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How To Increase The Scope of Purchasing


PurchTips - Edition # 202

By Charles Dominick, SPSM

 

What Justifies An Increase In Purchasing's Scope?

Getting more spend under a purchasing department's management is a common goal. Achieving it often requires using points like these to convince senior management to support a change?

  1. Purchasing personnel are measured on their performance of purchasing processes. Other departments are measured on different contributions to the organization. Assigning purchasing responsibility to these other departments keeps them from spending time on their primary functions within the organization.
  2. Purchasing personnel are trained in cost savings techniques like negotiation and strategic sourcing. Engineers, department heads, and other internal customers are typically not, which can lead to paying higher prices.
  3. The purchasing department has savings-generating tools, such as eSourcing systems, at their disposal. Other departments do not.
  4. The purchasing department is good at identifying alternatives, then guiding the organization to select the best option. Too often, internal customers just go with the first supplier found, committing the organization to a suboptimal arrangement that endures for years.
  5. By working with all departments, the purchasing department is aware of enterprise-wide standards. As such, it can leverage aggregated volume for lower costs, minimize inventory, and avoid pitfalls previously identified with competing products.
  6. Purchasing personnel are trained at evaluating supplier viability. Engineers, department heads, and other internal customers are not, which can result in the selection of a supplier that goes out of business during the course of the relationship.
  7. It's not uncommon for suppliers to charge different departments within the same organization different prices when they can get away with it. By having the purchasing department provide center-led oversight, the organization can have more assurance that all departments are benefitting from the organization's leveraged buying power.

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