Many junior buyers or people new to the field of purchasing have little or no conception of what purchasing involves as a job beyond basic functional buying. The intent of this article is to provide clarity on some very basic facets of the functional or tactical buyer’s area of responsibility.
Understanding the basics of Supplier Management
The basic principles of buying are important to understand for any buyer and especially those new to it. Many buyers unfortunately are trained to make the mistake of buying solely based on price and very little else.
Basic factors beyond price and delivery, that all junior and functional buyers should be aware of, include:
- Vendor Due Diligence: Should include researching the company and its financial, quality and customer service history that you wish to do business with. This could even include contacting other clients of theirs for reference purposes.
- Vendor Policy: Any successful Procurement Department should have such a policy which outlines Supplier Relations Management, and this document should provide the framework of vendor selection and governance. This usually is a subsection of the Procurement Policy Document and should be developed as part of the strategic sourcing programme. Get acquainted with it.
- Specification Compliance: Always ensure that whatever internal stake holder you are buying in support of i.e. manufacturing, are in agreement with you from the get go, concerning the basics such as specification, quality, available quantities price etc. before any supplier negotiations proceed. This may involve multiple stakeholders like Sales as well as Manufacturing. Always ensure that this compliance is in writing.
- Multiple Suppliers: Also known as supply base teiring, is a crucial tactical buying strategy that is often overlooked. When researching product sources it is critical to ensure multiple sources exist of supply for a single product.
- Contracts: Always ensure that all key factors relating to the supply of whatever goods or services by that vendor are clearly stipulated in the contract of supply. Usual key factors center on pricing, quality and lead-times etc., but anything that is pertinent to that specific contract no matter how minor deserves to be included.
- Vendor Performance Audits: Remember supplier performance impacts directly on operational procurement performance. Therefore supplier performance needs to be regularly reviewed, and adjustments made. Allowance for this needs to be made in the supply contract.
What are your views?
Should you have any pertaining enquiries email Karl at karl@furrutterandassociates.co.za or contact him on (27) 82 393-3685. Furrutter and Associates works nationally (South Africa) and internationally.