Definition of Purchasing

To procure externally those goods and services not available internally at the lowest possible price taking into account quality and service as well as form, fit and function. To perform this function many companies employ the services of Purchasing personnel, unfortunately this is a broad description which usually covers all levels of buying, from the Purchasing Manager down to the Order Writers. Too often pressure of work can result in most of the day to day buying being performed by the latter while the Senior Purchasing staff are struggling with the so-called major commodities. The lower echelons therefore usually do not have the authority, or in some cases, the skills to seek cost savings. Any they do attain are usually those promoted by professional sales people offering specials and quantity discounts etc. But, not all sales staff are this way inclined, many are the other side of the order writer coin and are merely order takers unable to offer any benefit to the user. Now over the years we have seen many changes in the Purchasing field with faster and better systems, more advanced (not always better) software and a gradual movement towards EDI.

This is all very well but some things do not change, for example, it is still a useful statistic that the cost of goods and services in a production company can be as high as 60% of total expenditure most of which is administered by the purchasing function. In the same way a high percentage of this portion is handled by those without the authority to make a difference. Another useful snippet for purchasing staff to be aware of is that it can take as much as $5 in additional sales revenue to match a $1 saving made at the buying level. So it follows that all your purchases have the potential for savings if a pro-active policy is adopted by all the rowers in the boat. Are you maximising your cost saving opportunities? Investigate every possible avenue of saving by trying alternate sources and methods, particularly in those areas not subject to annual tenders such as machinery spares not normally held in your stock, or high technology equipment, spares and consumables, most of which are imported and sold at fixed prices due to little or no domestic competition. The moral of the story is “You Can’t Catch A Fish Without First Casting Your Line”.

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