9 Fundamental Purchasing Strategies

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July 06, 2018

Purchasing Fundamentals

Every purchasing agent will find themselves in a much better position if they are armed with the correct purchase-making skills. Making smart purchasing decisions will help ensure that the agent is able to get their money back on their investments.

While there are a variety of purchasing strategies out there from which companies could choose from, it really all comes down to the method that works best for each individual business and company. Some companies will use a blend of procurement strategies to secure their goods.

There is no one or right way to obtain the goods that you will need for business, however, some of the purchase-making strategies and skills out there are more proven and have a longer history of success than others.

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Having said that the following are 9 fundamental purchasing strategies that purchasing agents have found help them make the best purchase decisions for their company or business:

  • Supplier Optimization: Supplier optimization chooses a solid mix of vendors who can provide the goods that the company will need in order to meet their business needs. Suppliers who cannot meet both the pricing and quantity of goods that companies need are being weeded out. This is the most common of the common fundamental purchasing strategies for businesses. The biggest advantage to this strategy for companies is that only the best suppliers are left and their needs are more likely to be met.
  • TQM: Total quality management TQM) is another common way that companies are optimizing their supply of goods and products. The TQM procedure allows businesses and companies to help increase the quality of their products while also reducing their total cost to obtain the supplies. The lesser the costs a company incurs to acquire the product, the more the company can cut prices to customers while not sacrificing their bottom dollar or profit margin. In fact, many companies will see profit margins increase as products become more affordable and more people can afford to do business with the company.
  • Centralized Purchasing: Centralized purchasing can help limit waste as all products are purchased from one central location. In many ways, it can also help optimize the supply of products as there is only one variable in the process of getting the needed supplies or products to the consumer as there are less factors to rely on as less vendors are providing the product.
  • Risk Management: Businesses and companies all operate in a world of some uncertainty. This uncertainty can pertain to a variety of things from how the market will perform to how their business will do in the upcoming year and everything in between. Chains of supply can be interrupted for a variety of different reasons, which means that many companies will have to study these risks and understand which risks are reasonable and which ones are not. Other risks include everything from the potential for things like labor stoppages to supply chain issues to inventory issues that may arise throughout the time a business is operational.
  • Global Sourcing: Global sourcing allows a company to reach out to other parts of and places in the world to get the supplies they need to run their business when those resources are not readily available at a reasonable price in their homeland. Global sourcing allows economies to intertwine with each other as products are not shipped only throughout the same country, but between nations all throughout the world. This allows people throughout the entire world to be more productive when they have the materials they need to run their businesses by reaching out to others who have the "pieces of the puzzle" that they don't.
  • Vendor Development: The world of business is a fierce competition and this holds true for vendors, too. Companies look for vendors who are continually developing and offering new, better products to the businesses looking to purchase them. The businesses and companies that seek vendors who are constantly developing and improving their products sooner will be the ones that end up getting ahead in the competitive business world simply by having a better product to offer the consumer.
  • Focus On Quality: Companies and businesses need to focus on only purchasing from vendors that offer top-quality products. In a world where the costs of living are consistently rising, many more people are much more aware of every dollar they spend. They expect quality for the money they are spending on the product. Ensuring that your vendor that supplies top-quality products will entice more people to buy your company's product and improve sales as well as revenue.
  • Green Purchasing: Green purchasing is becoming more and more common as more companies seek to move to "green" production of their goods. Abiding by "green" standards is not only better for the government, but many consumers will opt to choose those products over those that are not proven to be as good for the environment around them. In many cases, businesses and companies who produce "green" products experience cost reductions in creating their products. Many also experience an increase in consumer spending on their products as more and more people purchase their product that is "green" and environmentally friendly, rather than a competitor's product that is not environmentally friendly.
  • Continue Negotiations: Continue negotiations with vendors on a consistent basis to ensure you are getting the best prices for the products you are purchasing. As costs to produce goods lower over time, some vendors may have better prices available for businesses that use them as a supplier. Constantly negotiating ensures that you are getting the best prices and quality of goods possible at any given time.

These are just 9 of the fundamental purchasing strategies that will help companies and businesses get the quality goods and products that are needed for their businesses to operate optimally. While there is no one single method that is better than another or more recommended than another, it will all depend on the business or company and what strategy (or combination of strategies) can best meet those needs.

For more information on which of these fundamental purchasing strategies or combination of strategies works best for your business or company's needs please feel free to contact us.

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