What does Purchasing do?
A question to all the business owners and managing directors: what are the most important departments or specialists you invested in when setting up your business or thinking about organizational structure improvements. Depending on the nature of your business you would tell that these are Designers, Engineers, Legal, Finance, and of course people down on the floor.
Maybe, if you experiencing growth or want to reach out to your new customers, you will also mention Sales.
But what about Purchasing? Who are they? Are they needed?
Well, Purchasing Department is just a bunch of people placing orders; it’s not rocket science and no investment is needed here. We heard this many times over and of course, we were feeling deeply hurt and underappreciated.
So, what do they do? What are their days filled with?
They can be named differently: purchasing, procurement, sourcing, buyers and their job might differ from company to company, but in a nutshell, here is their routine.
First of all, they are in charge of finding suppliers. Not any suppliers, but the ones that provide the best price and best quality and deliver on time in full. Only from such a supplier, the business would benefit. And this job means a lot of market research, benchmarking, and meeting with potential suppliers.
Next come negotiations and signing of agreements. If you want your business supplies to flow in when you need them. If you don’t want to be surprised by bills and don’t want to spend sleepless nights thinking when your delivery arrives, this is something that ought to be done regularly.
Purchasing also keeps an eye on the market situation and works on year-on-year price reductions. Not an easy task in the world where generally everything gets more expensive not cheaper as the days go by, but they can do it and make your direct costs go down and your margin goes up.
And only now we are coming to the point of placing an order. But wait a second, it’s also not as simple as pressing a button and creating a document. Your buyer will take a look at your production situation, will analyze the demand, and bundle orders that might be placed at different points of time, therewith saving the money you spend on placing multiple orders, skipping multiple deliveries, and getting volume discounts from the suppliers. Only after that do they press the button and the order goes out.
So, finally, simple routine kicks in: make sure that the supplier received and confirmed the order, make sure that the confirmed date is when you needed your goods, track the deliveries, and ensure that the invoice submitted by suppliers actually matches the orders and delivered goods.
As you can see it is possible to omit the job that purchasing is doing, but the business that does it misses a lot of opportunities to save money and get better supplies.
So, if you want to stick to the routine when placing a purchase order is the only thing you do in terms of procurement, but still want to benefit from the job buyers must be doing, try using EoS4U services. We do work on cost reductions, negotiate with suppliers, agree prices, sign contracts, bundle volumes, and monitor deliveries. And then when someone asks what a person in charge of buying does in your company; you can proudly say that they are clicking the button to confirm orders because all the rest is being taken care of; and nobody will feel undervalued, as this colleague of yours does another job that is important to your business and that’s where she is most appreciated.