Purchasing Steps

Purchasing is a critical process in any business. A company purchases raw materials, subcomponents and support services that all are essential to the production and delivery of
the finished product to their customer. There is tremendous value in developing a
purchasing process that is tailored to a business' specific needs and that obtains
components and services from outside sources in an effective, efficient and timely
manner.
Whether it is a product or service, the purchasing process consists of four basic steps:
1. Define requirements and develop a purchasing plan.
2. Request and evaluate bids from potential sources.
3. Select a source and negotiate contract terms.
4. Carry out the contract and pursue continuous improvement.
Purchasing does not end with the selection of a source and contract agreement because
the process isn't complete until the required product/service is received and meets the
requirements for quality, cost delivery and service. Purchasing continues through product
delivery. The following sections provide detailed guidance on purchasing cast
components.
1. Requirements Definition
The first step in any purchasing process is to define the product requirements and develop
a purchasing plan. For cast components, product requirements are based on technical
performance and targets for quality, quantity, schedule and cost. With this information, a
complete and accurate "request for quotation" can be drafted and distributed to foundries
for consideration.
To be a "smart buyer," you need more than just a requirements list. You also require a
purchasing plan that outlines and defines:
the objectives and issues in the purchase
the purchase requirements
how sources will be identified, screened and selected
how the purchase will be contracted and managed for quality, cost and schedule

This plan may be simple and straightforward for small, low-value purchases; it may be
very detailed and extensive for a high-value, critical purchase.
2. The Request for Quotation
Purchasing cast components generally is not a simple matter of transferring pattern
numbers and quantity desired from the engineering bill of materials to a purchase order.
Careful consideration of technical quality, quantity and schedule factors is necessary to
ensure that all pertinent and important information is supplied to the foundry. When
necessary information is not provided, this slows the procurement and results in an
inaccurate cost estimate or in a cast component that does not fully meet requirements.
When possible, the foundry should be supplied with CAD files or blueprints for both the
as-cast and the machined part. If the foundry is to provide the most suitable and useful
cast components, it is important that the buyer indicate the areas to be machined and the
locating points for machining.
In addition, the buyer must know and understand the critical factors in specifying cast
components and how those factors impact production and costs in the foundry.
A request-for-quotation form is used to good advantage by many foundries and cast
component buyers. It provides a convenient way to develop the component requirements
in a comprehensive and detailed approach. It supplies the foundry with complete
information on component requirements and enables the foundry to make an accurate
casting price quotation for the most suitable casting for a particular application.
3. Select a Supplier and Negotiate Contract Terms
After the initial bids have been received, evaluated and ranked, the qualifying, "bestvalue" bids will be selected. If the component is well defined in terms of simple
shape/complexity and of relatively low risk, the quotation may be sufficient for closing
the contract and moving into production.
However, for the more complex, high-value cast components, additional engineering
design and contract negotiation may be required to reach final agreement. Specifically, it
may be necessary to:
perform a final review and refinement of the design for manufacturability with the
casting engineer;
finalize technical, quality and schedule requirements;
review and resolve non-technical contractual issues.
In contract negotiations, all parties should consider the following factors:

 the level and scope of technical service, including design consultation, production,
quality control and product improvement;
detailed instructions and guidance on specifications and quality assurance requirements;
assigned responsibilities for and integration of supporting engineering activities among
the different production activities; these include the patternmaker, foundry, machine shop
and heat treater;
cost of quality assessment (rejects, delays, rework, etc.);
scheduling and lead-time planning;
product liability.
After these factors are considered, the next steps are to review, negotiate and resolve cost
details, performance clauses and conditions of sale and then finalize and sign the
contract.
4. Carry Out the Contract and Seek Continuous Improvement
A signed contract is not the completion of the purchasing process. The contract must be
completed by two actions: on-time delivery of a fully qualified product at the agreed cost
by the foundry and prompt and timely payment by the buyer. During the life of the
contract, all parties have a valuable stake in continuous improvement in quality, delivery
and best value. Specific issues that must be considered during the production cycle
include:
open and timely communication (by visits, phone calls, e-mail, etc.) between customer
and supplier on project status, shortfalls, potential problems, forecasted changes and
opportunities for value improvement;
monitoring of quality, delivery, cost and performance by both the supplier and the
customer;
identification of opportunities to improve quality and increase value to the final
customer by the customer and supplier.