Purchasing & Supply

All businesses source raw materials, components and services; therefore, everyone should recognise the direct impact that best practice in purchasing and supply can have. But,

• Does your company have a clear strategy for purchasing and supply, or does it just happen?
• Is the purchasing operation well managed and controlled?
• Does your company have a flexible and forward thinking approach to supplier relationships?

Every purchasing manager will have to consider a number of critical issues; these are as follows:

• Many businesses will need to work closer with core suppliers.
• Training and skills have been neglected in the purchasing function.
• Supply chains are becoming increasingly complex but to maintain quality you need to seek greater commitment and control.
• Sourcing is increasingly a strategic issue - whether to make or buy.
• Partnership sourcing is a trend - maybe you need to build longer-term relationships.

For many companies, doing the right things well in purchasing and supply can have a major impact on the business.

The following section will enable you to determine your purchasing standards. See how many statements are really worthy of your "agreed" response.

F1 - Purchasing Strategy

The Purchasing Role	Strongly Agree	Agree	Not Sure	Disagree	Strongly Disagree	Good Business Practice
The purchasing and supply function forms a significant element of our total business effort.						Purchasing a supply can include any cost that is not wages… typically 55% of turnover.
Our management team regard time spent on the purchasing and supply function as important as that spent on the sales process.
We rarely base our purchasing decisions solely on who is cheapest.

Strategic Issues	Strongly Agree	Agree	Not Sure	Disagree	Strongly Disagree	Good Business Practice
Our production strategy is well established, we know precisely what we can make well and we stick to it.						Generally, a 1% cut in spend has a smaller effect on profits than a10% increase in sales.
Our purchase and supply strategy allows us clearly to see the direction of our business in the medium to long term.
We have a tightly controlled and focused strategy on stock provision.

Purchasing Practise	Strongly Agree	Agree	Not Sure	Disagree	Strongly Disagree	Good Business Practice
Good practise in our company dictates that purchasing is more than just shopping around for prices.						In the long term, better purchasing and supply can affect what markets you are in and whether you are competitive enough to stay in them.
The purchasing department actively involves our suppliers in order to achieve the right deal for our company.
The purchasing function is recognised as an integral part of our business success not merely administrative task.

Organisation	Strongly Agree	Agree	Not Sure	Disagree	Strongly Disagree	Good Business Practice
All critical stages in our business plan are dependent on the information supplied by our purchasing function.						Purchasing and supply rarely receives the management attention it deserves.
The individual roles and responsibilities within the purchasing function are clearly established in our organisation.
Our strategy on purchasing is clear but that does not mean to say we cannot react to unforeseen events in our market.

A well-defined purchasing strategy can impact on all operating areas of a business particularly where the strategy is flexible and forward thinking.

Where you "disagree" then you need to take action.

F2 Purchasing Operations

Responsibility	Strongly Agree	Agree	Not Sure	Disagree	Strongly Disagree	Good Business Practice
Our buyers have measurable performance targets set for them by which they can be reasonably assessed.						To be successful any purchasing strategy needs to be translated into workable specific targets with acceptable time frames.
The head of the purchasing and supply function reports directly to our board.
Our directors recognise the contribution of our purchasing personnel as a valuable input to our business success.

Procedures	Strongly Agree	Agree	Not Sure	Disagree	Strongly Disagree	Good Business Practice
Our purchasing and supply strategy takes full account of the changing needs of our business i.e. Balance between low stocks and low buying costs.						Establishing a system for measuring purchasing performance is not easy but is a means to an end to improve performance and efficiency of the company.
We are all clear that the purchasing function requires the right balance between quality, service and price.
The procedures surrounding our purchasing function are such that they are supportive of it; they do not administratively hinder it.

The Supply Side	Strongly Agree	Agree	Not Sure	Disagree	Strongly Disagree	Good Business Practice
Assessing the price of a supplied item involves questions on the risk involved if the supply process fails and not just the price of the item itself.						Negotiation is a way of reaching agreement with suppliers over quality, services and price etc, which ensure the best value.
We employ a system of total vetting for potential new suppliers, which looks at all aspects of their service not just cost.
Although our system contains a good database of suppliers, we actively encourage new suppliers because we recognise the need for competition.

Purchasers	Strongly Agree	Agree	Not Sure	Disagree	Strongly Disagree	Good Business Practice
The personnel involved in our purchasing function fully understand both the technical aspects of our business and the fundamental economic issues affecting us.						Purchasing personnel need a wide range of skills, use a professional.
Our purchasing personnel strive to achieve a win/win scenario over all negotiations with our suppliers, i.e. mutual success is the key to good purchasing practise.
We understand a value analysis of all our purchasing deals so that we always get precisely what we want and nothing else.

The purchasing and supply function needs to address a company wide approach where efficiency and effectiveness is reflected in sourcing and operational systems.

Where you "disagree" then you need to take action.

F3 - Supplier Relationships

The Supply Chain	Strongly Agree	Agree	Not Sure	Disagree	Strongly Disagree	Good Business Practice
We have examined every element of our supply chain costs to assess whether it is better to contract out or retain it in-house, i.e. transport and distribution.						Owning transport is expensive- a trip down any motorway will confirm many have decided to contract it out.
Although our supply chain is complex it can easily react to changes in the market or customer requirements.
Because our supply chain is costed accurately at each key stage we know the effects on our business resulting from any changes therein.

Stocks vs Costs	Strongly Agree	Agree	Not Sure	Disagree	Strongly Disagree	Good Business Practice
In our company we have the right balance between purchasing good practise and the stocks of materials.						Understanding the stock versus cost balance is vital.
We know precisely how complex our supply chain is and what are the critical processes in that chain.
We manage our logistics function through doing things right not by using unworkable methods just to do the right things.

Understanding Quality	Strongly Agree	Agree	Not Sure	Disagree	Strongly Disagree	Good Business Practice
Our suppliers are on the ball because we are on the ball-we know what we want, when and to what standards.						Either you will manage your suppliers or they will manage you. Getting what you want means knowing what you want.
Our suppliers know our reputation for accepting only that specified. Anything else will not do.
We have systems in place, which regularly evaluate our supplier performance and enable us to act when standards are not met.

Supplier Commitment	Strongly Agree	Agree	Not Sure	Disagree	Strongly Disagree	Good Business Practice
Our purchasing personnel understand our suppliers’ market almost as well as they do.						Look for committed suppliers for long-term stability.
Our suppliers are as committed to us as we are to our customers.
Our purchasing personnel strive to continuously upgrade our supplier’s commitment so that we may pass these benefits on to our customers.

Building stronger supplier relationships can represent the basis of cost saving and quality management in the 90's.

Where you "disagree" then you need to take action.

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