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The 7 Core Purchasing Strategies

The document outlines 7 core purchasing strategies that most companies implement. These strategies include supplier optimization and relationship building, total quality methods, risk management, global sourcing, vendor development, green purchasing, and building and training people's procurement skills. The strategies help companies make cost-effective purchasing decisions, deliver quality goods on time, and develop strong relationships with efficient vendors. Training procurement staff is highlighted as one of the most important strategies, as effective implementation requires people with the necessary skills.

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0% found this document useful (0 votes)
392 views3 pages

The 7 Core Purchasing Strategies

The document outlines 7 core purchasing strategies that most companies implement. These strategies include supplier optimization and relationship building, total quality methods, risk management, global sourcing, vendor development, green purchasing, and building and training people's procurement skills. The strategies help companies make cost-effective purchasing decisions, deliver quality goods on time, and develop strong relationships with efficient vendors. Training procurement staff is highlighted as one of the most important strategies, as effective implementation requires people with the necessary skills.

Uploaded by

takumkk
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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The 7 Core Purchasing Strategies!

Purpose of Purchasing Strategies?


Companies implement purchasing strategies in order to:

1. make cost effective purchasing decisions from a group of efficient vendors who will
2. deliver quality goods
3. on time and at
4. mutually agreeable terms.

Examples of Purchasing Strategies ...


Some purchasing strategies may include such choices as making procurement savings by using
centralized purchasing which is concentrating the entire procurement activities within one
principal location & source of authority.

1. Single Source Procurement

For example some companies may decide to undertake a single source procurement strategy that
involves obtaining excellent dedicated service from a single vendor.  These strategies are
predominant when sourcing for IT or indirect purchasing such as office supplies and cleaning.

2. Purchasing Cycle

Other companies may use a procurement strategy of using a core purchasing cycle.  This is
where they order from a group of regular vendors and use outsourcing procurement for their
larger and ad hoc purchases.

3. Procurement Auctions

Still others, particularly when they are seeking labor for short-term projects will use procurement
auctions in order to obtain the best pricing levels.

Regardless of the size of the company, there is a core group of 7 purchasing strategies that most
of them implement.  

1. Supplier Optimization & Relationship Building

The company chooses an optimum mix of vendors who can provide the best prices and terms. 
This process usually means that the less able suppliers who cannot provide a quality service at
the terms and prices required are discarded.  This is by far the most common of the various
purchasing strategies.

2. Total Qualify Methods (TQM)

Total Quality Methods, require the vendors to provide an ever increasing quality service with
zero errors. The supplier ensures purchasing best practices using a number of tools such as six
sigma.

3. Risk Management

As more companies obtain their supplies from countries such as China and India, they are more
concerned with the risk management of this supply chain. Whilst these countries can supply
products at very advantageous prices, these advantages can be soon negated by a natural or
human disaster.

Japan's Fukushima Nuclear Disaster in 2011 shook up the supply chain as in the race to provide
better quality at lower prices, manufacturers picked very narrow, optimized supply chain. They
put all their eggs with one supplier that had the best product at the lowest price. This resulted in
production delays, product shortages and higher prices, since manufacturers had not factored
risks from a natural disaster of such a great scale.

With Covid-19 in 2020 the situation became 'funny'. When Covid-19 hit China in January 2020
Buyers from Europe were confirming whether their Chinese suppliers could deliver as agreed -
these suppliers were struggling to meet demand due to lock-downs in China.

However 2 months later the situation 'turned-around' because Covid-19 hit Europe, US & other
parts of the world - now the Buyers were asking their Chinese suppliers to delay delivery as they
were not operating due to lock-downs in Europe. 

4. Global Sourcing

Large multinational companies see the world as one large market and source from many vendors,
regardless of their country of origin.

Implementing a global strategic sourcing strategy means efficiently sourcing goods and services
from any country that can manufacture the goods or provide the service more economically. 

While Global Sourcing is here to stay, organisations need to tread carefully and have plans in
place to manage risks.

5. Vendor Development

Depending on the scale and depth of services or goods a vendor provides, it might be necessary
to work closely with such vendors.  Helping in developing processes that assist these vendors to
come with better or cheaper products, helps companies to reduce costs. 
Or in cases where a company is dependent upon just one supplier for their products & the
supplier is unable to perform to the required standards, the purchaser may assist the vendor in
improving their service or implement processes to improve their procurement cycle. This
ultimately would help the purchaser/buyer have a reliable supplier and product deliveries.

6. Green Purchasing

This is one of the more common purchasing strategies for governments and local governments.
This strategy champions the need for recycling and purchasing products that have a negative
impact on the environment.

7. Building & Training People's Procurement Skills

While training people is the soft-side of purchasing & procurement strategies, this is probably
the most important strategy - all the other strategies above would have to be implemented by
people, and if they don't have the necessary skills to deliver the procurement strategy, the
strategy delivery will fail.

For many years since it started in 2014, Deloitte Annual CPO Survey reveals that more than half
of CPO's & Procurement Director's worldwide, say that their teams do not have the necessary
skills & capabilities to deliver their procurement strategy. This number remains more or less
constant regardless of the year the survey is published

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