Making the Most of Purchasing Organizations

Improve your bottom line through your purchasing organization

Small businesses pinch pennies to see black at the end of the month, and making the most of your purchasing organization can definitely save you money. Analyze how much time you or your purchasing manager spends price/vendor shopping and identify how much spending you incur.

Even if you believe your internal purchasing department is doing the best it can, always look for ways to improve efficiency and cost savings. Making the most of purchasing organizations may require you to consider a group purchasing organization (GPO) as an alternative to in-house purchasing. Purchasing groups offer individual, like-minded companies prices and leverage with suppliers they would not enjoy if they acted independently.

1. Any in-house purchasing group should weigh its current supplier prices against those achieved through joining a GPO, along with any GPO membership fee to decide which option works best.

2. Besides spend savings, outsourcing to a purchasing group can provide other benefits like networking, best practices, supplier development, contract management and more.

3. Consider starting your own purchasing group by joining with other companies you know you can work well with and trust.

Keep your purchasing organization function in-house

If you operate an internal purchasing organization, take steps to increase efficiency, improve cost savings and help better your bottom line. Encourage your purchasing manager to participate in supplier and customer councils to receive timely feedback and gather ideas for process, procedure and systems improvement. Periodically update savings reporting methods by using a spend analysis to help forecast potential current savings and future savings in new areas. Use supplier scorecards incorporating key factors your purchasing organization will use for choosing/evaluating suppliers.
University of Pittsburgh Supplier Evaluation Program to get some ideas. Keep your purchasing organization on top of its game with continuing education and training designed for purchasing professionals. At Next Level Purchasing, you'll find all types of classes to meet your needs: certification programs, purchasing fundamentals, purchasing management, supply management contract writing, purchasing best practices and managing supplier performance are just a few of the benefits to a more efficient purchasing organization.

Check into the viability of group purchasing organizations

Purchasing groups offer a few substantial benefits: purchasing discounts and negotiating power regarding issues with suppliers. Buying groups don't come free and fall under one of two models: one supported by member dues and the other by negotiated fees from vendors.

Join purchasing councils or some other professional purchasing association

Whether you decide to go with a GPO or take care of purchasing in house, benefit yourself, company, suppliers and customers by joining purchasing associations and other purchasing organizations. Through these, you'll reap valuable education, training and networking benefits.

• Before going forward with a group purchasing organization, check your existing supplier contracts; you'll need to satisfy those first or renegotiate if possible. You might give your existing suppliers an opportunity to match pricing in order to keep your business. Always leave the door open with your existing suppliers - just in case the purchasing organization route is not advantageous for your business.

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