Effective purchasing traditionally relates to purchasing the right items, at the right time, for the right place, at the right quantity and of the right quality.
It also relates however turning a reactive buyer into a proactive buyer.
Effective purchasing is ultimately a proactive way to assessing your buying abilities, adding value to your business, improving communications with your suppliers or manufacturers and provides you with a better understanding of the market place.
To implement an effective purchasing process or plan you will need to evaluate and assess your suppliers and/or manufacturers (this means that you don’t feel obligated to stay with them because you have always used them) and collect and classify your internal data.
Below are some steps towards implementing a system that will help you to purchase more effectively.
Step 1. Assess and Understand Your Business
Understand your business and learn how your business functions by assessing your internal customers, for instance:
- What goods and service are important for each department
- What are the crucial factors in terms of price, quality and delivery to each department manager
- Which items are purchased most and what do they use them for
- How does each department know when to reorder or restock these items
Step 2. Compile History
Compile a history of purchases by gather data on:
- Order quantities
- Product types
- Lead times
- Frequency of purchase
Step 3. Assess Suppliers/Manufacturers
Evaluate your suppliers/manufacturers and determine if they are really working for you as well as they should. For example:
- How long have they been trading?
- Have they got a positive turnover and profitability?
- Who are their major customers and how much do the rely on them to keep the business going?
- What are their quality control procedures and policies?
- How do they handle complaints?
- What is their level of insurance?
- Who will be dealing with your account?
- Are you able to obtain references from their customers?
- What is their communication like?
- How much experience or level of expertise do they give and present?
- Are they competitive and willing to keep your account?
- How much do they want your account?
Step 4. Be Proactive
- Negotiate better deals with your suppliers
- Advise them of expected purchase quantities
- Arrange stock arrangements
- Advise of your required lead times
- Discuss price and possible fluctuations and their causes
- Order products all at the same time so delivery costs are less
- Involve your internal customers in your process
- Build relationships
- Audit your suppliers/manufactures to ensure they still meet the standards and expectations
- Keep your communication open
- Keep your options open and get quotes if and when required
- Keep your knowledge and information up to date by attending seminars, trade shows, industry nights, subscribing to magazines, etc
Step 5. Establish Yourself
- Set a code of ethics for your business transactions and interests
- Protect yourself and never assume anything
- Don’t default on your promises or agreements
- Always ensure you have an audit trail
- Never feel guilty about moving on to another supplier