How purchasing leads to profit!
Why does someone coach purchasing, of all things? Are sales not the most important aspect of a company?
My answer to this frequently asked question is: A purchasing department that is motivated and focused on long-term success is the best thing that can happen to the sales department. This is because a trained purchasing department contributes significantly to quality assurance, innovation performance and a competitive price-performance ratio. However, in many companies, purchasing is reduced solely to a tool to cut prices. This often leads to a dead end. Compensation claims and the associated reputational damage in these cases are “only” the tip of the iceberg. A decline in production quality and a widespread shortage of skilled workers in the purchasing departments of companies are among the most common consequences of such a business policy. Therefore, as a purchasing expert, I am calling for a fundamental rethink. To view purchasing as an active shaper of businesses, which, in turn, cultivates a cooperative relationship with suppliers – this is essential for a modern corporate culture. Working in partnership with suppliers also increases their willingness to innovate. This results in long-term business relationships, which is significantly reflected in the quality. This in turn pays off in the long run.
A look at the automotive industry
For many years, the industry focus of my work as a trainer and coach has been on the automotive industry and its supplier companies. In times of high-profile product recalls – the numbers this year alone need nearly two hands to count them – this industry makes us realise how important it is to redefine the role of purchasing and the purchaser.
Which sectors are affected?
The fact that it is time to encourage purchasers in their efforts to acquire quality, instead of asking them to push their suppliers on price day after day, applies not only to the automotive industry. Those whose daily responsibilities include cost savings and who have little or no creative opportunities in their work find it hard to motivate themselves and others. This is a problem faced by executives in purchasing. And this applies to almost every company – regardless of industry and size.
Special features of SMEs
Of course, it is also worthwhile for SMEs (small and medium-sized enterprises) to strengthen the role of purchasing. This is why I have compiled a few tips and tricks here, which can be implemented in a practical manner in these companies in particular:
Take advantage of speed. Little companies run rings around large corporations. As purchasers in SMEs you have a clear advantage: You are faster. You know the internal processes and contacts in your own company inside out. Decision-making processes are short – in contrast to large corporations.
Impress others with your detailed knowledge: Salesmen usually only know their own product. You as a purchaser have to keep a much more complex range of products in mind. Go into your own manufacturing department, get your hands on the job for a few days and impress your negotiating partner with your detailed knowledge.
Avoid the image of the price cutter. The cheapest supplier may be the most expensive – in the long run. As a purchaser in SMEs, ideally keep an eye on long-term business benefits. The supplier should convince you in many ways: in terms of technology, quality, service, logistics, sustainability – and price.
Show strength at the social level. Get some training in presentation skills. This has enormous advantages in day-to-day business. Diplomatic purchasers with strong communication skills can represent their business objectives better to outsiders and sell their decisions better inside the company.
Use your position of power in negotiations: Many purchasers in small or medium-sized enterprises, especially in family businesses, are not aware of their position of power. But the short distances in operation are almost always accompanied by a direct and good rapport with management. In addition, purchasers in SMEs also usually have extensive knowledge. They know all the processes in the company. Focusing on this strength can yield the best results from negotiations with suppliers. So it creates a good basis for stable and trusting relationships.
Conclusion: Motivated professionals and executives in purchasing prevent material shortages, ensure long-term quality, increase the innovativeness of suppliers, contribute to employee retention and counteract the shortage of skilled workers. But we must never forget: “The profit is in purchasing and the profit is made by people”.
As the Managing Director of the company PURCHASING PARTNER, Tanja Dammann-Götsch has been training and coaching executives from the purchasing sector of the automotive industry in the US, Mexico and Europe since 2006. She is also a speaker at trade fairs and conventions. Previously, she was an executive in the industry for over 15 years, including in the training and development department at one of the largest car manufacturers. Tanja Dammann-Götsch lives in Hanau, Germany.