Purchasing enables a company to acquire the goods, products and services it needs to run smoothly. This department is responsible for a wide range of tasks, all of which require a strategic vision. For purchasing management to be effective, it is necessary to define precisely and correctly the products that the company really needs. What can be done to improve the performance of the purchasing management department?
A global, strategic approach
Whatever the size of the company, effective purchasing management must be approached holistically. This applies to all business sectors. With this in mind, the company needs to have visibility over all its expenditure. Some companies have chosen to control direct purchases, but are not necessarily aware of the other purchases made by their various departments (indirect purchases such as overheads). When it comes to purchasing policy, making savings can have a significant impact on the company’s bottom line. For many companies, purchasing accounts for more than half of sales, and some only consider production-related purchases.
However, efficient expense management requires a comprehensive approach. Certain items, such as the software used to produce pay slips or the service provider responsible for drawing them up, should be treated as purchases and not as exceptional expenses. All costs incurred (bank charges, purchases of services, etc.) must be tracked, and a cost analysis must be carried out for all purchases made. In the strategic approach, you need to know the costs generated by the act of purchasing. To visualize overall costs, you need to take into account procurement costs, inventory management costs and processing costs.
After evaluating all these parameters, you can see that a 30-euro invoice can “cost” the company the same amount as a 30,000-euro invoice.
The right tools
Once expenses have been targeted and stakeholders identified, it’s handy to map them. With this mapping, it’s easier to gain visibility of the company’s purchasing volumes and buyers. The main objective is to find a tool to simplify this procedure and guarantee efficiency gains. With a good cost analysis, it will be easier to see whether purchases should be globalized or grouped together .By applying an ABC method, for example, it’s easy to identify low-value, C-class purchases. You’ll also need to consider the best way to handle them. This will be an opportunity to determine whether you plan to use a specific platform or whether you wish to pool purchases with other companies.
On the other hand, for larger purchases, it’s important to choose the right supplier. You also need to consider their requirements, and whether it’s possible to develop fruitful relationships with them.
Once the mapping is complete, it’s essential to establish a purchasing policy. This should be determined according to:
- Company size,
- Organizational context,
- Raw materials, human resources and other costs,
- The company’s ambitions.
After analysis, certain purchases may be centralized under one person. This person will then negotiate with a single supplier. Once the company has the right organization in place, it will be able to move more smoothly. It’s also a way of saving money, since a high-volume orderoptimizes costs. Or to set up supplier contracts or framework agreements on which to capitalize for the purchasing process.
Review supplier relations
Thanks to spend mapping, purchases exceeding a certain amount can be associated with the company’s strategic suppliers. It’s a way of generating savings and quick results, because the approach is different. Mapping makes it easier to identify the most important suppliers. You’ll have to ask yourself questions about the quality of your suppliers. Supplier relationship management goes beyond the simple purchasing transaction to focus on building long-term strategic relationships with key suppliers. The aim is to create mutually beneficial relationships that can lead to improved supply chain performance.
Adopt risk management
A crucial aspect of purchasing management, yet one that is often overlooked, is managing the risks associated with the purchasing process. In the context of purchasing, these risks can arise from a variety of sources, including price fluctuations, quality issues, late delivery, compliance problems or supplier issues.To manage these risks effectively, it is essential to identify and assess potential risks, put in place strategies to mitigate them, and monitor these risks on an ongoing basis. For example, to manage the risk of price fluctuations, a company can use forward contracts or options to fix prices in advance. To manage supplier risk, it can diversify its sources of supply so as not to be dependent on a single supplier. Ultimately, effective risk management can help a company avoid unpleasant surprises and ensure the continuity of its operations.
Train your teams
Training to avoid improvisation
When it comes to purchasing organization, there’s no room for improvisation. It’s important to remember that “buying” is a “profession”: the buyer’s profession. An organization adapted to one company will not necessarily be adapted to another. Purchasing needs to be organized according to the context, the nature of the purchases, the sector of activity, and so on. Thanks to training, purchasing management teams have the keys they need to successfully optimize their departments.
Learn to use new purchasing management tools
Tools such as purchasing management systems, e-procurement platforms and data analysis software can help automate purchasing processes and provide valuable information for decision-making. Learning how to use these tools enables teams to reduce the time and effort needed to manage the company’s purchasing, minimize errors and improve traceability and control.
Who should be trained?
General management needs to consider the nature of its purchasing activities. There is no such thing as an all-round purchasing specialist. Each company can choose the option that suits it best. Some may prefer to train a person responsible for disseminating the purchasing culture, informing and communicating the approach within the company. This person will be responsible for negotiating, selecting suppliers, etc. Others, on the contrary, will form a group of buyers, as purchasing has a particularly strategic position in the organizational structure. Lastly, some companies smooth out the purchasing function by making its staff multi-skilled, which requires additional risk management.
Implementing a CSR policy
More and more companies are recognizing the importance of ethics and sustainability in their purchasing practices. This means that they are striving to buy products that are not only of good quality and at a good price, but are also ethically and sustainably produced. For example, they may seek to work with suppliers who treat their employees fairly, minimize their impact on the environment, or contribute positively to their community.To adopt a responsible purchasing policy, a company may need to introduce new CSR criteria into its supplier selection process, train its employees in these issues, and regularly monitor and evaluate its suppliers’ performance on these aspects. While this may require an initial investment, it is increasingly recognized that ethical and sustainable purchasing can bring long-term benefits. Whatever the case, it’s up to each company to think of an approach that’s right for its business. Once the right formula has been established, the purchasing management department will have the essential keys to guaranteeing its performance. To access essential purchasing data and automate certain processes, companies can choose purchasing management software such as Weproc. This SaaS-based tool adapts to a company’s organization and completes its purchasing process.
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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.