Purchasing is not about buying goods or services for a business for the lowest price. Purchasing professionals broadly contribute to their company’s success by working to make the right buy, at the right time, for the right price and from the right source. From meeting business requirements to controlling costs and maintaining relationships, effective purchasing management strategies and tactics help companies meet key business objectives.
TL;DR (Too Long; Didn't Read)
Purchasing professionals have a number of objectives including cost control, developing and managing supplier relationship, encouraging innovation and diversification of the supply chain.
Getting the lowest price for a particular product or service may not be necessary, but purchasers strive to save money for their businesses by getting the best prices and terms overall. Capitalizing on incentives and discounts that suppliers offer is important. So too are negotiating favorable contract terms that improve cash flow by prolonging payment and reducing long-term costs by cutting waste and avoiding defective products.
Spending too much with one supplier is risky. If that supplier should have trouble fulfilling their obligations or raise their prices significantly, the company that depends on them may have to delay delivery of goods to their customers or raise their prices, which could cost them business. So, ensuring the security of supply by expanding the supplier base is a key objective for purchasing management.
Fulfilling Business Requirements
Doing business with the right suppliers can matter as much as pricing and supplying. For example, companies may want to ensure that they support small businesses by allocating a certain percentage of their purchasing budgets accordingly. They also may want to avoid suppliers with bad reputations or business practices. Purchasing management can support the achievement of such objectives.
Purchasing professionals can support their company’s growth by obtaining innovative solutions to business problems and opportunities. They do so by working closely with vendors, sharing their company’s needs and exploring how suppliers can help. Together, they can develop better technologies and products for customers, and refine processes that allow them to deliver goods and services more efficiently.
Purchasing professionals can work with just about anyone in their companies. They may deal with representatives from marketing, finance and logistics departments to name just a few. Given the broad range of goods and services that they buy and the impact that their decisions have on their company as a whole, you can see how purchasing connects departments and aligns their efforts in pursuit of the company’s general goals.
Purchasing often accounts for more than half of a company’s spending. Investing purchasing dollars correctly can help a company expand market share and increase its sales by allowing it to bring quality products to market first. Purchasing management also can improve profitability by efficiently developing those products and services through collaboration with suppliers who are similarly invested in the company’s success.
Jim Molis has more than 20 years of experience writing for and about businesses. He has been a business reporter for the Columbus (Ga.) Ledger-Enquirer, a managing editor of the Atlanta Business Chronicle and an editor of the Jacksonville Business Journal. He also has written for management consultants, professional services firms and numerous publications as a freelancer.