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4 part question: How to manage ordering, inventory, purchasing, and operations?

1. Ordering stocks: I have asked around from our suppliers and would like to verify with you if this is also the most efficient way to order; if an item has a low level already, we must check the supplier if we have other items that we can already purchase with the same item even if it has not yet reached the low-level point? Will it still be based on remaining stocks versus the amount to completely replenish inventory to full plus safety stock? Or do we only order the particular item alerted as such?

2. What if certain items have alternative brands? That are better selling? Do we need an experienced purchasing officer to determine which to buy? I am really against giving employees too much room to make their own decisions and would like to make their choices limited so that anybody qualified will be able to do the job as well and minimize mistakes by using a Standard Operating Procedure document. What check and balances can we implement to make this happen?

3. How should we canvass prices from suppliers carrying the same items? It is very time consuming to be calling every supplier each item and for each item price to determine every time who sells at the lowest price, especially with steel products where the prices change regularly. Furthermore, we must also consider shipping costs because some suppliers deliver to us directly without incremental charges while others ship to a third party delivery company whom we have an account with.

4. Purchasing: Is there a formula for forecasting consumption of items in a hardware setting where there is no pattern with what the customer buys? Again, projects of contractors are not constant, unlike in the food industry, where we can determine how much stocks to buy beforehand because more likely the demand will be as anticipated as the previous year considering other influences. If no, how can we then be able to set up properly our inventory when we don't know how much space to allocate per item? We don't have a huge space.

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A good accounting program would automate a lot of the routine ordering for you. You can set up order quantities, preferred supplier, minimum inventory and standard order quantities which would trigger a purchase order. This would free up a lot of time and give you more time for shopping suppliers.

Sometimes you need to be hands on with the purchasing process but when you reach the point that your employees can do this with little supervision it is much better. Over time you will find which employees can be trusted to do a competent job with routine orders. When it comes to special orders, something one customer wants in quantities that are way above your usual inventory I do think most of those expect it to be a special order and are willing to wait.

I don't have a good answer as far as the need to shop for the best prices. Usually over time certain companies will emerge as being the low cost provider and when you reach that point things are much easier. Sometimes it is good to find suppliers who want to be a big supplier and will give you special prices if you give them as much business as you can. However even when someone is usually the lowest cost supplier it is good to check other sources just to keep them honest.

If your business can afford it then it is better to have one person in charge of purchasing. Otherwise sometimes you can have people order the products for their department and they can check prices for the various suppliers.

My business is not big but we have 5 different people who purchase. The person in charge of metal workings orders the steel products. The person who is in charge of welding orders all things for welding and the person in charge of assembly orders those components. The person in charge of painting orders all the painting supplies. The office manager orders all things for the office. They are all very close to the needs of their departments so things run very smoothly that way. Assigning certain product areas to each of your people may let you spend less time on ordering and more time running your business.

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