If you're caught in a downward spiral, you're probably reviewing your operations with an eye toward what's left. Where can you still make cuts?
One of the best answers is in your purchasing department. Ninety percent of the buyers in white collar companies have no purchasing education or experience. That's the first problem.
1. Educate the buyers
Books, classes and trade association seminars can provide your buyers with a basic introduction to the world of purchasing. It will help, believe me. They'll learn about purchase orders, inventory control, and requisition slips. But buyers must also become familiar with the industries from which they're purchasing.
The best ways to do that are by soliciting competitive bids--always a learning process, and by visiting the suppliers' shops. If they ask questions, they'll start to learn how their vendors operate, their strong points and, possibly, even their weak points (which could prove valuable in later negotiations).
2. Get the lowest cost
Once your buyer is properly armed, he/she can start to shop. Their knowledge will be a distinct advantage, sending a message to all the vendors--this is no goose for easy plucking. Vendors will be less likely to tack on hidden costs and your buyer's market savvy will help him/her know if he/she is getting the best price. But just to make sure, vendors must know that you are shopping around. One of the most effective ways to spread the word is to have competitive brochures on your desk the next time they want to meet in your office.
I know shopping around can be time-consuming, but it must be done. It should be done annually, at the minimum, and every six months, if possible. You've got to remember that your vendors are not concerned about your bottom line. They won't tell you if better deals can be had.
3. Hold them to it
Once your buyer decides on a particular supplier, how can you make sure they're as good as their word? You can't. That's why your buyer should capture any promises in written form, either in Memos of Understanding or on the purchase order. If you're promised the moon, make them deliver.
And don't lock yourself into any long-term agreements. Remember the rule: you must shop around at least once a year. If a vendor's contract is for more than 12 months, don't sign it. If they want your business, they need to make it available on your terms.
4. Make them fight
Another way to cut your purchasing cots is to limit the number of vendors with whom you deal. This may not always work, but if you're currently buying from four different vendors, you might try offering each of them the entire pie. Stand back and watch the bidding feathers fly! And in the world of supplies, you shouldn't just be comparing vendors. You should also be considering the prices available at nearby Super Stores or through mail-order companies.
Your purchasing diligence will pay off!