Purchasing management is the acquisition of goods and services by a company in order to ensure its production process.
It should be noted that purchasing management is a fairly complex process for a company. Before making a purchase management it is necessary to study the market looking for the best suppliers. For this, it is necessary to know the quality and price conditions of the goods and services to be purchased.
Then the negotiation process is carried out and the corresponding procedures are followed to manage the purchases. The purchasing management of a company is decisive to achieve a successful end result.
Purchasing management process
The most important questions we must answer in the purchasing management process are:
1. When to buy?
Undoubtedly, in order to know when to buy, you must first do a prior study of the market. Since this provides us with information about the goods and services that suppliers offer in the market. With this information, the company anticipates the requirements and needs of the company. Because when the goods and services are required, the supply sources have already been identified.
2. What to buy?
Of course, the purchasing process is centralized in the purchasing department of a company. Purchasing requirements for the production, inventory and sales areas are addressed to this department. Upon receiving the requirements, the department prioritizes the most imminent requirements and proceeds to carry out the purchasing management procedures.
Generally, the decision of what to buy is made by the company’s purchasing committee. This committee can be made up of company executives. The decision is made based on the most important needs for the performance of the company.
3. How to buy?
On the other hand, how to buy is defined based on the offers received. All offer proposals received must be analyzed and evaluated, in order to choose the best proposal. For the decision to be more effective, it is advisable to preselect the offers. So that only those proposals that best fit the objectives established by the company remain to be examined.
4. How much to buy?
In effect, the determination of how much to buy occurs after the negotiation process with the suppliers. They could be minimum and maximum sales quantities established by the supplier. Prices, payment methods, delivery service and guarantees can be negotiated.
5. Where to buy?
Likewise, this is decided after the providers have been selected. For this, the suppliers are contacted and information related to the economic and technical conditions and the after-sales services offered is requested. It is also convenient to require estimates, samples and catalogs.
Benefits of efficient purchasing management
Among the benefits of good purchasing management are:
1. Cost reduction
In the first place, good purchasing management can save the company from incurring unnecessary expenses. Therefore, the purchasing department must be made up of trained personnel. So that its good management achieves the strengthening of the relationship with the suppliers. This will allow a better negotiation of the acquisition prices and achieve better payment conditions.
Naturally, they should always negotiate better terms in the contracts, to have greater cash flow, lower costs and correspondingly increasing the utility of the company. In addition, they should avoid making urgent purchases, since everything should be previously planned.
2. Improvement in the quality of supplies and services
Second, good purchasing management helps to identify the best suppliers, which leads to an improvement in the quality and price of the final product that the company sells. That is why some companies work closely with their suppliers to improve all their processes, not just the purchasing management process.
Of course, for a company to offer a good and service of good quality and price, it must have the adequate supplies and means to achieve it. Better solutions can also be provided in critical situations.
3. Reduce risks and guarantee supplies
Third, the purchasing department must know, among the goods and services offered to the market, which ones are decisive for the survival of the company. Therefore, you must take the appropriate measures to guarantee the supply chains that supply your production process.
4. Improved competitiveness
Finally, if the purchasing department efficiently performs its task, it manages to increase the competitiveness of the company. Since its good management achieves cost reduction, the development of new products and greater customer satisfaction. All this, without a doubt, considerably increases the competitive position of the company.
Purchasing department functions
Among the most important functions that the purchasing department must perform, we find:
- Investigate the market : You must investigate the changes that occur in the market. Such as changes in prices, trends used by the competition and the appearance of new products.
- Advise internal clients: You must have close communication with the other departments of the company in order to offer a quality product. Advises internal clients to offer a better product or service to external clients.
- Select suppliers: You must select the best suppliers in order to bring highly competitive products to the market. Good suppliers ensure better prices, better quality, and better delivery times.
- Negotiation of prices and quality: Negotiate the conditions of quality and price, forms of payment and delivery, all in order to reduce costs for the company
Finally, we will say that purchasing management has a fundamental impact on the delivery of goods and services that companies offer to the market. Purchasing management is responsible for providing all the supplies that the company requires for its proper functioning. That is, it must satisfy the needs of the company’s internal customers, to offer greater satisfaction to the external customer.