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The Purchasing Manager (PA) performs a number of important functions in conjunction and under the direction of the Vice-President of Manufacturing. A good Purchasing Manager will not only allow his company to produce more effectively; he'll also make the company more profitable.
Many K-Business meetings will pass without note for the Purchasing Manager. Indeed, most of his work is done outside of the regular meetings. However, before or after making a purchase, the Purchasing Manager must and will interact with other officers, particularly his superior, the Vice-President of Manufacturing (VPoM). The VPoM will, either before or later, approve his purchases and guarantee that he gets any reimbursement due to him.
Every company, including FAWSEC, uses some kind of a purchasing process, so must a K-Business company. These processes include two important components: (a) approval and (b) payment. The main differences in these tend to stem from the amount of control given to the Purchasing Manager and to the manner in which repayment takes place.
Two different models involve the Purchasing Manager. Some companies, especially small businesses, give a large amount of freedom to the PA. Thus, the Purchasing Manager, after finding out what the company needs, shops largely on his own. Typically, he spends either his own money or that given in a lump sum by the CFO. He then returns with his receipts and change to receive reimbursement for his purchases. This model possesses several advantages, particularly as the Purchasing Manager can shop around for sales and make on-the-spot purchases.
A much more formal model typical prevails at large firms. Here, the Purchasing Manager will do the "shopping" on one trip and return with a list of prices and options for the VPoM. The VPoM will approve the purchases and request the CFO to write a check for the amount indicated. The PM then takes the check and returns with the receipts to present to the CFO. The CFO, however, through his checkbook, already has a paper record and no need to reimburse the Purchasing Manager. This model also holds some advantages; in particular, in allowing for greater control of spending by the VPoM and CFO, and it also negates the need for cash purchases and the confusing of the Agent's and Company's money.
The model used at a given K-Business company will largely depend upon the skills and qualities of the Agent and his relationship with the VPoM, his superior. Typically, PMs did most of the purchasing with their own funds. This creates a fundamentally important factor to remember: keep your receipts.
The entire Board must approve a product selection. A smart VPoM, however, will involve his Purchasing Manager in helping select the product. The VPoM will have the Purchasing Manager "price" the raw materials and capital necessary for the product. From this information, he can determine the approximate price it will take to make the good. Such shopping trips, obviously, should not involve any payments or promises to pay. However, the Agent can make inquiries along the lines of "If we were to order 100, what kind of price could you give us?"
A good PM often can give seminars on shopping as they love to shop. A Purchasing Manager, here, though, should keep several factors in mind. First, a business may give a different price for 400 units instead of for 100. Second, while the Agent can invoke the argument that "this is educational for kids," K-Business companies do not exist as charities and cannot ask for "special prices" or deals on this basis. Third, it sometimes helps to bring more than one person along, even a non-Company member, if it lowers the cost of the purchases.
Importantly, the Purchasing Manager must ALWAYS get a receipt. If the business will not give a receipt, the Agent should have the seller sign a piece of paper verifying (a) what he purchased (b) in what amount (c) on what date (d) and at what price. If the seller refuses to sign such a document, shop somewhere else.
Some small vendors, particularly at places like the Friday market, may not give receipts. For that reason you can fill out a blank receipt (receipt.doc) and fill in the details in Arabic and English if necessary. Then, the seller need only sign his name. If they refuse to do this, show elsewhere.
Occasionally, a PA or the VPoM will not find the purchased materials acceptable. In these instances, the Purchasing Manager must return the merchandise to the seller. This will usually involve returning the merchandise in the original package with all pieces and showing a receipt. The Purchasing Manager does not have to supply a reason for returning the purchase though typically the Agent does. The vendor should return all of the purchase price, given the conditions above. If the Purchasing Manager cannot meet all of these conditions, the vendor may bargain as to how much, if any, of the purchase price he considers "fair." The Purchasing Manager can bargain back, and can, of course, use the future purchases of the company as a tool in reconciling a reluctant vendor. Still, the Purchasing Manager should expect a full return if he returns a complete package with a receipt.
Most of the changes in the Code do not directly effect the PM. However, the PM needs to have awareness of the following factors.
(1) The sponsors will need to approve any rescheduling of meetings, and will show extreme hesitation in doing so.
(2) Although the K-Business program will stretch almost ten months, the year will actually include only 4 additional meetings.
These two facts should lead an important conclusion: PMs need to purchase materials necessary for production. On the one hand, they will have greater time to make such purchases, but the VPoM, CEO, and sponsors will show far less tolerance for failure to make required purchases.
Paperwork remains extremely central to the Purchasing Manager's job because out of the entire company more money may pass through his hands than anyone else's other than those of the CFO. The company wants proper accounting for these funds.
The Purchasing Log forms the heart of the PA's responsibility. Every time the Agent makes a purchase, he must make entry into the log. This should name specifically what he purchased, the amount, and the vendor. After making this entry, he will present his receipt to the CFO, and the VPoM will sign for receiving it. This he does on the pur_log. Every time he makes an additional purchase, he needs to change the name of the file (pur_lg00 to pur_lg01) so that it eventually contains a records of the entire year's purchases.
Alternately, using the tighter purchasing process mentioned above, the PM can enter all of the information and have the CFO initial for issuing the check. Upon the receipt of the merchandise, the VPoM can sign verifying receipt of the merchandise though, since the CFO will write the check directly to the vendor, the Purchasing Manager cannot do much with writing the check.
In either case, the receipt will go to the CFO to add to his records. A wise Purchasing Manager will make his own copy of the receipt prior to giving the original to the CFO. The Purchasing Manager should staple his copies of the receipt to the Purchasing Log.
As most companies rely on cash purchases, failure to secure a receipt may well result in non-repayment of spent funds.
The Purchasing Manager should fill out this form in close conjunction with the VPoM. If directed, the Purchasing Manager should "shop" the items needed for one or more products prior to making any purchases; then fill in the worksheet. As initially set up, the worksheet will arrive at a total of fixed (capital costs) excluding salaries, which the VPoHR will provide to the VPoM. These expenses include only those items that the Purchasing Manager will only purchase once, such as a sander, a website, a company mailbox, etc.. The default set-up includes up to seven items, but the Agent can add or subtract lines.
After the company selects a product, the Purchasing Manager, again in conjunction with VPoM, should complete the calculations a second time using actual purchase amounts. At the direction of the VPoM, the Company may choose to simple delete out the original figures, or to copy the calculations and retain the original figures while copying the actual ones to later pages. Either way, the Purchasing Manager should print out updated figures.
Many VPoMs will skip having the PM fill this out, opting instead to do the entire calculations with the fixed cost.
The Variable Cost Worksheet forms the logical counterpart of the Fixed Cost Worksheet. For this, the Purchasing Manager needs to enter any expense that varies with the amount produced. The Company may base its initial estimates on a given number of units or a given period time, but the Agent must consistently follow through and make all figures based on the same assumptions.
While the worksheet contains spaces for additional months, and these take relatively little effort to create, they have less relevance. However, the VPoM may ask the Purchasing Manager to complete these figures to monitor the costs.
As in the fixed cost worksheet, the Purchasing Manager should print these out whenever called upon by the VPoM or whenever updated. The PM may end up doing multiple copies of this form as VPoMs might find initial estimates unrealistic after manufacturing begins.
Again VPoMs will skip having the PM fill this out, opting instead to do the entire calculations with all variable costs included.
Typically the Purchasing Manager will not report at the Monthly meeting. Instead, the VPoM will speak regarding the company's purchases and their impact on the company. If called upon, though, the Purchasing Manager may explain some aspects of why he purchased at one place or another.
Some companies may do without a Purchasing Manager. This may occur in a particularly small company or one in which the VPoM takes a particularly intense and personal interest in all aspects of the production including purchases. In this case, the Purchasing Manager may find himself squeezed between the fact that no one particularly needs his services at the same time no one seems him executing those same services as they occur outside the meeting period. In this instance, a Purchasing Manager would do well to position himself as active and versatile Assistant VP of Manufacturing although the Safety Director may end up trying the exact same thing.
In other companies, the VPoM may take very little interest other than in the actual manufacturing process. This would make the Purchasing Manager a stronger figure with an even division between the one making the purchases and the other working with the results of the purchasing function.
A Purchasing Manager would do well to work out his relationship early.