Commentary & Analysis
10 Tips For Smart Purchasing
This article includes tips for saving money and improving your operational excellence by using all your resources – especially your vendors. Areas covered include: consumables, freight, paper, and recycled waste. By picking one or two of these ideas you can improve your operation and lower your costs.
By John G. Braceland
Published: September 27, 2013
Here are some tips as you look for areas to save money and improve your operation.
1 - Check out groups to improve your purchasing power. Associations and purchasing groups offer ways to help you consolidate purchases with other companies. This can include consumables, services and insurances. Whether it is your local printing association, chamber of commerce or independent purchasing group you can take advantage of their programs to help benchmark costs as well as save money.
2 - Speaking of consolidating, how many freight vendors do you have? Can you drive a better deal, improve service and have more leverage by reducing the number of freight vendors? Bring in the top four or five and show them your entire volume of business to see if you can increase your discount.
3 - Get the most from your vendor relationships. Vendors are a valuable source of information. Make sure you find out everything they offer. Can you save money by consolidating more purchases with fewer vendors? Are you meeting with the top people your vendors have to offer for help and advice? This can be on a technical level as well as a management level. Are your vendors keeping you up to date on the latest trends in their specialty? Will they come in and do an audit of your operation? Can they provide training or help with creating procedures?
4 - When you bundle products and services do you know what you are paying for? Anytime a bundling arrangement is proposed get the costs both ways, bundled and unbundled. In plant ink mixing was at one time considered to be free. Today with shrinking margins and rising labor costs do you know what your in plant is costing you? If you have not unbundled the cost, now is a good time. Equipment, such as the GFI ink formulation equipment, can help you reduce this cost. While you will still need a person to mix the ink the improved speed and accuracy of mixing may allow you to do this yourself or reduce labor.
When you lease or use consumables to offset equipment costs know what you are paying for. If money is being added to your consumables your volume determines how much you are actually paying.
5 - Are you still letting your vendors charge as much as they want for freight? Take control of your inbound freight. Not only will you lower your incoming freight price but you will increase your total freight volume to drive better deals with your existing vendors. Make sure to use your UPS or Fed Ex number for all incoming small packages.
6 - Is your waste stream a nuisance or a profit generator? Some plants are just happy to get rid of the stuff. Plant limitation can sometimes dictate what you can do. Your waste dealer may not always be forthcoming in helping you increase your revenue. Bring in other people from time to time to review what you are doing. Tie pricing into the pricing tables in national independent publications or the London Metal Exchange for aluminum.
7 - Are you using a variety of stakeholders to make decisions about major consumables or equipment purchases, or is it left up to one person? Often, when new personnel come aboard, so does a new vendor. Incorporate purchasing, manufacturing, finance and senior management to bring about better decisions.
8 - When is the last time you met with competitive vendors to look at major consumables’ pricing and service? While working on long term partnerships is good, any relationship can go stale when not challenged. Sometimes sales people become complacent and let pricing increase over time and get out of sync with the market. Service levels can also dip. Pick a time frame that is appropriate for your organization’s culture to keep up relationships with the other vendors.
9 - Develop closer relationships with the mill. Usually the merchant is the first and sometimes only point of contact for paper. This is your largest purchase and the more information you can gather about the market and players, the better. Work with the mill reps to increase your understanding of the market.
10 - CEO’s need to consider the amount of time they spend overseeing and reviewing supplier relationships and purchasing policies. Walking through the plant and warehouse and talking to people throughout the organization about materials, their performance and cost is time well spent. This is a good way to find out if there are problems associated with different materials and if they are being addressed.
Choose a few of these ideas to see if you can make them pay off in your company!