Purchasing Strategy
A purchasing strategy is the company's overall plan for how to acquire goods and services in the most efficient and value-creating way. The strategy includes selecting suppliers, purchasing volumes, timing, contract management, and risk management with the goal of optimizing costs, quality, delivery capability, and tied-up capital.
What is a Purchasing Strategy?
A purchasing strategy is a systematic approach to managing the company's procurement. It translates overall business goals (for example, growth) into concrete actions and decisions within the purchasing department.
A purchasing strategy typically includes::
- Supplier Selection and Management: Defining criteria for the selection, evaluation, and collaboration with suppliers.
- Purchasing Methods: E.g., spot buying, contract purchasing, or framework agreements.
- Price and Payment Strategies: Setting goals for costs, discounts, payment terms, and total cost of ownership.
- Risk Management: Identifying and managing supplier risks, capacity bottlenecks, and price fluctuations.
- Volume and Timing Management: Determining when and how much to buy to optimize inventory and liquidity.
What is a Purchasing Strategy used for?
A purchasing strategy helps create structure, overview, and targeted action in procurement work:
- Optimize costs: Reduce expenses through better contracts, volume utilization, and total cost of ownership.
- Ensure delivery reliability: Ensure that critical goods are always available, without superfluous inventory.
- Improve supplier collaboration: Build relationships that create quality, flexibility, and innovation.
- Reduce risk: Manage fluctuations in prices, supply, and capacity in a structured manner.
- Support strategic goals: Align purchasing with the company's overall goals for growth, margin, and service level.
How is a Purchasing Strategy developed?
Developing an effective purchasing strategy requires both data insight and a strategic overview:
- Analysis of spend and suppliers: Identifying where money is spent (spend analysis), which suppliers are critical, and where there are opportunities for improvement.
- Segmentation of goods: For example, using an ABC analysis to prioritize resources and focus.
- Strategic goal setting: Defining the desired service level, cost targets, and risk profile.
- Method selection: Evaluating contract forms, purchasing methods, and supplier collaboration.
- Implementation and monitoring: Implementing the strategy in systems and following KPIs to ensure it creates the desired effect.