When an employee wants to purchase something, the traditional approach is to fill out a purchase requisition form and send it to the purchasing department. The purchasing staff investigates where it can obtain the requested item at the lowest price, and then issues a purchase order to the selected customer. Once the supplier delivers the goods and issues an invoice, the company's accounts payable staff must match the invoice to the initiating purchase order and evidence of receipt, and then issues a payment. This process is an extremely cumbersome one, which can be avoided through the use of an electronic purchasing catalog.
When employees are given access to an on-line purchasing catalog, they can view a standardized list of products that have been reviewed and approved in advance by the purchasing staff, and place orders through the system. The system then creates an electronic purchase order and forwards it to the indicated supplier, along with a pre-approved blanket purchase authorization. Once the supplier forwards the requested goods to the company, the receiving staff calls up the order on a workstation and checks off the ordered item as having been fulfilled. The system then flags the accounts payable staff to pay the supplier.
By using an on-line purchasing catalog, the following benefits are realized:
- Paperwork. All of the documents used in-house to request, order, and pay for purchases are eliminated.
- Concentrated purchases. Most purchases are funneled to a small number of pre-selected suppliers, which means that the company may be eligible for volume discounts.
However, some system programming may be required to set up on-line purchases, and blanket purchase orders should be set up in advance, which makes this a less cost-effective solution for smaller companies. Also, it works best for incidental purchases, rather than for the acquisition of raw materials, which may require a more detailed materials management system.