All You Ever Needed to Know About Purchasing!

This article is intended to provide a clear explanation of purchasing as a function of your business.

Purchasing as a Function

Purchasing within a business can be seen as a specialized task performed by individuals with a particular role. The purchasing function within a business is intended to acquire supplies, necessary widgets, services or other business related items. The more efficient this process becomes the easier it is for a company to obtain the parts, including services and labor, necessary to carry out their operations. You might be able to get away without pickles but you can't make a hamburger without the bread and meat.

Someone with the title of purchaser, procurement officer, buyer or even a purchasing department would be responsible for carrying out purchasing within a company. Depending on the size of the company it might even be the owner. The main challenge that organizations face is understanding and properly integrating purchasing with the supply chain management or logistics functions of the business. Successfully integrating and measuring purchasing within a company will allow for more insight into company spending. You'll be able to have a better understanding how many pickles you need, or better yet, how much bread and meat you should have stocked up.

Knowledge will shape your strategy.

The Purchasing Process

Purchasing as a whole can be boiled down to answer two main questions.

Question 1) What do we need to obtain?

Depending on how effectively you can properly answer this question you can move onto answer question 2. Many companies have major problems in Question 1. Do you really need the pickle? What kind of bread should you be buying? What about meat?

Question 2) How and who should we go to obtain what we need?

This question is a lot more dynamic because it has a lot more moving parts. If you choose to buy a pickle do you go direct to a farm and make the pickles? Do you buy from a store? Direct to manufacturer? How will the pickles get to you?

A major concern with the supply chain is actually communication between each of the links on the chain. Getting information from one link to the other without a properly integrated system usually requires a cost of time or money. Possibly both.

The impossible triangle suggests you can only exist at one point within the triangle. You can have fast and cheap but it won't be good. Fast and good but it won't be cheap. Good and cheap but it won't be fast. Or a combination of mediocrity between all three.

What is your solution to a problem like this?

Impossible Triangle

The trick to solving the triangle is not to actually solve the triangle. The trick is actually to find a new triangle or create a new shape or way of doing things entirely. (Star Trek fans this is called the Kobayashi Maru)

How does this apply to purchasing?

Typically someone in a company will realize that they need to order something. Or even expense something. They'll make a request to order or go through a requisition process. If an order is approved, the purchaser will normally have a supplier in mind and will need to obtain a quote. This takes time. Then there might be a period of negotiation. This takes time. The order then needs to be placed and eventually received. This takes time and communication. Finally a payment needs to be made. This takes communication and possibly time.

Delays in this process will eat at efficiency and create bottlenecks. It might even cost you very real dollars. You can't have upper management just sitting around waiting for requests and you shouldn't really skip steps or it'll create monster problems later. The solution will be to find a solution that suits your organization's requirements.

You wouldn't get a Ferrari to drag a trailer. If you need to move that trailer you can't really ignore it either. It's really just comes down to finding out your options.

Purchasing process

Purchasing as a business function can be a competitive advantage for your organization. In fact every business will have expenses, purchases or orders they need to make so in the grand scheme of things if your company doesn't have proper control of it's purchasing it is most likely hurting your organization. Hint see: Hidden costs. Indirect Costs. Preventative measures. Bottlenecks.

Find out how you can improve your purchasing process:

Related posts

Leave a Comment