Purchasing Best Practices – Designed To Profit
Why do you need purchasing best practices? Well because purchasing costs vie with salary costs to be the biggest depletion of a company’s profits. Every time you save money on purchasing you are directly contributing to a company’s bottom line. One Dollar saved is One dollar earned.
So how do you define purchasing best practices and ensure that they are adhered to? Well you define your purchasing strategy and ensure that all staff understand it and all your purchasing staff adhere to it. So what kinds of purchasing strategies go into your purchasing best practices?
Choose a good spread of suppliers who can provide you with reliable supplies of quality products at good prices with good terms. Leverage your suppliers against each other so that competitive prices and terms are possible. Keep the supplier information up to date.
Provide all major suppliers with a Master Agreement so that they are contracted to supply your products at the prices and terms agreed.
- Supplier Relationships
Ensure that good relationships are maintained with your suppliers so that problems can be easily solved you take the best advantage of their services.
This is one of the key purchasing best practices as happy, well looked after suppliers ensure that purchasing is a relative stress and trouble free activity.
- Preferred Supplier List
This should be reviewed and updated on a regular basis.
Ensure that ordering is only undertaken when the stock needs to be replenished and that the stock is kept at its optimum level.
- Cost Reduction
This must be key to all of your activities.
These must be consolidated if at all possible. Deliveries must be tracked and all goods checked in. Only quality items that are as ordered is to be accepted.
Negotiate hard but fairly so that your suppliers understand your need for keen prices and good terms but still wish to do business with you
- Product Information
Ensure that all product information and prices are current and that complete catalogues are maintained.
Ensure that all staff are fully trained and motivated and understand all the business goals.
Communicate all purchasing policies to relevant staff.
- Management Information
Take full advantage of the management information available from the computing system. This information should be used to make the best and most advantageous purchasing decisions.
All management and executives should understand and maintain the purchasing best practices.
All purchasing information should be centralized and the purchasing activities centralized as much as possible.
Purchasing should be fully integrated with the stock room, warehousing and accounting so that profits are enhanced and a complete financial picture is available.
Buy and install the best technology that your company can afford in order for your purchasing department to be the best that it can.
Provide incentives for all your staff to save money in purchasing.
As you can see the above purchasing best practices embrace all of the purchasing activities and should lead to a well managed, efficient and profitable purchasing department and ultimately profitable company.
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