The success of a company or organization depends on several aspects such as marketing, planning, and purchasing. These aspects are as important as the managerial and leadership skills needed by businesspeople to run their companies smoothly. Understanding these aspects will enable businesspeople to deal with various challenges and risks associated with business.
Strategic purchasing allows certain companies or organizations to openly communicate with their suppliers, improve their relationship with them, and develop a strategic plan to maintain a long-term relationship with the suppliers and attain mutual goals. Most business executives believe that good purchasing management plays a significant role in attaining business success. A good purchasing strategy can withstand the negative effects that are associated with unhealthy economic condition.
Over the years, purchasing consultants and experts have developed several purchasing best practices that can be used by companies to create a solid foundation for their supply chain. These practices are designed to guide companies when making purchasing decisions. Some of these purchasing best practices are:
- Improve the Company’s Relationship With its Suppliers
Most successful companies have a good working relationship with their suppliers. This will allow them to have quality supplies at reasonable prices and better deals. An effective relationship with suppliers will also give companies the chance to develop a strategy that would be beneficial for both parties. Companies that have an open communication with its suppliers can freely discuss the things that might affect or improve their relationship. Companies should make sure that their suppliers enjoy doing business with them.
- Attain the Information Needed for Developing a Good Purchasing Strategy
It is important that the finance and purchasing departments in your company develop a team that would determine the company’s current spending as well as any areas that have opportunity for improvement. When brainstorming ideas for the improvement of the company’s product or service, certain factors should be considered such as manufacturing, sales, and engineering.
- Keep a Record About the Supplier’s Performance
Companies need to monitor the performance of the suppliers in terms of their product quality, service, pricing, and delivery. It would be helpful if the chosen suppliers have a big picture of how the supplies they provide fit into the overall scope of your business. This way, the suppliers can determine the appropriate options and may make suggestion or seek out options that would be better for you down the road. It is also important that the company and the suppliers understand the needs and requirements of one another.
- Create an Effective Team of Purchasing Executives
Purchasing executives are some of the key people who play a fundamental role in the success of a business. These executives should have a fine-tuned knowledge and understanding regarding the effect of price increases on core business supplies will have on the overall business. Purchasing executives should be able to make wise decisions as to how they would offset this potential price increase to provide everything the business needs without sacrificing quality or negatively effecting the cash flow of the business.
- Form an Experienced and Knowledgeable Purchasing Staff
Effective members of a purchasing team have good analytical and negotiation skills. Suppliers will better understand the need of a company through better negotiation. Purchasing personnel should understand the importance of achieving the company’s goals and complying with the agreements, policies, and terms set in the company-supplier contact. An effective purchasing team can work in other areas of the company such as sales and finance departments.(Part 2 on Thursday will cover 5 additional best practices)