Quality of Purchased Material

The quality of purchased materials and parts is helpful in the improvement of

productivity with fewer defects and waste. Hence, it strengthens the competitive
position of the organisation. It generates the adaptability to changing or emerging
market conditions and to environmental and other government regulations. The
quality production is the result of the quality raw materials and parts. The output of
this exercise is the improvement in the market image and market share. The quality of
purchase materials and parts leads the reduction in the overall production cost due to
less wastes and defects. Thus, it helps in better cost management. The quality of
purchased materials is determined by many factors like Materials Management,
Purchasing Management, Purchasing Process, Materials Requirement Planning (MRP),
Just-in-time (JIT), Quality Inspection, Material Handling, Value Analysis, Supplier
Evaluation and Selection Process, Vendor Rating, Warehouse Management, etc.

Materials Management:

Materials management consists of many activities which determine the quality of

materials and parts purchased. Material management is defined as the planning,
acquiring, storing, moving and controlling of materials as per the requirement of the
organisation. It is basically related with the smooth flow of materials. It includes
planning, organising, communicating, directing and controlling of all those activities
mainly concerned with the flow of materials into an organisation. The key material
activities are:

 Purchasing Activities:
It involves mainly identification of materials needs, market research,
maintaining materials records etc.
 Procurement Activities:
It involves material specifications, materials studies, receiving materials etc.
 Inventory Management:
It involves planning and controlling of materials handling, storing materials and
managing material supplies etc.
 Supply Management:
It involves monitoring in-plant material handling, strategic planning of
materials etc.

Supply Chain Management:

Supply chain management consists of many activities which determine the quality of
materials and parts purchased. Supply chain management (SCM) is the flow of
materials, information, products and finances as they move in a process from supplier
to manufacturer to wholesaler to retailer to consumer. Supply chain management
involves coordinating and integrating these flows both within and among companies.
The key activities involved in supply chain management are purchasing, logistics,
warehousing and information handling. In fact, the purchasing is the key and integral
part of the supply chain management.
Purchasing:
The smooth functioning of the production department depends upon a large extent on
the right type of materials purchased at right time, at right cost and at right quality.
The right quality of materials purchased leads to good saving. It is possible through
efficient buying. For the quality materials buying, the purchase manager must be
technically skilled, innovative, intelligent, vigilant and efficient in bargaining.
Quality purchasing describes the effective process of buying. It is the learning of the
right requirement, identifying & selecting a right supplier, and settlement of price
through negotiation. Quality purchasing is an element of the wider function of
procurement and it includes many activities such as ordering, expediting, receipt and
payment. Quality purchasing is responsible for obtaining the right materials, parts,
supplies and services needed to produce of right product or service.

Organizational Purchase:

A purchase will be considered to be organizational if it is made in the name of a

company or organization, regardless of size, from a medium sized company up to a
multinational or state company. Organization consists of business, industries, retailers,
wholesaler, government and non- government organizations.
 Business and industries purchase materials for business use or as a raw
material to produce other product.
 Wholesalers/Retailers/traders buy product for resell at profit.
 Government organisations purchase products for use in offices or provide
services to people.
 Non-government organizations purchase products to provide services to their
client.
Purchasing Process/Cycle:

Purchasing process/cycle consists of many activities which determine the quality of

materials and parts purchased. The purchasing process begins with a genuine request
generated from within the organization to purchase materials, parts, equipments,
supplies, or other items from outside the organization with the right description. The
important step in the quality purchasing is the right selection of the supplier. Then, the
order is placed after the bargaining of terms, conditions and price and the order is
monitored & followed. The purchase department is notified about the satisfactory
arrival of shipment and the process ends with the approval of the payment to the
supplier. The main steps in the purchasing cycle are as under:

 Right recognition and right description of need

 Right selection of suppliers
 Determination of prices through bargaining
 Preparation and placing the order with a right supplier
 Monitoring and follow up the order
 Receiving the ordered materials in the stipulated time period
 Checking and approving for payment to supplier

In the whole purchasing process, the quality is an important part and the checking
quality matters as the raw materials and parts enter the factory. Before any part or
raw material is used in the manufacturing process, it is the responsibility of the
 purchasing department to ensure that the materials and parts that arrive are of right
quality specification. Right recognition and right description of need is possible
through Materials Requirement Planning (MRP).

Materials Requirement Planning (MRP):

Materials requirement planning consists of many activities which determine the

quality of materials and parts purchased. It is a computerized inventory control
system. It helps in knowing the need of raw materials and helps to calculate the
demand for a particular item. It takes into account the lead time required to order
automatically with the help of software. It helps in tracking the records of the raw
materials especially when the materials like raw materials or components parts are
required. Basically MRP is an information system which generates automatic results in
the area of systematic planning of materials requirement. It uses three important
input data: bill of materials data, inventory data, and master production schedule to
calculate the demand for particular items like raw materials or components parts.
Many upgraded versions are made available till now. The benefits of MRP are
remarkable as it generates work orders and purchase orders automatically. Now in
these days MRP-II is available, which is known as Manufacturing Resource Planning.

Just-in-time (JIT):

Just-in-time consists of many activities which determine the quality of materials and
parts purchased. It is a philosophy which means purchasing only what is needed, when
it is needed, not early, not late; not less, not more. The key target is achieving high
volume production using minimal inventories. JIT purchasing involves fewer suppliers
dependency and developing long-term relationships with the suppliers. According to
this philosophy, anything which is not generating value is called waste. JIT advocates
minimising all types of wastes. The success of JIT philosophy lies in the commitment of
the employees. This philosophy covers the whole organisation under one umbrella.
All the departments have to work with coordination and follow the guidelines with full
spirit. The top executives have to be the leaders involved in JIT and they must be the
guiding light for all the employees. Getting everyone involved and committed is the
first step to successful implementation of JIT and the first step to an increase in
continuous improvement. Applications of JIT are as follows:

 Inventory Reduction as a Tool for Improvement:

Inventory reduction is directly related with cost. Costs are reduced greatly if
inventory is reduced.
 Waste Reduction:

If any activity that increases cost but does not add value to any process in an
organisation is called waste. Eliminate waste of labor, material or equipment.
JIT advocates zero waste in organisation.
 Supplier Relationships:

There must be good relationship with suppliers. Its helps in getting raw
material supply exactly when required.
  Minimum batch sizes:

The batch sizes must be kept as small as possible. The defects can be observed
easily in small batches.
 Minimum Movements:

The movements must be kept low in production plants. The computerized

equipments are very much helpful in minimising the movements in the plants.
 Total Quality Assurance:

The production department must control all the processes time to time to
control the variation in the production output in terms of quality. Proper
training is very much in the total quality assurance.
 Preventive Maintenance:

The inspection after the accident is useless. Preventive maintenance is needed

to reduce variation in the process. This requires a regular and complete
examination of all the processes on a regular basis.

Quality Inspection of Incoming Materials and Parts:

Quality inspection consists of many activities which determine the quality of materials
and parts purchased. It aims at regular checking, measuring and testing of the
following:

(i) Incoming materials and parts;

(ii) One or more processes; and

(iii) Finished goods.

Quality inspection of incoming materials and parts is also called receiving inspection. It
is checking, measuring and testing of incoming materials and parts that are supplied
before they are taken to store or inventory. Incoming inspection can be conducted
either at supplier’s end or at manufacturer’s gate. If the incoming materials are bulky
or large in quantity and involve huge transportation cost, it is economical to inspect
them at the place of vendor or supplier.

Importance of Receiving and Incoming Quality Inspection:

Quality Inspection consists of checking, measuring and testing of all the purchased raw
materials and parts received from the suppliers. It is must before the materials and
parts are taken into stock. Receiving Inspection is the most important aspect because
the purchased raw materials and parts are to be used in the manufacturing. The sub-
standard raw materials and spare parts generate sub-standard products which is
unacceptable at any stage by any stakeholder.
Receiving and incoming of materials and parts is a routine work, hence, it is considered
as clerical task and understated by some companies. Sometimes this job is considered
 very light in terms of receiving, incoming and generating documents. It is a very
serious mistake. If the poor quality, pilferage, shortage or damaged quantity is
overlooked at the receiving stage and the problem(s) is discovered at later stage, it will
prove to be a disaster. It will not only increase the cost of the product, but also waste
the precious time of the employees. The problem(s) must be considered at the
receiving to run the production smoothly.
Materials Handling:

Materials handling consists of many activities which determine the quality of materials
and parts purchased. It is the movement, protection, storage and control of raw
materials, parts and products in the plant. Wide ranges of manual, semi-automated
and automated equipments are incorporated in it. Material handling means providing
the right amount of the right raw materials/parts/products, in the right condition, at
the right place, in right sequence, at the right time, in the right position, and for the
right cost, by using the right method. It is simply picking up, moving, and lying down of
raw materials/parts/products in the organisation at various places. It applies to the
movement of raw materials, parts in process, finished goods, packing materials, and
disposal of scraps. In general, hundreds and thousands tons of materials are handled
daily requiring the use of large amount of manpower along with manual, semi-
automated and automated equipment. The materials move within the confines of a
building, between building and a transport vehicle, from one place to another place,
one plant to another plant, from one processing area to another or from one
department to another department of the plant. The cost of material handling is very
important as it contributes significantly to the total cost of manufacturing. In some
industries, the ratio of handling cost to processing cost is very high. In such industries,
material handling is a very important function. If our material handling system is
properly designed, integrated and automated then it provides remarkable cost saving
opportunities. It is also helpful in providing magnificent and great customer services.

Objectives of Material Handling:

The primary objective of a properly designed, integrated and automated material

handling system is to reduce the cost of production. The other objectives are:

 The material handling is helpful to lower unit materials handling cost.

 It provides better control of the flow of materials in the organisation.
 It reduces the manufacturing cycle time.
 It reduces delays and damage of raw materials/parts/semi-finished or finished
goods.
 It increases storage capacity.
 It promotes safety and improves working conditions in the organisation.
 It is helpful to maintain or improve product quality.
 It provides contribution for better quality by avoiding damages to products.
 It provides higher productivity at lower manufacturing costs.

Value Analysis:
Value analysis consists of many activities which determine the quality of materials and
parts purchased. It is an organized creative approach aimed at identifying unnecessary
costs and eliminating the same from the product without affecting the quality of the
 product. While eliminating the unnecessary costs of the product, due care must be
given that there is not loss of functional utility/guarantee/safety performance. There is
no compromise regarding the functional utility or safety performance of the product.
The concept of value analysis or value engineering works before the actual production
starts. This process involves the right substitution of materials/parts/components of
the product to be manufactured at the lowest cost. It is an approach of providing the
required function of the product at the desired time and place at the lowest cost. This
approach is a perfect blend of right quality, right design specification, right standards,
right methods of manufacture, etc. and involves the substitution of
materials/parts/components at a lesser price or better quality. The application of the
value analysis/value engineering ideas during design and engineering stage of the
product before its actual production is known as Value Engineering.

Supplier Evaluation and Supplier Selection Process:

Supplier evaluation and supplier selection process consists of many activities which
determine the quality of materials and parts purchased. It is very important factor in
the determination of quality of materials to be purchased. It has following steps.

 Identifying the Need of Supplier Evaluation:

At this stage, the buyer organisations identify a need to evaluate and select a supplier.
The supplier evaluation may be requested by purchase officers, production manager,
quality manager or design managers.

 Identifying Criteria for Supplier Evaluation:

At this stage the criteria for supplier evaluation is fixed. It can be on-time
delivery/delivery commitments, quality of raw materials/parts, technical performance,
production capabilities, design verification, evaluation of product samples, innovation
and management expertise, meeting specific requirements/standards, suppliers’
financial viability, customer service, reliability and responsiveness, records of past
achievement etc. These are the parameters on which the evaluation of the supplier(s)
is decided.
 Determine Sourcing Strategy:

The sourcing will differ from requirement to requirement of the buyer organisations. It
can be like dependency on single supplier or multiple suppliers, short-term or long-
term contracts and domestic suppliers or foreign supplier. According to sourcing
strategy, the supplier(s) are identified. Various internal as well as external sources of
information are used to identify the supplier(s).
 Determine Method of Supplier Evaluation and Selection:

After reducing the number of suppliers, the method is to be determined regarding

suppliers’ evaluation and selection. The evaluation process often includes use of
questionnaire tools, interviews and supplier’s site visit.
  Select Supplier and Reach Agreement

In the last stage, the supplier(s) is finalised and negotiated for certain stipulated terms
and conditions.

Vendor Rating:

Vendor rating consists of many activities which determine the quality of materials and
parts purchased. A vendor is any person or company that supplies raw materials/parts,
goods or services to the buyer organisations. The effectiveness of the purchasing
department is judged by the quality and reliability of its suppliers.
Objectives of Vendor Rating:

Assessment of vendor’s performance on certain criteria is called vendor rating.

Vendor rating is the result of a formal vendor evaluation system.
The key objectives of vendor rating are as under:

 Selection of Right Suppliers

It helps the buyer organisations in the selection of right suppliers.
 Rating Assessment of Suppliers
It rates the entire performance of the suppliers and gives a clear-cut vision about
the quality, cost, reliability of the products and services to be provided by the
suppliers.
 Negotiation with Suppliers
It provides buyer organizations with the information helpful in subsequent
negotiation with suppliers.
 Proper Feedback
It gives a feedback to suppliers to further improve their performances.
 Useful Information
It provides the buyer organisations with the important information which is
helpful in the development of the suppliers.
 Reward
It recognizes and rewards outstanding suppliers.
 Standardized Practices
It generates suppliers’ standard practices.

Warehouse Management
Warehouse management consists of many activities which determine the quality of
materials and parts purchased. The organisations need a variety of items, raw
materials and parts of different uses for different purposes at different time. Some
items/materials/ parts are required instantly and some are required after some time.
Some are required throughout the year without any break. Some are required in high
amount in a particular season. So, storage is very important concern. Storage involves
proper arrangement for preserving items/materials/parts from the time of their
production or purchase till the actual use. The role of storage is very important in
smooth production. When the storage is done on a large scale and in a specified
manner it is called ‘warehousing’. The place where goods are kept is called
‘warehouse’. It is a planned space for the storage and handling of goods and material.