Cutting Purchasing Costs – Business Acumen 101
Today,we continue to look for ways to cut costs. These methods can be used internally by managers looking to improve their productivity or unit performance. Externally, B2B sales people can look for ways their products or services can produce these advantages for their customers. The key is to review the lists and find one that makes sense for you. Then take that one method – launch and measure your results.
Purchasing of raw materials and other inventory items can be very effective or very wasteful – depending upon the methods and standards used. I’m including twelve methods to lower your purchasing costs. Here are the 12 ways to lower your purchasing expenses:
- Reduce the number of types of items in stock. (Be careful here – there is an issue of Critical items.)
- Standardize preferred items. (Key item is used properly)
- Shop market for optimal supplier quality, delivery and cost.
- Centralize negotiations for major items.
- Subject bids and contracts to periodic review. (a check system – still need to be careful here.)
- Plan ahead to reduce rush procurement – reduce overnight delivery expense.
- Shift burden on certain inventory management issues to the suppliers.
- Establish a most economical production or ordering quantities system.
- Speed up disposal of slow-moving inventories.
- Have a system for minimizing damaged items delivered to dock.
- Speed up invoice processing to avoid discount losses.
- Conduct “make or buy” studies.
This twelve methods for cutting purchasing costs can create projects for management teams, functional units or sales teams positioning a sales advantage with a customer or prospect. Use the ones that make sense for you. The key is to measure the results – does it really work for the company?