the concept of purchasing management and its role in optimizing the process
This is because buying decisions have a total impact on an organization’s profit margin and growth. It is possible to enhance your company’s performance by aligning the purchasing management objectives with your business strategies.
Only what will add value to your business shall be purchased. However, only what you consider of worth depends directly on your strategic objectives. If it happens to be a low-cost product, the strategic objective for the purchasing management would be to bargain for low prices with suppliers.
On the other hand, if you desire to make higher priced products of better quality and increase profitability, the purchasing manager has to ensure that suppliers deliver the best goods available.
That means that the first step in the effective management of purchasing is a review of purchasing objectives and its correlation with the strategies of the company. Continue reading to find out more.
The importance of having good suppliers for effective purchasing management
Suppliers are of prime importance for good purchasing management. For example, if they supply poor quality material and do not deliver on time, then this will work very deleteriously for the company. Therefore, it becomes the purchasing professional’s responsibility to find good suppliers and have a relationship with good suppliers.
A company’s suppliers can be divided into three groups, which are:
Sole source: consists of an exclusive supply regime, which may occur due to the type of material supplied or due to an agreement signed between the parties.
Multiple source: This is the most common model, in which companies are free to purchase products from more than one supplier. The advantage is that it is possible to negotiate better terms and prices.
Single source: in this modality, a partnership is sealed with a company chosen from among several, so that it can provide the supply for a longer period.
When a company has a long-term relationship with suppliers, it finds it easy to obtain low prices, more reliable services, and better support.
This is a responsibility of the person who has been entrusted to handle the purchasing management, whose task is to search for this kind of partnering and to look after the ones already established. In addition to maintaining a good relationship, there is a need to keep evaluating suppliers and their materials so that quality is continually maintained.
Systems integration to optimize the purchasing process
Many things could work in your favor if your internal system is connected with the suppliers’ systems. For example, whereas previously the individual who had been tasked with the job of purchasing management had to call the supplier to get an update on whether there was a given product available in stock, now all that person needs to do is access the system.
Through this kind of integration, the supply can be automated and made efficient and more practical. In that sense, since the company will receive information regarding the stock of the other company, it is possible to arrange the delivery whenever it is detected that an item runs out. Such a measure thus optimizes the process and avoids delays in production.
5 Tips for more effective purchasing management
Check out some essential tips below for more effective purchasing management and thus contribute to the company’s good results.
1. Build good relationships with suppliers
As mentioned earlier, maintaining good relationships with suppliers is very important. They represent partnerships that are essential for the business to achieve success and grow more and more. To do this, it is necessary to correctly comply with everything agreed between the parties and create ties with the representatives of these companies.
2. Create alternative plans
No matter how good your relationships with suppliers are, we know that unexpected events can happen. For example, a long-standing supplier may suddenly be unable to deliver an order on the date your company needs it.
So, to avoid those surprises, alternative plans should be created. The more ready you are for that type of situation, the easier it will be to act right when the situation occurs.
3. You should have a list of the best suppliers
Depending on the size of your company, there are probably many suppliers that you work with and it is impossible to remember all details. You should maintain the list of top suppliers, that fit most of your criteria, such as good price, on time delivery, quality, willingness to solve problems, etc.
4. Measure everything possible
In the purchasing sector, there are indicators everywhere. Paying attention to all this data is a great way to check which actions are working and which need to be changed. Therefore, measure all the information you can, check the prices charged by suppliers, the frequency of adjustments, punctuality, among other aspects.
5. Create a purchasing policy in the company
It is important for the company to have a purchasing policy and, of course, that it be followed. Without this care, any employee could purchase items on behalf of the company, compromising the organization of the purchasing department. If the company already has this policy, efforts must be made to ensure that it is respected.
How to reduce costs in purchasing management?
Finally, we have selected some quick and practical tips to help you reduce costs in purchasing management. After all, the main goal of every company is to do more with less, using its resources in the best way possible. Follow along!
- Buy items in larger quantities instead of making smaller, more frequent purchases, as long as, of course, you are certain that you need the item in question.
- Having more than one supplier is important both to negotiate better prices and to avoid unexpected situations.
- Keep an eye on the market to find similar goods at lower prices.
- It is extremely important to analyze your stock frequently, both to prevent any items from running out and from accumulating.
Through simple measures it is possible to make good choices and use the company’s resources wisely and responsibly.