## Purchasing of Materials: The Core Questions
Effective purchasing of materials answers four interrelated questions. Getting each right ensures uninterrupted production without overstocking.
### 1. When to Purchase?
Materials must arrive before production needs arise. Timing depends on three factors:
- Material availability in the market (ease of supply)
- Lead time — the gap between placing an order and delivery at the production site
- Consumption pattern — the rate and regularity of usage
> Objective: replenish stock without causing production delays or overstocking.
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> Related tools: Re-order Stock Level (the level at which a fresh order is triggered) and the Just-in-Time (JIT) approach (receive materials only when needed).
### 2. How Much to Purchase?
Order quantity depends on:
- Material consumption pattern
- Minimum order size offered by the supplier
- Quantity discounts
- Storage cost and storage capacity
- Working capital availability
The optimal answer is formalised by the Economic Order Quantity (EOQ) model (covered separately).
### 3. Where to Purchase? (Selection of Supplier)
Choosing suppliers is a critical and sensitive step — especially in Public Sector Undertakings (PSUs) where public money is involved. It draws scrutiny from watchdogs such as the CVC (Central Vigilance Commission), the CAG (Comptroller and Auditor General), and auditors.
The sensitivity flows from the constitutional value of "Equality of Status and Opportunity" — competition among suppliers must be fair and transparent.
The process begins with one of:
- Enquiry
- Request for Proposals (RFP)
- Notification Inviting Tender (NIT)
The RFP/NIT may be local or global depending on material type, availability and government procurement guidelines. Tenders are floated either offline (manual circulation) or online (websites / electronic marketplaces).
GeM (Government e-Marketplace) is the online portal for government procurement of goods and services. It promotes transparency, efficiency and speed, and enables e-bidding, reverse e-auction and demand aggregation. The Ministry of Finance has made GeM mandatory for government purchases.
### 4. At What Price to Purchase?
The price is settled by selecting the lowest bidder, the L1 bidder, from the comparative evaluation of quotations.