<P> Another method of decreasing administrative costs associated with repetitive contracts for common material, is the use of company credit cards, also known as "Purchasing Cards" or simply "P - Cards". P - card programs vary, but all of them have internal checks and audits to ensure appropriate use . Purchasing managers realized once contracts for the low dollar value consumables are in place, procurement can take a smaller role in the operation and use of the contracts . There is still oversight in the forms of audits and monthly statement reviews, but most of their time is now available to negotiate major purchases and setting up of other long term contracts . These contracts are typically renewable annually . </P> <P> This trend away from the daily procurement function (tactical purchasing) resulted in several changes in the industry . The first was the reduction of personnel . Purchasing departments were now smaller . There was no need for the army of clerks processing orders for individual parts as in the past . Another change was the focus on negotiating contracts and procurement of large capital equipment . Both of these functions permitted purchasing departments to make the biggest financial contribution to the organization . A new term and job title emerged--Strategic sourcing and Sourcing Managers . These professionals not only focused on the bidding process and negotiating with suppliers, but the entire supply function . In these roles they were able to add value and maximize savings for organizations . This value was manifested in lower inventories, less personnel, and getting the end product to the consumer quicker . Purchasing managers' success in these roles resulted in new assignments outside to the traditional purchasing function--logistics, materials management, distribution, and warehousing . More and more purchasing managers were becoming Supply Chain Managers handling additional functions of their organization's operation . Purchasing managers were not the only ones to become Supply Chain Managers . Logistic managers, material managers, distribution managers, etc. all rose to the broader function and some had responsibility for the purchasing functions now . </P> <P> In accounting, purchases is the amount of goods a company bought throughout this year . It also refers to information as to the kind, quality, quantity, and cost of goods bought that should be maintained . They are added to inventory . Purchases are offset by Purchase Discounts and Purchase Returns and Allowances . When it should be added depends on the Free On Board (FOB) policy of the trade . For the purchaser, this new inventory is added on shipment if the policy was FOB shipping point, and the seller remove this item from its inventory . On the other hand, the purchaser added this inventory on receipt if the policy was FOB destination, and the seller remove this item from its inventory when it was delivered . </P> <P> Goods bought for the purpose other than direct selling, such as for Research and Development, are added to inventory and allocated to Research and Development expense as they are used . On a side note, equipments bought for Research and Development are not added to inventory, but are capitalized as assets . </P>

Explain the relationship of purchasing with other functions in production