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Why is the purchasing department so strategic?

For many years, the purchasing department was considered just another department within the companies, responsible for carrying out the purchasing activities in isolation, without any connection with the other activities carried out by the company.

However, times have changed, and today this department is already recognized as a fundamental part of organizations, actively participating in the selection of the best suppliers, choice of the lowest prices and working together with other departments involved in the production process of the company.

In an increasingly competitive world, companies need to act strategically, optimizing to the maximum the processes that directly interfere with productivity and business profitability. Each action is placed under a microscope, to evaluate the viability of it and the return it can bring.

Efficient management of the purchasing department can mean improvements in a number of areas, such as competitive advantage, profit and even corporate image. In today’s article we will list some reasons that make the procurement sector so strategic and important to the success of companies.

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Supply of basic needs

 

The purchasing department is responsible for keeping the business running. It is through it that office supplies come in, providers of cleaning and maintenance of the space, snacks and meals, machinery and equipment, security apparatus, all items for inventory and much more.

Without these purchases the operation simply stops, that is, the company can not work unless these conditions are in full operation. Therefore, the first big importance of the purchasing department is this: make the company work. Without it nothing will exist, no business will be closed, there will be no profit, jobs or production demand.

 

Cost reduction and time optimization

 

When it comes to reducing expenses, rather than layoffs and outsourcing, the answer may be in the purchasing department. Effective management can ensure equally positive results at a lower price, and in times of global crisis, saving is a key word.

Today, technology needs to be present in the structure of the purchasing department. Modern machinery and state-of-the-art software ensure cost savings, by eliminating document storage costs, paper loss and damage, and by reducing human failure rates.

Thus, the company that invests in computerizing the operation of the purchasing department is ahead of its competitors, offering more structure and organization so that the work can be carried out in the best way possible. Still, in addition to the improvements in organization and cost reduction already mentioned, the time of the purchasing department can be highly optimized by technology.

Within any company, the desire is to perform as much as possible in the shortest time frame. So do not underestimate the saying “time is money”! The more time is devoted to performing simple activities, the less time left for more complex activities, which really need more attention. All the operation is impaired and the money invested is wasted.

A bureaucratic purchasing department is more efficient, works harder in less time, and generates more results costing the company less.

 

Maximization of profits

 

The company’s profit is virtually in the hands of the purchasing department. The strategies adopted and purchasing process are critical to the company’s financial success, and a small step in the wrong direction can symbolize irreparable damage.

A truly effective purchase involves building relationships with the best suppliers, ensuring better purchasing conditions, investing in the department’s employees negotiation skills, and promoting periodic meetings to evaluate the purchasing strategy within the company’s goals.

In addition, we can not ignore the search for lowest prices, which directly impact the final price of the product, thus, the competitive advantages of the company. Therefore, an evaluation of the supplier and the negotiation strategy must be in line with the company’s objectives, so that it is possible to design profit margins and establish achievable goals.

 

Institutional image

 

The purchasing sector can even improve the institutional image of the company by ensuring partnerships with reputed suppliers and avoiding association with organizations involved in controversies. The purchasing process also runs through the evaluation of the suppliers, in view of their image among the public and the suitability of each organization.

With this, the relationship between the company and the clients is strengthened, creating a relationship of trust based on the mission and the values that the company defends. As a consequence, new customers can be attracted by this image, representing new business horizons for the company.

Production cost

 

There are many variables that interfere with the final cost of production. However, the purchasing sector is linked directly to one of them, the inventory control. Stockpiling is a department that often generates a lot of burden to businesses, with high costs of maintenance, disorganized purchases, and exorbitant personnel expenses.

The purchasing sector acts in conjunction with the company’s inventory needs, acting in a preventive manner in the vast majority of cases. This means that the purchasing department should, in partnership with the stock managers, ensure that purchases are made before the demands arise, based on some usage forecasts, as well as expiration dates and pre-scheduled maintenance.

As a result, purchases on an emergency basis are fairly reduced, allowing space for better price negotiations, reducing inventory costs and, by consequence, the total cost of production. It’s a win-win ratio for departments and for the company as a whole!

In addition to these points, the purchasing department acts jointly with several other sectors, placing itself as a fundamental piece throughout the company’s production chain. Therefore, it is necessary to see beyond the purchase orders, and invest so that the functions can be exercised fully.

 

How is the purchasing department seen in your company? Do you know of other points that are relevant to an organization’s success? Tell us, in the comments below!

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