The importance of the purchasing function in a company

The corporate purchasing function is an emerging concept no more than thirty years old. This means that academic knowledge is still relatively young compared to other internal departments. For a long time, and still today, it has not been given the importance it deserves. However, the context is increasingly reversing, and purchasing is rising to its rightful status as a strategic function. Purchasing strategy is now being taken to the highest level, and purchasing departments, for example, are now part of the management committees of major corporations. In SMEs, general management is also paying closer attention to purchasing management within the company. On the one hand, this is due to the proposed areas of productivity, and on the other, to the legislative arsenals that are being built up over time: electronic invoicing, supplier compliance, ISO standards and quality controls. This article is a plea for the purchasing function in business, and lists its advantages, proving both its usefulness and its importance for structures in all sectors of activity.

A brief look at the purchasing function

The corporate purchasing function covers all aspects of purchasing management. Its main mission is to ensure that the entire purchasing process is properly implemented. It can be run from a purchasing department, or from within your general services department. With its broad scope of activity, it keeps a close eye on the total costs generated by the company’s purchasing policy. Good purchasing management guarantees the financial health of purchasing organizations. More than simply reducing costs on non-production purchases or raw materials, the purchasing function provides a strategic vision, monitoring the quality of products and services purchased, the reliability of supplier relations, areas for optimization, and consolidating strategic partnerships with long-term benefits.

The importance of the purchasing function is becoming more and more a reality within SMEs, as it contributes to economic performance. The attention paid to this function is proportional to the size of the company. It’s for this very reason that groups have set up purchasing departments.

Optimal management of resources

A company can’t function properly if it doesn’t have the resources it needs to run its business. The wider the range of products and services on offer, the greater the number of requirements. It is therefore necessary to make an effort to provide a good framework through a procurement function. Even for small companies, there are a minimum number ofactions to be taken to ensure optimal purchasing:

• Keeping track of expenses allocated to purchasing categories, and of likely price variations according to the economic context,
• Knowledge of purchasing parameters such as volume, quality, delivery times, etc.
• Identification of technical skills to identify the levers for optimizing the purchasing process.

Finding the right purchasing strategy is a real necessity for any company. It enables them to master their environment and respond to any situation. A number of risks need to be anticipated, such as uncontrolled purchases, higher-than-anticipated expenditure or, worse still, a supply disruption, as was the case during the health crisis. It also means keeping an eye on the supplier market and the opportunities it provides for your business.

Essential for company performance

In addition to the criteria taken into account in purchasing management that do not directly affect the price of the product or service purchased, the purchasing function prioritizes cost optimization. It analyzes the composition of the price as well as the total cost of the purchase. This work is crucial, as it enables the company to identify the most suitable suppliers and offers. It helps to find the best value for money. In a responsible purchasing approach, it analyzes the supplier’s impact according to several criteria in order to meet CSR (Corporate Social Responsibility) challenges.

The purchasing function also determines the purchasing policy, which defines the line to be followed with regard to the company’s interests. This direction is important, as it reflects the company’s strategic ambitions: sustainable purchasing, social responsibility, ISO standards, etc. It is essential to bear in mind that a purchasing function that complements a sales function contributes toincreasing the company’sresults. A company that offers quality goods and services is a safe bet for its customers. Encouraging good-quality products is therefore one of the most effective promotional gestures a company can make.

Creating the right conditions for a good purchasing function

For a company to make the most of its purchasing departments, it must havereliable agents to entrust with this task. To achieve this, the search for talent must be carried out through human resources. Among the criteria they must meet is the ability to combine available data to accurately assess the company’s needs. Finally, it is essential that these employees have the data and tools they need to do their job properly. These days, it’s a mistake not to take advantage of digital solutionsfor the purchasing function. Tools as simple as Microsoft Word Excel spreadsheets are already sufficient for basic actions.

These tools then reach their limits when it comes to collaboration between company players. If a company is to grow, it must not minimize the importance of its purchasing function. It’s something for which it must deploy the necessary resources. That’s why purchasing management software like Weproc offers you a simple and effective service to meet these challenges, with an intuitive interface.

Want to learn more about our procurement management software Weproc? Contact us or request your free 15-minutes demo below!

Team Weproc

Weproc is a SaaS software specialized in digitizing the procurement process of companies. From purchase requests to supplier invoicing, through the validation process, Weproc is designed to simplify the purchase management of SMEs and mid-sized companies by centralizing all purchase-related activities.