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What is Strategic Purchasing?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 13 October 2014
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Strategic purchasing is a methodology used in many businesses to realize the greatest amount of benefit to the company while still effectively managing the costs associated with the acquisition of raw materials and operational components. As opposed to tactical purchasing, which tends to see the purchasing process as somewhat distanced from other functions within the corporate structure, strategic purchasing attempts to promote the most efficient use of all materials throughout the company. The goal of this type of purchasing is to increase the bottom line of the company through the most judicious use of purchasing approaches and strategies.

One of the ways that strategic purchasing takes place is through the analyzing how money is spent for purchases currently. The idea is to determine if there is any way to enhance the purchasing process through adjusting the guidelines associated with requisitioning materials or placing orders with suppliers. Often, this type of spend analysis will reveal one or two small ways to make the process more efficient and possibly save the company time and money.

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Staying on top of current and projected needs is also part of strategic purchasing. For example, attention to the purchase of new software or computer equipment takes place long before the need becomes necessary. This allows the purchasing department to evaluate a number of options in advance and settle on the solution that is in the best interests of the company without having to make snap decisions at the last minute. This approach is particularly important if keeping up with the latest technology is crucial to the successful operation of the business.

Strategic purchasing also involves building rapport between purchasers and suppliers. Working together, it may be possible to streamline the advance time needed to process an order with the supplier, thus reducing the need to maintain a larger inventory. Depending on the volume of business done by the company with the supplier, it may also be possible to find ways to expedite delivery as well.

The use of strategic planning also means automating as much of the planning process as possible. Tasks that are routine can often be set up for completion by software or other automatic means. This frees purchasing agents to focus on other aspects of the purchasing process and thus increase the chances of using available resources with more efficiency.

In the end, this method is all about redefining buying habits, processes, and behaviors so that the company enjoys the most benefit. From this perspective, strategic purchasing is not an event, but an ongoing process that involves the interaction of purchasing professionals with suppliers, and the management arm of the corporation.

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Telsyst
Post 3

Glasis, the key to strategic purchasing, really, is doing your homework. This doesn't necessarily mean hiring high-priced experts and asking for special favors from suppliers.

On a smaller basis, think of it as bargain hunting. Know your product well, know exactly how much it costs to produce and gets quotes from various suppliers to cut costs.

These are all things you can do yourself as a small business owner.

Also, once you have established a good relationship with suppliers, they will be more willing to work with you on special order and delivery dates and other cost-saving measures.

Glasis
Post 2

It sounds like strategic purchasing can be very expensive. Hiring a strategic purchasing expert or group and arranging special order and delivery arrangements with suppliers are almost out of the question for a small to mid-size business.

Is there a way to implement strategic purchasing on a smaller budget?

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