purchase management
Every company needs to provide itself with raw materials, services or other goods necessary for the exercise of its activity, therefore, in the procurement process, it will be necessary to study which operations, suppliers or operational activities will be the most profitable.
We can basically differentiate purchasing management into two large groups:
Goods or raw materials for the products we market.
Consumables and services for the company's private use.
It is important to anticipate both groups. We cannot run out of raw materials or have a surplus, just as it will be important to keep track of the consumables that our company needs to develop its activity.
Purchasing Management Jobs
The main objective of the purchasing department of the company is to provide the goods and services needed by the company, making sure to obtain the required quantity, quality and price for a certain period of time.
The purchasing department is responsible for deciding what the company should buy from, from which supplier, and how much.
As we have said, it is not the same to evaluate consumables or office services that we need, for example, the raw materials with which we make our products.
Both groups of procurement need to be studied, both can be recurring purchases and we will measure the effectiveness of procurement management thanks to some indicators.
This way we can apply the experience to become more profitable as we learn.
We can help ourselves with a tool from the sales activity, such as a CRM, which, thanks to history, we can predict the raw materials we will need to supply ourselves.
Step by step through the buying process
When to buy, what to buy and from whom, will be determined by criteria to support the company's needs and production capacity.
The department must follow these steps:
Realize the real need.
Select the ideal provider.
Place an order or buy.
order tracking.
Receipt of the request.
Review and request acceptance.
Purchasing Management Indicators
To improve procurement management, we need to provide us with as much information as possible to control the process, there are countless mechanisms for cost optimization and control.
In this article, we would like to explain the indicators that we need to take into consideration in order to improve your purchasing management. Purchasing management indicators are mechanisms that help companies improve their expenses. These are the most important ones:
Budget and Actual Expenditure:
It is the result of forecasting the expenditures on the budget line and the difference from the actual expenditures, sometimes the estimated budget differs from the actual final expenditures, which is not always negative.
The reasons may be unexpected, an increase in internal consumption, a different presentation. But this indicator measures the percentage that we adjust according to the set budget.
Scouting (price study):
We must perform this task frequently, because knowing the prices that suppliers can offer us helps us to make a better decision.
Return on Investment (ROI):
This indicator measures the economic performance obtained as a result of investment.
Spending and Consumption:
This indicator analyzes whether what is obtained is really what we are consuming, we will analyze whether everything purchased is necessary and what benefit it provides, this will be known by the margin obtained.
transparent operations:
It will be necessary to know where the budgets end, exactly where the money is spent. This indicator should justify every euro spent and will measure the effectiveness of the department or purchasing manager, it will also be important in this indicator to consider that everything happens according to a legal framework.
It is these elements that will basically tell us whether our purchases are in good health, whether they help us to be more profitable and also to see market trends.
Importance of Purchasing Management
Purchasing is the first stage of materials management. Purchasing means purchasing goods and services from some external agency.
The objective of the purchasing department is to arrange the supply of materials, spare parts, services or semi-finished goods, which are required by the organization to produce the required product, from an agency or source outside the organization.
The items purchased must be of definite quality in the desired quantity available on time at a competitive price.
Procurement is the purchase of materials, supplies, machinery, tools, and services required for equipment and the maintenance and operation of a plant.
Purchasing function means purchasing by purchasing the appropriate materials, machinery, equipment and supplies for the stores used in the manufacture of the approved product for marketing in the right quality and quantity at the right time and at the lowest price, consistent with the desired quality.
Thus, purchasing is the process of exploring the market to purchase goods and services of the desired quality and quantity at the lowest price and at the required time. A supplier who can provide standard items at a competitive price is selected.
Purchasing in an organization has now become a specialized function. It has been experienced that by giving the responsibility for purchasing to a specialist, the company can have greater economies of scale in purchasing, moreover, the purchase includes more than 50% of the capital expenditures set by the company.
Procurement is a managerial activity that goes beyond just the purchasing process, and includes research and development for proper selection of materials and sources, and follow-up to ensure timely delivery; Inspection to ensure both quantity and quality; To control traffic, receiving, warehousing and accounting processes related to purchases.”
Modern thinking is that buying is a strategic management function and any neglect will eventually lead to a decline in profits.
Importance of buying:
The purchasing function provides the factory with the materials without which the wheels of the machines cannot move.
A one percent saving in material cost equals a 10 percent increase in sales. Thus effective purchasing can achieve this.
The purchasing manager is the custodian of his company's money because he spends more
than 50 percent of his company's profits on purchases.
read more:
Learn about purchasing management problems
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