Within the context of risk mitigation, the purchasing department might analyze the pros and cons of using domestic versus foreign suppliers, for example, and make decisions about whether the company should manufacture goods itself or buy them from external suppliers. Risk is another consideration – what happens if the business is reliant on a particular supplier and the supplier goes bust? What's the contingency plan to ensure the security of supply? With its strategic hat on, the department will check out all the suppliers in the market and weigh them up against each other in terms of quality, reputation, service delivery, capacity and cost. It involves assessing the company's long-term needs for goods, services and materials, and setting budgets by department or location based on the company's current needs and projected future growth.Ĭost efficiency is a key objective of the purchasing team. While it's tempting to think of purchasing as a purely operational role, the department is in fact responsible for setting the company's strategy regarding procurement.
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