Purchasing Department: how to be more strategic?

In the not so distant past, the supply department had the exclusive function of fulfilling orders for direct and indirect purchases from different areas.

The main problem was that many of these orders were made urgently, without the necessary information, requiring buyers to do a real juggling act.

This lack of strategy resulted in financial losses for companies, as the high investment did not bring returns for the business.

But to survive in a competitive market, change was inevitable. Today, the purchasing department is considered one of the most strategic for organizations.

However, there are still many doubts about how the purchasing area works, which goes far beyond the processes of negociação with suppliers.

Below, learn about the main tasks of the purchasing department and how to make the sector more strategic.

Read on!

Purchasing department: main activities and strategies

The buyer has several tasks to perform on a daily basis and a clear purpose: to seek to reduce the company's costs, without this impacting the quality of the products or services purchased.

Learn about some of these activities and how to be more strategic in each of them:

Contracting suppliers

The purchasing department is the sector responsible for supplier selection. Those who work in this area need to have knowledge about the company's main demands, both in terms of raw materials and equipment and services.

Before starting the acquisition process with a supplier, the buyer needs to consider different aspects, such as price, quality, delivery times, payment methods, issues related to risks and compliance.

Although it may seem like a simple process, hiring suppliers is one of the tasks that usually takes up the most time for buyers. Therefore, having a supplier management tool is essential for supplier management helps to optimize work and reduce purchasing costs.

Purchasing performance evaluation

Purchasing performance is linked to the company’s performance as a whole. Questions such as “does it improve the product that reaches the customer?”, “does it affect the return on investment?”, “does it meet compliance rules?” are some of the issues to be considered.

For example, if many complaints are reported regarding the final product or if suppliers do not comply with company rules and policies, the purchasing department must reevaluate its partner base and act quickly to change the situation.

Supplier evaluation work must be ongoing to improve the functioning of the purchasing department. A good partner should monitor feedback on their service and understand what can be improved, even if there is nothing apparently wrong.

Analysis of purchase requisitions

One of the main functions of the purchasing department is to produce and evaluate internal requisitions. For example, when an order is placed, cost estimate information may have already been provided.

Analyzing purchase requests from buyers is important, since every real saved on purchases means a real profit for the organization. The professional needs to assess whether the purchase order is in line with the business objectives and the available budget.

Buyers can also submit a counterproposal to the internal order, estimate a deadline, seek an alternative product, find a more interesting supplier or establish a spending limit for a new proposal.

Defining KPIs in purchasing

Key performance indicators (KPIs) are essential for many areas. KPIs allow you to evaluate important data to achieve goals and positive results for your business.

Each department of the company has its own KPIs, as they measure progress differently. In the purchasing department, some of the indicators that can be monitored are:

  • Savings
  • Number of requests served per month
  • Number of replacement purchases
  • Customer satisfaction index

Tue KPIs in purchasing Well-defined processes are essential for buyers to be more assertive in their decisions. In addition, the department can measure its performance and identify problems that might otherwise go unnoticed.

Cost reduction

Increasing company revenue should be a goal for all sectors. However, some have a greater impact on this task. As the market is increasingly competitive, profit margins tend to be very small, which leaves material investment at the top of the list of expenses.

Let's say a factory sells its product for R$100 with a material expense of R$50, a production cost of R$30 and a profit of R$20. If the purchasing department reduces the material acquisition cost by 10%, the net profit will increase by R$5 (25%).

Consequently, if production reduces its cost by 10%, net profit will increase by R$3 (15%). At first glance, this may seem like a small amount, but when more than 1000 units are sold, these values ​​become relevant to the company's profitability.

Negotiation with partners

One of the main buyer skills is knowing how to negotiate with partners and win the best opportunities. The professional needs to master the art of negotiation, understand finances and know how to convince the supplier to offer the best proposal.

The same goes for your internal customers. New purchasing department practices, including good negotiation, directly impact the company's profits.

Strategic value of the purchasing department

In addition to operational activities, buyers work to plan the company's expenses. It is through this planning that it is possible to make larger investments without negatively impacting the accounts or payroll, for example.

The purchasing department also evaluates its actions over time, measuring their consequences and creating projections. A change of supplier, for example, requires greater care before signing the supply contract, in addition to a trial period.

During this period, the quality of the final product, in the case of raw materials, and the performance of suppliers are evaluated and compared. If the established KPIs indicate progress, the action was successful. If not, it is time to reevaluate and devise a new plan.

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