6 Core Purchasing Strategies to Improve Organizational Efficiency: Role of Purchasing Strategy

Role of a Purchasing Strategy (Efficient Procurement)

Historically, the purchasing function has been limited to acquiring goods and services from other organizations. However over time, the purchasing function has evolved from being just a tactical contributor to a strategically significant business unit. Organizations can significantly increase their overall savings by implementing proven purchasing strategies. Apart from cost savings, an efficient purchasing strategy can cut down on lead times and ensure the delivery of quality goods on time. Here are the core group of purchasing strategies that organizations can implement to improve their overall efficiency:

Core Purchasing Strategies to Improve Procurement Process

Purchasing Strategy #1: Supplier Optimization

Organizations often transact with multiple suppliers spread across vast geographies. Companies are following supplier rationalization to simplify the purchasing process by only involving key vendors who are essential to the company. Also, purchasing from one single supplier opens the possibility for a volume discount.

Purchasing Strategy #2: – TQM Practice

Total quality management alongside supply chain management can equip organizations with a sustainable competitive advantage by improving product quality and service while reducing cost. A TQM strategy aims at reducing quality problems and increasing customer satisfaction by monitoring personnel management, process management, customer relationships, supplier relationships, product design, quality information, and benchmarking.

Purchasing Strategy #3: Risk Management

Organizations operate in a dynamic environment of uncertainty and complexity with a high risk of supply chain disruption. Companies should establish a thorough risk management process to continuously analyze and reduce these risks. An effective risk management process helps to identify factors causing supply chain disruption such as labor disputes, capacity issues, natural disasters, incorrect forecasts and delays, and inventory problems.

Purchasing Strategy #4: Global Sourcing

The quest for product perfection and increasing pressures for price reduction has prompted companies to look across the globe for their purchasing needs. Global sourcing also provides organizations with an opportunity to source skills and resources that are unavailable or unproductive at home; thereby, increasing their productivity.

Purchasing Strategy #5: Vendor Development

In a world of fierce competition, businesses are looking for multiple ways to gain a competitive advantage that drives innovation. To do so, it is important for organizations to look at vendors not only as sellers but also consider them as partners to co-create innovative products or identify savings opportunity. Organizations focusing on vendor development will eventually realize efficiency gains sooner in the future.

Purchasing Strategy #6: Green Purchasing

A majority of the companies are making efforts towards green procurement. Abiding by the green purchasing standards can help organizations achieve cost-savings, minimize supply chain risks, and enhance their brand image. Such companies are better equipped to deal with stringent environmental laws.

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