Purchasing & Procurement, Cost Saving and Supplier Negotiations
“Purchasing should be a proactive main management function”
Irish Institute of Purchasing and Materials Management
Dempsey O, (editor) (2005), Purchasing and the Commercial Environment, IIPMM
Reach your organisations full potential by reviewing your everyday costs.
- Costing and Comparisons
You will be amazed when you sit down and sift through dockets, how much money can be clawed back from suppliers. Is the practice within your organisation to just pay the first price that is quoted or the first price that pops up? If so then you could be paying upwards of 40% more for goods than you should
This leads to investigation. If you are not spending that extra five minutes on the phone or looking through the brochure or viewing costs online, then you are missing a great opportunity to save net cash. Never purchase anything unless you have seen three or more competitor cost prices.
- Supplier Negotiations
Very simple here. If you don’t ask, then you don’t get. Go old school on this one. Look after the pennies! A negotiation should always for the most part be Win/Win, but know your walk away point
Always get written confirmation on any agreed cost. It mightn’t seem important today but in six-twelve months’ time, it will be invaluable. Start a cost price list file on excel or somewhere you are comfortable with. Print off emails with confirmed cost prices and file them.
- Transaction costs reduced
Look at the amount of delivery dockets and invoices that arrive into your business. Now, try to half them. Needless ordering five to seven days a week leads to increase transaction costs. It has been noted that the life cycle of every invoice/docket can cost a business between € 30-€100 from the time that it is ordered right through to final payment
- Purchase Order System Implementation
Try to start some sort of purchase order system. If you think about they way the ordering is currently done, the product or service needs to be written down somewhere prior to ordering. So why not have it entered into a dedicated purchase order system. Then you have product history, what did I pay for this the last time? set cost prices, auto generated purchase order numbers, printed orders per day, an order approval system, huge transparency etc. The list is endless. If you compare that to some guys that are still writing orders on the back of the ripped piece of cardboard, then it’s a no brainer