So what is the definition of purchasing? Well the dictionaries say something like "a central business area where purchasing of items is undertaken". A non-business orientated person will have a definition of purchasing that involves buying things they like or want.
Obviously, the business has much more to lose if it does not understand the importance in getting purchasing just right. The layperson will think that it is just a case of listing what you want to buy, going out and purchasing them and then getting on with the rest of business. Any entrepreneur that took this as their definition of purchasing would soon go bankrupt. It is probably one of the most important business concepts to grasp. So what is the correct definition of purchasing?
Business management is complex and there are many areas that need to be controlled. These are cash flow, profit, quality, inventory costs, contractual issues and product availability not to mention maintaining your business strategies and marketing needs. All of these are affected by the purchasing strategies and management of the company. If the business does not have products – then they will not be able to sell to their market. If they have too much money tied up in their stock room, they will not be able to spend it on other things like staffing or new equipment. If they do not control their spending and who they are spending with, not to mention what they are spending on – then they are soon to see the inside of a bankruptcy court.
Therefore, the definition of purchasing that a company has is very important. If your company just has a list of companies and products to buy from them, how do you know that there is not something elsewhere that is better, cheaper and more easily obtained?
Your purchasing department is by far the most important area of your business but they need to know what you want from them. Tell them that you expect them to manage, control and check on the following: inventory, costs, when you really need to pay your bills and from whom they are buying. Impress upon them that you really need to manage your cash flow, receive quality goods and buy best available. Most of all tell them that they are the most important people in your company and make them believe you. You will have a much more profitable company if you do.