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Design a Good Purchasing Policy and Choose Efficient Suppliers

Have you ever thought about why you buy from one supplier and not from another?

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Have you ever thought about why you buy from one supplier and not from another? Have you calculated how much money it costs your company if you did not ask yourself that question? In general, there are very few SMEs that have prepared a purchasing plan with the rigor demanded by the current market. This is the main idea handled by the various experts and businessmen consulted by this magazine.

To grant purchases the prominence they deserve, we must reflect on the importance they have for our company. In the first place, they have a very direct influence on the final price of our products or services, more specifically in a percentage that can reach up to 60%.

This means that minimal management will directly result in our income statement. But they also have a determining influence on quality. Some studies have calculated that 50% of the problems that arise in the products or services offered by the companies have their origin in a lack of quality in the purchases.

For both reasons it is imperative that you consider the design of an adequate supplier management policy.

THE PURCHASING PLAN

Here are some practical and simple tips that will allow you to select and negotiate better with your suppliers.

1. REFLECT: WHAT DOES IT MISS?

The first – and fundamental – is to carry out an inventory of needs. As explained in Optimizing Purchases, by R. Perrotin and P. Heusschen, “not all purchases represent identical challenges”. Therefore, we must know what we need, in what quantity, at what time and at what price.

For this, it is necessary to take into account the different types of products and services that are needed for the development of your business activity. The most important are those that experts Perrotin and Heusschen call “strategic”. They are so called because they are fundamental for the company, both for their benefits and for their price. This is the case of the computer equipment necessary for the operation of an insurance broker or the policies that this type of company offers.

On the other hand, there are more specific and daily purchases that have a lower added value. For example, the paper and ink of the photocopier.

In doing this needs analysis we must assess three different aspects: benefit, quality and service. The balance between all of them will be the key to our success. It is essential to take these three issues into account when facing the next step.

2. STUDYING CANDIDATES

After knowing what we need to buy, we will have to decide to whom. There are two types of providers: those that offer cost leadership and those that offer the best quality. Or what is the same: those that are very cheap, but for which we can not put our hands on the fire because they are good, or those that are undoubtedly good and we are sure that their price is equally high. Between both suppliers there is an unlimited number of nuances depending on the greater presence of one or the other quality.

Although it may be obvious, you should never forget that you must have a thorough knowledge of the product you want to acquire. In fact, we must go further and learn about the market situation and the suppliers that provide it. Professional associations, chambers of commerce, databases and yearbooks or, simply, the references that these companies can give us from our acquaintances, clients, etc., can provide us with the necessary information to make the best selection.

3. MAKE THE FIRST CONTACTS

Then comes the time to arrange meetings and interviews with different providers. “Do not ask the candidates to come see you. Preferably, go to their companies and observe them, “advises Charles L. Gayen in his book The contracting of goods and services. It will be a good opportunity to observe your work live and gather valuable information.

Try to check your work systems, your skills and weaknesses, if they consider you important among the rest of your clientele and what kind of commitments you can expect from that company.

4. THINK: TWO BETTER THAN ONE

The CEF for Entrepreneurs study advises “to always keep more than one supplier for each product that is purchased. If he incurs a breakage of stocks, for example, your company will avoid not being able to meet the deadlines committed to customers. “

The ideal, whenever possible, is to know the offers of different suppliers and stimulate competition between them. Get used to doing small tests with new suppliers to check how they work before launching you into important operations. This will always be to your benefit.

5. THE SIZE MATTERS YOU, AND MUCH

Another conclusion of the study emphasizes the relevance of the provider’s size. This is an important issue so as not to create “excessive dependencies in the acquisition of certain products vital for the operation of a company”.

If the provider is a company larger than your company, you may not care about looking bad with you. But, on the other hand, if it is too small, it may not have enough capacity to assist you effectively.

6. IMPLEMENT A CONTROL SYSTEM

The first thing we should value from a supplier is the quality of their product. Also, we must take into account the service that accompanies the product.

In order to maintain an adequate control over these objectives, the CEF study ensures that simple evaluation systems can be developed by means of “non-automated tools, using spreadsheets in which the orders placed and the delivery notes received are tracked” .

On the other hand, Perrotin and Heusschen indicate that in this control it is also necessary to assess issues such as the delay in deliveries, the guarantees linked to the product, the price, the communication system, the supplier’s corporate reputation, and so on.

7. EYE WITH EXCLUSIVITY

Another aspect to take into account, especially in certain businesses, is the exclusivity of the area. Developing a suitable supplier management to a company provides benefits.

What we should value from a provider according to some studies conducted in the US, there are a number of parameters that must be assessed when choosing a provider. Without a doubt, the most important are quality and price. But in addition there are other factors that have an importance that we can qualify as large or medium. We offer them to you next.

  • Delay in deliveries. Delays by a supplier can seriously affect our business activity.
  • Previous results obtained by the provider. Evaluate the operation of previous operations with us in order to decide on new agreements.
  • Guarantees that are linked to the product. If the supplier we are analyzing has an after-sales service, repairs, product changes, etc., we will surely value these characteristics in a positive way.
  • Production capacity. Possibility of the supplier to deal with orders of medium and large size.
  • Technical competence. Both to meet the specifications of our orders and to provide coverage before a possible increase in complexity.
  • Financial position. It is basic that the economic situation of our suppliers is healthy.
  • Adaptability to procedures. Flexibility to adapt to our ways of working.
  • Reputation. Find out the experience of other clients with a provider.
  • Attitude of the seller. Apart from the ability of a company to meet our demands, for the proper development of the commercial relationship is important for your interest in the product you manufacture, the humane treatment and cordiality.
  • Geographic location. Accessibility of the company that provides us. We must assess the fact that it is not located in an area close to our company, which can hinder the operation or increase the transport of material.
  • Management competence. Assessment on the diligence of a supplier to resolve specific issues of operation, speed, result …
  • Good communication. Communicative fluency that avoids delays and delays in work processes.
  • Importance of previous businesses. Check, as far as possible, the work previously carried out by the supplier company for third parties.
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