Having clear the functions of the purchasing department is essential if we want it to work as well as possible. One of the things to do when a company has losses is to delve into the operation of this department and see if everything works as it should.
In this way, it will be much easier to achieve better results and save on purchases. With a little attention to each point, we will see the situation in which we find ourselves. If the department is clear about all its functions and they are optimizing them.
If the human resources department is the heart of a company, the purchasing department is its brain. Both are essential for the company to function, and the entire business body depends on its proper functioning.
Below we have developed the ten primary purchasing department functions.
Table of Contents
Planning With Suppliers
The planning with suppliers is essential for the proper functioning of the company. The purchasing department is in charge of always keeping in mind what the company’s needs for materials or services will be.
Likewise, they will have to agree with the suppliers on delivery times and responses on special dates. For example, some companies have peaks of activity at certain times of the year, and the purchasing department has to make sure that their supplier can provide the necessary stock on those dates.
All the planning that is carried out must be reflected in the contracts. Another option is to do it through a purchasing and service center.
In this case, the baking will be done with the purchasing center, and, in turn, this will be in charge of the management with the suppliers.
The control stock or inventory can be crucial in preventing a crisis. Therefore, the purchasing department must know what is in the company and what is not. What is missing and what is leftover.
Selling surplus is one of the spending control tricks in an SME that we can follow. Only with inventory control will we be able to know what surpluses we have.
It also helps to buy only what is needed. Although surpluses can be sold, they are generally sold for a lower price than what was purchased. Therefore, the most advisable thing is always to adjust purchases to the real needs of the company.
In this sense, purchasing software can be fundamental allies to keep inventory control up to date without requiring a very high effort.
The supplier evaluation allows us to know if we have the best possible suppliers. This is another of the functions of the purchasing department that can be most useful in the medium or long term.
It is about systematizing a method that objectively scores the suppliers that work with the company. This same method can also be used with potential vendors that we have not yet used.
In this way, we will know if we have the best option or room for improvement. It is a score by price or quantitative criteria and qualitative such as the quality of the product, compliance with the agreed deadlines, the possibility of responding to possible unforeseen events, etc …
In working with a purchasing center, the purchasing center will be in charge of this process.
The accounting is one of the aspects most tired, but more important of the functions of the purchasing department.
It is the responsibility of the department to have clear accounts at all times, taking care of all the accounting management in smaller SMEs. This is so because in smaller companies the purchasing, sales and accounting department is usually unified.
The largest must be aligned with the accounting department, providing all the necessary information and being clear about the expenses arising from purchases. After human resources, purchases are usually the largest item of expenditure in a company, so having clear accounts is a legal obligation. Still, the company needs to function in the short, medium and long term.
Joint work is also essential to avoid liquidity problems.
In addition to accounting, you have to add the whole business management aspect. These two sections usually account for most of the working time within the department.
Commercial management includes managing administrative processes, the accounting that we have already mentioned, the fiscal and financial ones. Of course, all this work must be in line with the company’s direction and the advisors in case they are hired.
Review and Preparation of Contracts
The contracts with suppliers also require special attention. Sometimes, the purchasing department handles dealer contracts, especially when dealing with the purchasing and sales departments.
It is advisable not to use model contracts but to personalize them according to the company’s needs. Model contracts can serve as a starting point but ideally, tailor it.
Likewise, you have to be careful with each point when providers offer a standard contract. In all matters relating to contracts, it is important to be legally advised. Everything we put in the contract has to be following current legislation. Otherwise, it will not be valid.
Therefore, this function is quite important. Fortunately, this is a one-off action, which only needs to be done once with each type of contract. Of course, we must be aware of possible legislative developments in this regard.
Compliance With Purchasing Policies
You have to take care of the contracts with the suppliers and make sure that they are fulfilled. It is useless to make very exhaustive contracts that regulate the entire relationship with them if we do not consider if the different parties are being fulfilled as indicated.
In this sense, negotiation techniques must be controlled when demanding certain aspects of the contract. It is important that any contractual relationship with a supplier is seen as a win-win and does not appear that we are taking advantage.
In the same way, it is also important to be tough when it comes to being. The policies of the contract are to comply and must demand when they are not met. For that reason, they were signed in the first place.
If we have a purchasing center, the same will happen with the contracts with the purchasing center. In this case, the contract is usually the same for all associated companies, and we will not have the opportunity to customize them in a general way.
Definition of Procedures
For a purchasing department to optimize, its processes must be defined. The entire department must work together so that its procedures are systematized.
This way, there will be no room for confusion or different ways of doing things. If everyone considers how things are to be done, it will lead to faster and better performance. Here it also helps to be clear about the chain of command of the company’s administration.
The systematization of the recurring processes in the department will also allow the commitment to automation. If we have the right software, this will allow the department’s work to do much faster and have more time to find new suppliers or work on the last point.
Feedback With Other Departments
Communication is critical in any department of a company. In the purchasing department, being the brain of the same is even more important.
Each department must have fluid communication with it, considering what resources it has and the material needs it requires.
Likewise, the purchasing department must be in continuous contact with the company’s management and the financial department.
Having regular meetings with these departments is a way to keep the relationship, and the information needs flowing at all times. They don’t need to belong meetings. It is enough to schedule periodic online meetings in which the most important data is given, and each department has all the information it needs.
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Attention To News, Changes And Innovation
Finally, we cannot forget about the innovation part either. The purchasing department must be up to date with what is happening in the market with the materials or services it provides to the company.
There may be new, cheaper and more functional material, or simply a new phone or energy provider to take into account. Purchases should always have an eye on the market. Thanks to this, the competitive advantage of the organization’s service or product can be maintained.
If you are looking to save in your company at Smart Buys, we can help you. Please consult with us without obligation or enjoy two hours of completely free cost consulting.