Next time you pay a bill that seems too high, or your cost of sales goes into the red, might be the time to ask does your business need a Purchasing/Procurement Manager?
Look at any small or medium-sized company and, more likely than not, there will be no single person dedicated to making key purchasing decisions. Usually, it will be the business owner or office manager, or in larger companies the CEO or CFO.
Every business needs to purchase items such as raw materials, power, phone, transport, gifts, paper and paper clips. Who is making these decisions now and do they have the core competency to get the best buying deals available?
Five reasons your business may need a Purchasing or Procurement Manager
To protect your business brand and reputation
Building a successful business takes time and energy. As a business owner or dedicated manager, you do not want to risk your hard work and jeopardise your reputation by making rushed decisions on goods that are poor quality, or signing service contracts that fail to deliver to required standards.
A purchasing or procurement manager will protect your brand by vigilantly buying goods and services that reflect your business culture and standards.
To easily increase your profit margin
To purchase wisely, you need to buy the right quality and quantity of materials or products at the best possible price and at the appropriate time from the best vendor.
A sales or marketing manager might increase sales and revenue by 10%; however not all that revenue will reach the bottom line. Instead, a dedicated purchasing/procurement manager could reduce your cost base by 10%, and all of that 10% drops to the bottom line.
Purchasing experts claim that a 2.5% improvement in bought-in costs can be enough to double profit. In effect, the wages you invest when you hire a purchasing/procurement manager could save your business double their salary.
When you have no idea what your business is spending on purchasing
A typical business will spend 55% of production costs on purchasing goods and services. In some manufacturing and assembly companies, this can be 80%. You need a Purchasing/Procurement Manager to examine your supply chain costs, look for efficiencies and give you a strategic plan for improving the bottom line.
Are you ordering too much or too little due to not knowing your inventory? Maybe you are settling for bad customer service because you don’t have time to shop around for a new deal. Employing the specialist knowledge of a Purchasing Manager will protect your business from suppliers and salespeople whose goal is to sell products at inflated prices.
When a purchasing audit tells you its time
One of the first ways to decide if you need a purchasing/procurement manager is to do a purchasing audit. You can do this in-house or use a consultant.
Look at the following measures:
- List all your suppliers
- How long have you purchased from them?
- How much have you spent with each supplier in the last 12 and 24 months?
- When was the last time you got a new quote on each good or service you buy?
- Do you or your staff have the time to work your way through the list?
- Would cutting costs by 5% or 10% cover the wages of a part or full-time purchasing manager?
If purchasing for your business requires specialist knowledge
As your business grows, it will get too large for purchasing decisions to be made by the CEO or CFO, or in small business, by the owner. You will need a Purchasing or Procurement Manager when your business gets to the size where specialist skills make sense.
Areas that Purchasing/Procurement Managers can be vital are:
- Analysing inventory acquisition costs – costs associated with generating and processing orders, including salaries, taxes, insurance and operating expenses
- Conducting supplier evaluations across measures such as timeliness, quality, price, expertise
- Implementing quality frameworks such as ISO
- Sourcing overseas suppliers – that might involve international trips, visiting tradeshows and developing long-term relationships
The day you decide that your business needs a purchasing manager will be an exciting stage for your business. Ensure you recruit a qualified purchasing/procurement manager who will have the skills and knowledge to join your team and help take your business to the next level.