When it comes to the day to day running of a business, it’s easy to let supply purchasing slide to the bottom of priorities, especially during rougher economic times. More firms than you would imagine take this approach, but that would be missing the point. The best way to increase profit in business is to cut outgoings, and there’s no easier way to do this than by managing what the company buys more effectively.
• The first thing to remember when buying for a company – whether that’s essential trading supplies such as those intended for use in the manufacturing process, or simply office supplies that every business uses like cardboard boxes – is the increased buying power that results from the higher volumes you will be purchasing. Firstly, building up a healthy working relationship with suppliers is key, and will allow you to negotiate discounts over time as a result of your loyalty and any increases in volume. Secondly, try asking about money off for combining orders due to the cost reduction of joining shipping and admin costs together. One last possibility with more eco-friendly companies is to ask if there are any money off incentives for recycling efforts on the part of your company.
• A professional and fit-for-purpose inventory system is not only vital for purchasing supplies, but even affects the business as far as budgeting and finance company-wide. The relatively small amount of capital and man hours needed to put an efficient system in place pales in comparison to the benefits it will bring, including an exact knowledge of what needs ordering and when, which over time will mean that supplies can be ordered in anticipation of them running out, eliminating over and under-ordering and breaks in the supply chain.
• Another important thing to take into account is to balance the ‘cost of money’ – the interest accrued on money used to purchase supplies, and a system used by many businesses, particularly start-ups – against savings made from discounts, recycling schemes etc. If the savings are larger than the cost of money, the decision to purchase more supplies should rest on the needs of the company, the other way around however, and the company will be losing money on every purchase. It’s important to note however that even in these circumstances, not purchasing supplies that are needed can end up creating a bottle-neck and losing the firm even more money.
This helpful article was kindly provided by Daniel Nicklin on behalf of Rajapack.