Purchasing management is much more than a functional area of a business that buys inventory. Purchasing management is a strategic function within an organization. From sourcing quality products to vendor management and controlling costs to ensuring the correct quantities of inventory are available to be sold to customers, purchasing management is key to the success of an inventory-centric organization.
As with most strategic organizational processes, purchasing management affects all areas within a company and requires people, systems, technology and discipline. In return, purchasing management can be the profitability difference-maker. Having a controlled cost of goods and the right products in stock in the correct quantities is a key factor in achieving customer satisfaction and organizational growth.
Managing the purchasing process
Purchasing management has become more complex in the last decade and, with only more challenges in the future, the days of managing vendors and purchasing with a spreadsheet and sticky notes is no longer an option.
Effective purchasing is more than finding a vendor and issuing a purchase order – it is a process that can provide great value to an organization not just from a monetary standpoint, but also by sourcing the highest quality, high demand products at the lowest cost and making sure those products are in stock and available for customers when they need them.
While each company’s specific sourcing and purchasing activities vary, most businesses that have implemented a purchasing process do so to improve forecasting, determine stocking levels, handle and control purchasing tasks, monitor vendor performance, and identify savings opportunities.
Many of these activities would be extremely difficult, if not impossible to do, without advanced purchasing tools integrated with inventory management and sales functions.
By leveraging technology, many processes and procedures can be automated or managed with alerts and activity reminders and collaboration and visibility across the company is improved.
Acctivate purchasing management software solution user, Masters Equipment
What features are most important in a purchasing management software solution?
Purchasing management fulfills a need for products for the business, so that is a good place to start when determining required features in a purchasing solution.
Need. For each product, questions surrounding need – how many should be ordered and what are the required specifics, colors and quality – must be answered in order to purchase correctly.
Take those questions and multiply them by every product, which for some businesses equates to thousands, and the task can be difficult. Forecasting and trend analysis enables better buying decisions that can take into consideration trends, seasonality, promotions & changing marketing conditions.
Cost. There are many factors that need to be considered in addition to the price a vendor quotes. Knowing the true cost or landed cost of a product is critical for evaluating vendors. Additionally, tracking and aggregating spend across the organization can uncover opportunities to leverage volume discounts with suppliers.
Vendor performance. Insights gained through supplier performance analysis will enable better planning, improve spend decision-making and result in a more cost-effective supplier management process.
Easy access to full vendor historical data including vendor’s published price, last cost paid, and lead time allow for ongoing evaluation & establishing new vendor expectations.
Acctivate user, The Brand Passport
Multi-currency. As global sourcing continues to grow in popularity, the ability to trade in multiple currencies is a requirement for buying (and selling) internationally.
The cost of doing business in each country is different and a solution must support both your multi-national pricing strategy and multi-currency conversion.
Buying. When stock levels hit a pre-determined minimum quantity, the responsible purchasing manager needs to be alerted that a reorder is required.
Purchase order creation, whether new or for a reorder, should be quick and easy and include automated approval routing, which assists with reducing unauthorized purchases.
Additionally, the capability to easily manage drop shipped orders and special orders, easily but separately, keeps inventory quantities & forecasting accurate.
Acctivate user, A&D Sales and Marketing
10 steps to better purchasing management with Acctivate
How can Acctivate help your business gain control of purchasing activities, and in the process, save money & improve customer satisfaction?
1. Determine how & where spending has occurred.
Where does all the money go? Regardless of a business’ size, the ability to access, organize, and analyze spend data is a key component to successfully managing the supply chain.
By tracking and analyzing how and where spending has occurred, you will find savings opportunities and gain a better understanding of what has been purchased, what is selling and how your current vendors are performing.
Acctivate provides easy access to supplier or supplier type information such as the quantity and value of inventory on hand, sales figures, sales revenue numbers, cost of goods sold, turnover rate and more.
Acctivate user, Cantrell Turf Equipment
2. Know your vendors & set supplier expectations. One of the best places to start when developing vendor expectations and selection criteria is with a look back.
In the past, across your products, how have your vendors performed? How often have they delivered on-time? How responsive were they to your requests? Did the cost paid affect vendor reliability?
Acctivate has the tools to determine what past results were acceptable, if your current vendors are really the best choice, and to develop vendor expectation criteria for evaluating suppliers going forward.
3. Understand the true product cost.
Numerous fees and expense such as duties, taxes, VAT, government fees, customs, freight, and insurance can occur in the supply chain that, when added to the purchase price of a product, can significantly change the true product cost.
Acctivate allows businesses to automatically or manually capture these additional charges, whether the costs are known at the time of receipt of the goods, or sometime after.
Acctivate purchasing management software solution user, MR BOX
4. Make better buying decisions.
Buying the right inventory in the correct amount at the right time keeps in-demand products on shelves and customers happy.
Knowing how to accomplish that – that can be a bit more difficult.
Unless you have Acctivate.
Acctivate’s inventory forecasting and trend analysis tools simplify the process of making sure you have enough inventory on hand, but not too much, to fulfill sales when sales happen – which can vary depending on trends and seasonality.
Acctivate purchasing management software solution user, Pigs Unlimited
5. Free up cash by identifying obsolete or overstocked inventory.
There are numerous reasons businesses end up with too much inventory or products that don’t sell – overbuying from fear of potential lost sales; getting a “deal” from a supplier encouraging a larger order; inability to predict customer demand or seasonality; a lack of or adherence to inventory control and inventory management processes.
Acctivate’s tools help identify obsolete, slow-moving and stale products that can be converted to higher performing inventory, redirected to other business needs or converted to cash.
Do you have cash tied up in non-performing inventory?
Talk with one of our inventory specialists about how to turn it into cash »
6. Receive low stock alerts.
How many times have you lost a sale because of an out of stock product?
In addition to the lost revenue from the sale and the cost of acquiring the customer in the first place, the customer is now shopping your competitor to find the needed product.
And, what if the next time it’s time to buy, they call them instead of you?
Acctivate’s low stock & recommended reorder conditional alerts let you know when a pre-determined stocking level is hit and more product should be reordered – making out of stocks a thing of the past.
7. Streamline the purchasing process.
Using technology to streamline procurement saves time, puts controls into place that can reduce overspending, and enables resources to work on more strategic tasks.
From simplifying creation of requisitions, requests for quotes, and purchase orders, to automating routing and approvals, to one click receiving of shipments, Acctivate frees up the time and increases accuracy throughout the purchasing process.
8. Gain spend control & policy compliance.
You see it called everything from rogue purchasing to maverick spending, but stopping unauthorized purchases can significantly reduce the amount of obsolete inventory in a warehouse and saves money.
Acctivate’s systematic controls enable purchase orders to be created based on pre-established reorder policies and procedures using preferred vendors.
Once a purchase order is created, managers can receive an alert, letting them know a PO is awaiting their review.
9. Know when it’s time to give the vendor a call.
Sometimes even vendors that you’ve relied on for years run into difficulties in delivering on time.
Unfortunately, those delays can mean lost sales and unhappy customers for you.
With Acctivate, purchase order expected delivery dates are automatically tracked, and if a shipment is not received on time, an overdue shipment alert lets you know.
10. Measure purchasing performance.
Purchasing management is an important contributor to the profitability and success of a business. Keeping costs low and making sure deliveries are on-time ties directly to having the ability to price competitively and keeping customers happy.
Acctivate’s dashboards make on-going purchase performance monitoring a part of daily business operations, ensuring activities are on track and effective.
From summaries to details, key purchasing performance indicators are available in real-time, providing at-a-glance insight and enabling issues to be identified and resolved quickly.