Purchasing control is a crucial aspect of supply chain management that directly impacts a company’s profitability and efficiency. It involves managing the acquisition of goods, services, and materials necessary for the company’s operations. Effective purchasing control ensures that the company obtains the right products, at the right price, from the right suppliers, and at the right time. This article explores the significance of purchasing control for a company, highlighting its key objectives and benefits.
Key Facts
- Lower costs: A well-run purchasing department can achieve immediate savings by choosing suppliers who offer the best prices and terms. It can also provide savings by taking advantage of warranties and discounts.
- Reduce risk and ensure the security of supply: Purchasing control involves identifying crucial goods and services for the company and taking steps to secure their supply chains. This can be done by diversifying suppliers or transferring risks to suppliers who are better equipped to manage them.
- Manage relationships: Purchasing control involves managing relationships with suppliers and internal stakeholders such as marketing, finance, logistics, and distribution. It requires aligning the interests of all parties and fostering long-term relationships.
- Improve quality: Purchasing departments can help improve quality by setting performance targets and tracking performance against those targets. They can also work closely with vendors to develop processes and improve quality.
- Pursue innovation: The purchasing department, through its contact with various businesses, can source innovative goods and services that provide a competitive advantage to the company. It can also help source supplies for innovative products or services developed by the company itself.
- Leverage technology: Purchasing control involves identifying and implementing technology solutions to address supply chain problems. It also plays a role in selecting and implementing systems such as ERP and inventory control systems to improve supply chain efficiency.
Objectives of Purchasing Control
The primary objectives of purchasing control are to:
Lower Costs
A well-managed purchasing department can achieve significant cost savings by selecting suppliers that offer competitive prices and favorable terms. Additionally, it can take advantage of discounts, warranties, and other incentives provided by suppliers.
Reduce Risk and Ensure Security of Supply
Purchasing control involves identifying critical goods and services for the company and implementing strategies to secure their supply chains. This can be achieved through diversification of suppliers, risk assessment, and establishing long-term contracts with reliable suppliers.
Manage Relationships
Effective purchasing control requires managing relationships with suppliers and internal stakeholders, including marketing, finance, logistics, and distribution. It involves aligning the interests of all parties, fostering open communication, and building long-term partnerships.
Improve Quality
Purchasing departments play a vital role in improving product and service quality. By setting performance targets, tracking supplier performance, and working closely with vendors, purchasing control can ensure that the company receives high-quality goods and services.
Pursue Innovation
The purchasing department, through its interactions with various businesses, can identify innovative products, services, and technologies that can provide a competitive advantage to the company. It can also facilitate the sourcing of supplies for innovative products or services developed by the company itself.
Leverage Technology
Purchasing control involves identifying and implementing technology solutions to address supply chain challenges. This includes selecting and implementing systems such as Enterprise Resource Planning (ERP) and inventory control systems to improve supply chain efficiency and transparency.
Conclusion
Purchasing control is a critical aspect of supply chain management that directly impacts a company’s profitability and efficiency. By effectively managing the acquisition of goods, services, and materials, companies can achieve cost savings, reduce risks, improve quality, pursue innovation, and leverage technology to optimize their supply chains. Effective purchasing control enables companies to operate more efficiently, respond quickly to market changes, and gain a competitive advantage in the marketplace.
References
- BDC.ca: “6 Ways the Purchasing Department Can Improve Your Business”
https://www.bdc.ca/en/articles-tools/operations/purchasing/purchasing-department-objectives - Procurementexpress.com: “Purchase Control Is A Nightmare To Solve – Here’s Why”
https://www.procurementexpress.com/research-articles/why-purchase-control-is-a-nightmare-to-solve/ - uSellCRM.net: “The Importance of Purchasing Management in a Company”
https://www.usellcrm.net/en/what-is-purchasing-management-in-company/
FAQs
1. What is purchasing control?
Purchasing control is the process of managing the acquisition of goods, services, and materials necessary for a company’s operations. It involves identifying and selecting suppliers, negotiating prices, placing orders, and monitoring deliveries to ensure that the company obtains the right products, at the right price, from the right suppliers, and at the right time.
2. Why is purchasing control important?
Purchasing control is important because it directly impacts a company’s profitability and efficiency. Effective purchasing control can help companies achieve cost savings, reduce risks, improve quality, pursue innovation, and leverage technology to optimize their supply chains.
3. What are the key objectives of purchasing control?
The key objectives of purchasing control include:
- Lowering costs
- Reducing risk and ensuring security of supply
- Managing relationships with suppliers and internal stakeholders
- Improving product and service quality
- Pursuing innovation
- Leveraging technology to optimize supply chain efficiency
4. How can purchasing control help companies lower costs?
Purchasing control can help companies lower costs by:
- Selecting suppliers that offer competitive prices and favorable terms
- Taking advantage of discounts, warranties, and other incentives provided by suppliers
- Negotiating favorable payment terms
- Optimizing inventory levels to reduce carrying costs
5. How can purchasing control help companies reduce risk and ensure security of supply?
Purchasing control can help companies reduce risk and ensure security of supply by:
- Identifying critical goods and services and implementing strategies to secure their supply chains
- Diversifying suppliers to reduce reliance on a single source
- Assessing supplier risks and taking steps to mitigate them
- Establishing long-term contracts with reliable suppliers
6. How can purchasing control help companies improve product and service quality?
Purchasing control can help companies improve product and service quality by:
- Setting performance targets for suppliers and tracking their performance
- Working closely with suppliers to develop processes and improve quality
- Conducting regular quality inspections
- Providing feedback to suppliers on their performance
7. How can purchasing control help companies pursue innovation?
Purchasing control can help companies pursue innovation by:
- Identifying innovative products, services, and technologies through interactions with various businesses
- Facilitating the sourcing of supplies for innovative products or services developed by the company
- Collaborating with suppliers to develop new products and services
8. How can purchasing control help companies leverage technology to optimize supply chain efficiency?
Purchasing control can help companies leverage technology to optimize supply chain efficiency by:
- Identifying and implementing technology solutions to address supply chain challenges
- Selecting and implementing systems such as ERP and inventory control systems to improve supply chain visibility and efficiency
- Automating purchasing processes to reduce manual effort and improve accuracy