Learn something new every day
More Info... by email
Good strategic purchasing involves identifying the main goals of a company and making sure that supply chain activity is congruent with those goals. Critical factors that lead to solid purchasing decisions and supply chain management include need assessment, market analysis, vendor research, and cost analysis. Involving key leaders and decision makers from multiple departments is also an important contributor to successful purchasing.
The most important foundational step in strategic purchasing is identifying the company's overall goals. For example, one company may have the goal of being the top seller in the beverage market, while another might wish to be perceived as the retailer with the best service. All activity that occurs within a company's distribution and supply chain should work towards accomplishing those goals. Supply chain activities include what type of distribution network is used, the amount of vendors involved in the process, and the specific raw materials suppliers a company uses.
Part of a good strategic purchasing plan is to find out what suppliers and distribution networks are currently available. A company can conduct an internal needs assessment and identify gaps that may need to be filled by outside third-parties. For instance, a large corporation may be able to purchase and operate its own trucking fleet. This may be more economical and efficient for a organization with solid financial resources and influence in the marketplace.
Smaller companies, on the other hand, may find that it is more cost effective for them to outsource the majority of their supply chain activities. A small company may not have the resources to move its sold product from a warehouse or manufacturing plant to the final customer. The company may choose to use a wholesaler to distribute its product to retail shelves. Some small businesses sell products directly, eliminating the need for a wholesaler and a retailer.
Besides choosing vendors that may distribute a company's product, strategic purchasing decisions should take into account the company's market and overhead costs. Most firms try to establish a balance between cost savings and quality when purchasing raw materials that go into making and distributing products. Several suppliers may be available to satisfy the same need and it is important that a company's leaders involve multiple departments in order to select the best fit.
Strategic purchasing decisions can affect multiple functions within an organization. Typically each department has its own goals which may at times conflict with other functional areas. When selecting suppliers and materials it is best to identify how they will synchronize the most crucial needs of each department.