance of business standards and protocols. In broad terms, the objective of purchasing is to procure right-quality materials, of the right quantity, at the right time and price, and from a | PLACE YOUR ORDER NOW AT writtask.com | broken down into sub-objectives: 1) to reasonably pay low prices through negotiation; 2) to maintain acceptable levels of inventory necessary for production; 3) to establish a supplier portfolio and maintaining good relations; 4) to secure excellent…