It should be remembered, also, that successful pur chasing in an industrial establishment involves more than natural purchasing skill and a knowledge of markets. A successful purchasing agent should know intimately the processes and operations for which he is buying material, and he should be fur nished, whenever it is possible, with carefully pre pared specifications in regard to the material which he is to purchase. Not only does such knowledge enable the purchasing agent to guard against actual mistakes but also to discriminate knowingly between the several kinds of material that may be offered and which seem, superficially, to be much alike.
Of equal importance is a knowledge, on the part of the purchasing agent, of the article which is to be purchased. A man might be very well qualified to buy building material but be wholly unfit to purchase electric motors. And this knowledge of the article to be purchased may need to extend to a clear under standing of the processes by which it is produced, to enable the purchaser to judge whether or not a bidder is adequately equipped to fill the contract under con sideration.
The technical knowledge required by a purchasing agent may, in many industries, be very great, and a purchasing agent who possesses also the requisite in formation and purchasing skill is an invaluable aid in the securing of low costs; in fact, in most industries such a man is an absolute necessity.
3. Stores and stock.—In a continuous industry of an ideal type the material would be used as soon as received, flowing thru the factory without pause and going directly to the consumer as soon as fabricated.
Such conditions, however, are almost impossible to attain, tho closely approached in some of the simple continuous processes. In most industries the rate of sale varies with the kind of product and the season, and if prompt deliveries are to be made a stock of finished product must be carried on hand. On the other hand, materials must usually be bought in large lots in or der that good prices may be obtained, and they must be bought in anticipation of production so that work may be started promptly. In shops making prod uct to special order only, these features are not of such great relative importance; but, even in these cases provision must be made for storing material in advance of fabrication and for storing the manu factured product until it is shipped. Stored material in any form represents inactive capital. The advan tages of prompt service are supposed to more than compensate for the loss of interest, but this aspect of stored material should not be overlooked.
Raw or unworked material is properly known as stores, and the place where it is kept is called a store room. The function of the storeroom is to act as a
reservoir, between the stream of incoming material and the production department, equalizing the varia tions in supply and demand. Finished product ready for the market is properly known as stock and the place where it is kept is called a stock room. The stock room acts as a reservoir between the production department and the selling department, equalizing the variations in the demand of the market and the output of the factory. A careful distinction should be made, therefore, between the terms stock and stores, which are quite commonly used indiscrimi nately. In a small enterprise the stock room and the storeroom may be one room and under one man, but even here there are two distinct functions to be con sidered, and as plants increase in size a separation of these two functions becomes imperative.
Material which is being fabricated is lmown as goods in proCess. In addition to the raw material that is to be transformed into a marketable product, every factory, as explained in the foregoing discus sion, must carry in its stores a considerable amount of indirect material; that is, material that does not enter directly into the product, but which is essential to its production. In works such as smelting furnaces and rolling mills, the amount of material carried in stores for repairing the usual wear and tear of the plant may be very great. Other supplies, such as coal and oil, must often be bought in quantity and stored, in order that the best market prices may be ob tained.
4. Finished-parts storeroom.—In intermittent man ufacturing it is often necessary to finish up a large number of parts of machines, or other products, and store them away, drawing them out as they may be needed for final assembly into a completed product. Thus it may be necessary to manufacture more parts than are needed for immediate consumption, in order to obtain the advantages of manufacturing in quan tity. Or again, certain parts that it requires a long time to produce, as compared to other parts of the complete machine, may be made in advance, in order to insure prompt deliveries of the finished product. A supply of such finished parts may also be car ried to furnish repair parts for apparatus already sold. Stored parts of this kind are known as finished parts, and in some factories a special section of the storeroom is set aside for them and is known as a fin ished-parts storeroom. Such a storeroom acts as a reservoir to equalize the variations in the manufactur ing processes of the factory.