Four Ways to Dramatically Improve Your Purchasing

1. Maintain an open door policy

You can control your costs by controlling your competition. Therefore, vendors should be approached with open arms. This does not mean you have to meet every sales representative that knocks on your door. Efficiency is a key factor in productivity and lower costs.

My point is to use common sense when choosing who and when you view them. But make sure you and your staff are seeing a rotating base of vendors and suppliers. Competitive bids are required for products and services your company purchases.

You will never achieve total cost control if you and your purchasing team only review prices from the same vendors year after year. You will never know whether you are getting the best value out of your existing suppliers and if there is a better source.

To get the best value for the people who do the buying, they need to be constantly looking at new sources, new products and new processes.

What if a new product is available that lasts twice as long and costs half the price? You might not know it exists if your supplier doesn’t offer the product or you don’t keep up with other suppliers’ product lines.

Your people should not be restricted to working with one supplier. You must encourage your people to be open-minded and not limit their ability to deal with the same suppliers.

2. This is a great source of ideas

You will also benefit from working with a core group of suppliers and a rotating base of secondary suppliers. This allows you to be exposed to other ideas. These suppliers can be a great source of information about your market, trends, the industry, and competition. These suppliers can help your employees see things differently and find new ways of doing things. You may get new ideas to improve sales, productivity, and reduce errors.

These people are in business to sell to your sector and other related industries. It is their business to be knowledgeable about your industry. You should consider the top suppliers and sales reps more than just a vendor. Consider them a resource, and don’t be afraid to ask questions.

They can and should be a great source of creative and innovative ideas.

Let me tell you about a real-life example. One sales representative called me from a company that sells printing material. He informed me about a new type of printing plate that was better at image reproduction, lasts 25% longer and costs 15% less than the ones that we were using. All of these claims were true after we gave them a test run. These plates were the only ones we switched to.

There were many people calling us, but only one of them was an authorized distributor. Even if they wanted to, none of the other reps could sell us these plates. We may not have discovered these plates if we had only worked with one rep or a small number of regular reps.

This is only one example of the many I could offer. Reps have given me tips and helped me improve production. I also received employee leads and new product ideas.

3. Dual Signatures

All purchase orders exceeding a predetermined amount should be signed by two people. This will provide additional protection against fraud and bad buying habits. You will also have another party that is familiar with the purchase available in case something happens to any of the signing parties.

In this instance, I suggest that the purchase order form include a space for a second signature. The printed words that indicate that any purchase orders exceeding the predetermined amount are invalid without the second signature would also be helpful.

4. Centralize purchasing efforts

This is the best way for maximum control and cost savings. It is absurd to have every department or division order what they need by themselves. Different branch locations cannot order what they need on their own. It is absurd to let each individual who requires something order it from their own branch. Having one source for all purchases will allow you to combine purchases to get the best prices and terms.

You will be able to work with a select group of best-value suppliers, which will allow you to get the most value and leverage from your relationships with them. These are the significant advantages of centralised purchasing over decentralised buying, which can rob you of cost control and reduce efficiencies and replace them with duplication and waste.

Note: I am well aware of the fact that purchasing small quantities or low-cost items from different departments and divisions can have higher costs than the savings on the purchase. To eliminate delays and internal costs, you might want to set a minimum level for purchasing that all departments can participate in. This subject is too complex for me to discuss in detail. It is merely a matter of your consideration.