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Purchases represent an important part of the turnover of companies.
As they cannot produce all the products they need to ensure their activity, they resort to the purchase of goods and services. They play a decisive role in the company's competitiveness.
It is essential for companies to manage their purchases properly, otherwise they will lose efficiency and profitability. This purchasing management involves rigorous administrative control of expenses, rationalization and modernization of this key item that should not be neglected.
However, it is a department that is little valued by company managers who consider the purchasing department as a support department, whereas it is much more than that. Provided that a relevant purchasing strategy is thought out and implemented, the purchasing department will be a strong link in the company.
The Purchasing function is responsible for procuring the raw materials and elements necessary for production. Delivered on time, in the right quantity and quality, the company's production and success depends on these purchases.
It is also about providing the company with all the products and services it needs to operate on a daily basis. Thus, the management of purchases is very broad and extends from raw materials to office supplies. It is an important expense item in a company, which must be controlled to avoid unnecessary expenses and loss of competitiveness.
The purchasing department will impact the company in many ways, but there are two essential levels:
- The financial level: the purchasing strategy contributes to the company's profitability by influencing its financial margin.
- The commercial level: avoiding stock-outs is essential while assuring customers of the best possible products.
The main objectives of the purchasing department are to contribute to increasing the company's financial results, to ensure the rationalization of expenses, their improvement and to protect the company against the risks inherent in production (e.g. stock shortage, failure of the components of a product).
Good purchasing management will limit litigation and legal proceedings which have a direct impact on the company's results but also on its reputation and credibility. The buyer's job consists of meeting internal needs, obtaining the best conditions from suppliers while optimizing costs.
The constitution of the purchasing department will depend on the objectives of the company, its sector of activity, its modes of production, its size.
There is no course on purchasing management, so the following elements will have to be adapted to each structure and deserve the implementation of a personalized strategic reflection, inscribed in the global strategy of the company.
In general, a purchasing department consists of the following items:
The purchasing manager will participate in the definition of the company's strategy and will be responsible for managing their team, reporting and communicating the department's actions.
They will also ensure that the department has the tools necessary for the performance of its actions, such as the installation of purchasing management software, which is essential for steering actions, automating non-value-added tasks and guiding skills towards missions that have an impact in financial and human terms. If purchasing management can be done via Excel, specialized software will be more efficient.
These can belong to three distinct families:
- A family buyer: this person will work on the entire purchasing process for a family of products at a single site
- A project buyer: integrated into the project teams, they will have the goal of a traditional buyer plus the functions of monitoring and research in innovation
- A lead buyer: this is a family buyer but attached
A Quality Manager will report to either the purchasing department or the quality department. They will be in charge of controlling receptions and quality audits. Other positions may be necessary depending on the company, such as a management controller specific to the purchasing function, a methods manager, etc.
Of course, the above-mentioned positions can also have more complex and broader objectives. These different positions, when they do not exist completely, can be assigned to one or more buyers or managers.
It should be noted that the purchasing department must be able to benefit from legal support in the event of disputes. Access between the purchasing department and the legal department must be provide
Traditionally, it is recognized that the process of buying a company is divided into 5 steps.
- Recognition of the need: what are the company's objectives? What does it need to run all its departments and to produce?
- The search for solutions: what are the solutions to be put in place to meet the objectives?
- Options assessment: what are the possible options?
- Decision making: validation of purchases
- Evaluation of the actions implemented: were the decisions judicious with regard to the objectives?
Understanding the mechanism of the buying process is important. It will allow the company to optimize its visibility and profitability. Furthermore, by working in depth on the buying process, the company can improve the customer experience and anticipate the needs of future customers.
Purchasing and supply management is a key component of business success. Would you be interested in an in-depth file on purchasing management in pdf format? This key position of the company deserves several resources as it is essential but also complex to deploy, which do not have much of a purchasing management culture.