Putting Your Current Purchasing Approach Under the Magnifying Glass – 3 Tips

The first quarter of the year has started and you want to make an impact to your companies bottom line. What better way than putting your current purchasing approach under the magnifying glass? Here are three purchasing strategies that will hopefully cut costs without sacrificing quality. 2018 is here and it’s time to get lean and mean!

Evaluate authorizations to purchase

If you walk through the shop floor and there is a requisition pad at every employee’s desk, there certainly may be an overstock problem in your plant. Giving too many employees purchasing power will lead to many problems. First, the average employee, while perhaps well meaning, will order the maximum amount of product to make things easier without thought to stock levels, price or shelf life. In addition, with multiple people outside of purchasing in the mix, they are certainly not communicating with each other and duplicate orders are sure to occur. Run your purchasing through a ladder of authorized and ultimately responsible individuals who have clear and defined parameters to follow when making decisions on what to buy.

Ask for discounts

Here is a challenge. Sit next to your purchasing agent for a day and listen for how many times they ask for a discount when on the phone with a supplier. How often does this happen? If I were to make a bet I would guess not once. Is this their fault? Well no, not really, not unless they have been trained to do so. But most companies have an amount they can discount on certain products to help with making a sale, appeasing upset customer or otherwise adding value on demand should the need arise. Your company should take advantage of this whenever possible!

Review Stock levels

Stock just left to sit in a warehouse is referred to as “Dead Money”. It sits there while you incur storage costs, the product ages and perhaps even becomes unusable. By taking stock of what you have, you can then investigate why it is there and implement changes to prevent future wasteful purchases. In addition, you cans see if there is a way to repurpose the material for a current need or find an avenue to resell it. In fact, some suppliers will take back overstock for a fee, which may be more appealing than keeping it on hand to be wasted.

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