Knowing how to make strategic purchases is a logical step if we look for cost savings in the company.
And it is that knowing how to manage the savings of purchases in a company is not an easy task. Especially if we want the protection not to affect the quality of our product and service. The key is to spend less but maintaining or improving everything that makes us unique.
After personnel expenses, purchases represent the second largest expense of the company. Achieving savings on purchases can help companies to have more possibilities to cope with an environment as changing and dynamic as the current one.
It is not only about optimizing the purchasing department but also about establishing methodologies. Methodologies that demonstrate steps and formulas to be followed to achieve lower expenses do not jeopardize the commercial result. Quite the contrary that in addition to spending less we can make our product or service better.
One of these methodologies for purchasing savings is strategic purchases.
What are strategic purchases?
This methodology divides the entire section of a company’s purchases into different concepts. That is, from a complex general task appear various operational tasks with a common focus.
It is not about breaking down tasks following a process. Rather the division has to do with the hierarchical levels of planning or management. In the field of this methodology, we focus on operational or strategic decisions.
In continuous reinvention, the short-term tactical work is no longer thought so much in the search for efficiency. Still, the focus goes more to the medium and, above all, to long-term strategic activities.
The final objective is to reduce the costs of the materials, goods, and services acquired by a company. The best purchase opportunities must be identified, taking into account both price and quality and minimizing risk.
Have a clear vision of the market situation and its innovations and a correct selection of suppliers.
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Tasks of strategic purchases
We are going to see one by one the different tasks into which strategic purchases can be divided.
Perhaps the most important way to make strategic purchases is to get your spending analysis right. This section allows a clear vision of the composition of the purchase expense by the company.
It is probably also the most basic task, from which everything else springs. This section analyzes the amount of expenditure for each category of products, goods, or services. The first part of the analysis should be to be clear about 4 points:
- What do you buy?
- How do you accept?
- Who do you buy from?
- How much do you take?
The results obtained should be used in the rest of the tasks since the potential opportunities for improvements will be identified from here.
The analysis and evaluation of suppliers is another fundamental part of this methodology. The team in charge of this part must have identified the entire supplier market, knowing the different options to save costs, such as purchasing centers.
In this case, the key concept is managing relationships with suppliers or SRM (Supplier Relationship Management). It is a discipline that seeks to improve the communication of the company with its suppliers.
To do this, they must share a common methodology, business terms, and information. Of course, the human factor also enters, having to know and be familiar with each other.
It is intended that suppliers are familiar with the core business of the company and its products. In this way, a personalized supply process can be ensured. In many cases, this is done with some specific software.
Beyond SRM, it is necessary to know how they work and what suppliers are available in the supplier analysis.
The objective is to understand the supply market both locally, nationally, and globally, depending on the company’s scope. In this way, the purchasing department will be aware of the barriers that may exist in the market, competition, size, or the possibility of finding substitute suppliers.
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Development of technological tools
Another section of strategic purchasing tasks is the development of technological tools.
It is about the identification or implementation of new technologies that have a more efficient purchasing process. It is about buying cheaper and reducing cycle times or human methods (which have an associated cost) of the entire purchasing process.
Currently, there are different technological processes focused on B2B ( Business to Business ), P2P ( Purchasing to Payables ), electronic auctions, etc … Have a computerized strategic purchasing management model, both internally. In the relationship With suppliers, it can be a huge overall saving.
Thanks to technological tools, the information available can be analyzed automatically. Tasks can also be delegated or eliminated if they do not add value and different forms of automation. Among other options, supplier portals, online purchasing platforms, or Business Intelligence platforms can make a real difference in the day-to-day life of the purchasing department.
Definition of repetitive patterns
Another key to the entire analysis process is to have the recurring activities identified. These repetitive patterns are the ones that can be automated or find easier formulas to achieve savings.
Equally important is identifying different one-time projects. That is purchases or situations that will not be repeated in time but can or have occurred.
Thanks to the company’s project management tools, they can be optimized once identified, giving it its importance for the final result. It is also about prioritizing the most common processes or activities as they are the ones that would generate the most additional value once optimized.
Definition of purchase strategy
To achieve this task, the previous ones must already be carried out. Once the opportunities – and the possible risks – of the different buying scenarios are known, decisions must be made.
In this case, the decisions will probably have to leave the purchasing area and involve the company’s management. Together, it will be necessary to establish the best purchasing strategy for the company, making sure to support the entire company.
The feedback with other departments is critical because you have to close delivery times, current demand and expected soon and the possibility of peaks, forms of payment, etc …
With this information, the purchasing department can optimize its relationship with suppliers and ensure that they can meet the needs expected by management.
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Management of corporate contracts
The next step is corporate contract management. Although it is one of the heaviest parts of making strategic purchases, it is also essential because all the work done in the rest of the tasks will be reflected.
We are facing the stage in which contracts with suppliers are closed. It is, therefore, the ultimate goal of strategic purchases. Have all the needs of the corporation covered with favorable agreements for it.
Development of suppliers
This task is parallel to the rest of the strategic purchasing process. When we speak of supplier development, we refer to joint work to improve the services or products offered.
Depending on the product or service, it is about developing new materials, products, or even skills that improve their quality or cost and allow the company to grow to a new level.
This section is also contemplated within the SRM that we talked about in the second point. The idea is the constant development of new capacities or products or simply reducing the price of the supply chain thanks to the joint optimization of the processes.