Supply chain: Easy ways to improve purchasing
Taking a strategic approach to purchasing is an important part of boosting the efficiency and profitability of your company.
Here are some simple, yet effective, tips on how your company can improve your purchasing methods.
1. Centralize purchasing
This is a commonly used strategy whereby purchasing for the entire company is made by one department. It allows for a lot more control over purchasing on all levels and helps minimize waste.
2. Plan for purchases
Identify preferred suppliers in different categories based on criteria such as quality, price and delivery history. In this way, your company will have options and can make better informed decisions on purchases.
This is valuable in the event a main supplier raises its prices or ceases production of the product in question. Buying exclusively from one supplier can be risky, unless the product is highly specialized.
3. Focus on quality
Companies need to go beyond working on the quality of their own products to ensure their suppliers are just as vigilant in their operations.
Evaluate and analyze the quality of your suppliers’ processes and products, and then choose those that will consistently deliver on their promises to you.
4. Purchase locally
If it can be done without compromising quality or price competitiveness, look to purchase locally. It will help you to create close relationships with your suppliers and reduce shipping costs.
5. Build long-term supplier relationships
Developing long-term relationships with suppliers creates a mutually beneficial partnership.
Better quality products and price reductions are the principal advantages of strong relationships and longer term contracts. Open communication between buyer and supplier can also lead to more tailored services.
6. Explore outsourcing some purchasing
It’s important that companies recognize their core purchasing competencies.
They may be effective at acquiring supplies they commonly use. But if a special project calls for unfamiliar products, it can be helpful to seek the advice of a purchasing consultant that specializes in the product in question.
7. Understand your inventory carrying costs
Companies should have an accurate breakdown of what it costs to store goods and work to reduce inventory to minimize cost and waste.
Communicating a company’s forecasted needs to suppliers will help with on-time delivery and minimize the need for storage.
8. Base supply chain management on real-time demand
Purchasing is just one element in your supply chain. Adopting efficient purchasing methods, coupled with lean manufacturing and delivery processes, can help reduce customer lead time.
9. Negotiate constantly
Even if a company is satisfied with its suppliers, it’s important to review and negotiate agreements regularly. Performing an annual review of all suppliers is a good idea.
Make a wider push to improve operational efficiency
These straightforward measures are relatively easy to implement and can yield savings for companies that adopt them. But while implementing sound purchasing strategies is hugely important in increasing overall efficiency, they should be part of a wider operational efficiency effort.