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Purchasing

Purchasing is a fundamental function within a company’s organization yet few understand the importance and direct impact it has within the supply chain.

The primary objectives of the purchasing function are:

  • the creation of an effective procurement strategy
  • obtaining a correct management of the supplier base, a relationship that has now become of primary importance from a functional and strategic point of view.

 

A lack of knowledge of the active areas of the purchasing department, often within the same company, is one of the main factors that lead to deviations from a correct execution of a company’s global integration, often resulting in real and consequential operational disagreements that extend to the corresponding market, and ultimately to the customer.

 In an increasingly complex supply chain it is necessary to keep operating activities extremely simple

The lack of an integrated policy within a company can cause significant increases in costs and therefore the loss
of competitive advantages on the market. Knowing and integrating the functions of the various departments
allows for the creation an efficient business strategy.

THE AREAS OF ACTION OF THE PURCHASING DEPARTMENT

Defining the purchase strategy
This function has the task of planning purchases while maintaining continuous efficacy within the supply chain. In fact, it develops more and more explicit knowledge and methods. Among the primary objectives is the search for suppliers able to offer quality goods and services but at the lowest possible cost (therefore not only the lowest possible price);
Sizing the supplier base
Choosing suppliers is essential within the production process. Analyzing companies and cataloging them according to the needs and requirements of both the present and the future is, in fact, one of the most important and complex tasks of the purchasing
department. In many cases, the department must also select alternative suppliers to avoid risks within the supply chain;
Managing relationships with suppliers
The function of defining framework agreements remains a primary activity of the purchasing department, allowing for a defined and transparent identity to be established within contractual profiles with third parties. The area of monitoring selected services remains fundamental to the successful maintenance of such relationships: speed, punctuality and quality of products and services via a true auditing plan, all the while maintaining an efficacious relationship with the supplier through continual monitoring;
Reduction of costs and not just purchase prices
If the aim of the procurement strategy is to maintain the steady flow of goods and services coming from suppliers so as to avoid delays in the production process, the purchasing department also has a responsibility in using the company budget. With this in mind, in the seeking of savings, the establishment of conditions and constant negotiations with suppliers, the department must give equal precedence to the real costs being generated (and not just the purchase prices). This type of approach will guarantee true global savings while avoiding the generation of additional, hidden costs;
Integration of company policies
Suppliers must not only provide quality goods and services within the agreed upon time, but it is essential to foster true, integrated management through the sharing of predeterminded objectives, set within the context of a common ethical vision. All internal functions and external bodies must maintain a common profile in order to successfully execute agreed upon activities;