The 6 Core Purchasing Strategies

Companies implement Purchasing strategies in order to make cost effective purchasing decisions from a group of efficient vendors who will deliver quality goods on time and at mutually agreeable terms.

These purchasing strategies may include such choices as making procurement savings by using centralized purchasing which is concentrating the entire procurement activities within one principal location.

Other companies may decide to undertake a single source procurement strategy that involves obtaining excellent dedicated service from a single vendor.  These strategies are predominant when sourcing for IT or indirect purchasing such as office supplies and cleaning.

Other companies may use a procurement strategy of using a core purchasing cycle.  This is where they order from a group of regular vendors and use outsourcing procurement for their larger and ad hoc purchases.

Still others, particularly when they are seeking labor for short-term projects will use procurement auctions in order to obtain the best pricing levels.

Regardless of the size of the company, there is a core group of purchasing strategies that most of them implement.  These are:

  • Supplier Optimization

The company chooses an optimum mix of vendors who can provide the best prices and terms.  This process usually means that the less able suppliers who cannot provide a quality service at the terms and prices required are discarded.  This is by far the most common of the various purchasing strategies.

  • TQM

Total Quality Methods, requires the vendors to provide an ever increasing quality service with zero errors. The supplier ensures purchasing best practices using a number of tools such as six sigma.

  • Risk Management

As more companies obtain their supplies from countries such as China and India, they are more concerned with the risk management of this supply chain. Whilst these countries can supply products at very advantageous prices, these advantages can be soon negated by a natural or human disaster.

Large multinational companies see the world as one large market and source from many vendors, regardless of their country of origin.

Some companies believe that they are working hand-in-hand with their vendors.  They therefore spend some time in developing processes that assist these vendors.  There may also be the situation where a company is dependent upon just one supplier for their products.  If this supplier is unable to perform to the required standards, the purchaser may assist the vendor in improving their service or implement processes to improve their procurement cycle.

  • Green Purchasing

This is one of the more common purchasing strategies for governments and local governments. This strategy champions the need for recycling and purchasing products that have a negative impact on the environment.

A company will choose purchasing strategies that promote their procurement best practices of minimizing costs, maximizing quality and ensuring that quality products are delivered on time.

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