What Management Wants From Purchasing

PurchTips - Edition #101 May 31, 2006

By Charles Dominick, SPSM

Are You Giving Your Management These Results?

Cost Savings – Management wants Purchasing to save money. But successfully achieving and reporting cost savings requires a careful approach. Be sure to align your definition of cost savings with management’s definition, track your cost savings, and focus on total cost reduction, not just price reduction at any cost.

Productivity Improvements – Management will always expect you to do more work with fewer resources. No matter whether you’re in a tactical or strategic purchasing organization, there are many productivity metrics that you can choose from to track productivity gains: PO’s per buyer per day, average length of sourcing cycle, man-hours per dollar saved, etc.

Brand/Differentiation Support – Your organization’s mission or vision statement should give you some clues as to how your organization wants to be perceived in the marketplace and how it wants to be differentiated from its competition, such as offering higher quality, faster cycle time, better service, lower cost, or something similar. Make sure that your decisions and metrics support your management’s brand and differentiation strategy. As brainless as this sounds, you’d be surprised how many organizations have a mission of being the “highest quality provider” in their industry, yet their purchasing departments measure only cost savings.

Customer Satisfaction – Sometimes, being in purchasing can make you feel separated from your organization’s customers. But management relies on things that you’re responsible for, like assuring continuity of supply, to keep its promises to its customers. Realize that you can personally be responsible for your organization’s failure to meet customer expectations. In this day of tough competition, organizations simply have to meet customer expectations to survive and you have a critical role in that survival.

Positive Cash Flow – In some organizations, the timing of monetary receipts and payments is critical. Those organizations cannot afford to have more cash leaving the company than coming in during certain periods. Be aware of that and negotiate appropriate terms with your suppliers. But don’t just pay them late and hope that they don’t notice like some organizations do!

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