How to purchase effectively

Checklist

  1. 1 Make purchasing part of business planning and budgeting and consider purchasing issues when developing products and planning production.
  2. 2 Focus on high-priority purchases - those on which you spend most and those which are most important to your business.
  3. 3 Decide how to organise purchasing, and who will be authorised to purchase which supplies; set individual purchasing limits.
  4. 4 Specify what you need, such as product features, quality and reliability, delivery schedules, guarantees and support.
  5. 5 For asset purchases, identify lifetime costs (eg maintenance and consumables); consider alternatives such as outsourcing, purchasing secondhand and leasing.
  6. 6 Identify potential suppliers; ask for recommendations.
  7. 7 Get quotes based on your specification; compare them in terms of the factors which matter most to you.
  8. 8 Investigate the reputation and financial stability (for a long-term relationship) of your favoured supplier; if appropriate, ask for references.
  9. 9 Negotiate pricing and terms and agree the contract.
  10. 10 Introduce systematic ordering for raw materials and other consumables, based on stock levels and forecasts of supply needs.
  11. 11 Set up systems for checking deliveries and dealing with errors, for storing and monitoring stock and for handling invoices and other paperwork.
  12. 12 Consolidate purchasing with a small number of suppliers but avoid over-dependence on a single supplier.
  13. 13 Build relationships with key suppliers; keep them informed of your needs, and co-operate to handle problems and suggest improvements.
  14. 14 Regularly review supplier performance on key issues such as quality, price, reliability and service; keep track of competing supply offers.

Cardinal rules

Do:

  • specify what you want
  • compare different offers and suppliers
  • set up systems to handle orders, deliveries, storage and paperwork
  • build relationships with key suppliers

Don't:

  • purchase on price alone
  • become over-dependent on one supplier