Unmasking the Mysteries of Purchasing: Prepare to be Surprised!

In the realm of purchasing, various cost factors come into play when businesses acquire goods. Most organizations focus primarily on the 'cost of purchase' without considering the variables that directly impact other cost fluctuations.?

By understanding the components and effectively measuring the elements, you will be able to make strategic decisions in product procurement/development.?

In this article, I will share some of my insights to drive key considerations related to the world of purchase mapping which include but are not limited to scale of production, raw materials, packaging, branding, minimum order quantity (MOQ), and lead time. By mapping and implementing these purchase guideposts, you can optimize your procurement processes and achieve desirable outcomes.?

1. Scale of Production:

Scale of Production plays a vital role in purchasing decisions as it determines the manufacturer’s?quality of output. You must carefully assess the scale of production to ensure optimal purchasing decisions. By understanding the production volume that the organization is making and mapping it against your purchase requirement you can negotiate favorable terms with suppliers, and minimize inventory costs. Determining output level can help predict future demand, align production capabilities? and explore strategies to scale production cost effectively.?

The scale of production is directly proportional to product quality. For instance,?a larger-scale production often allows for greater consistency in product specifications and the implementation of robust quality control measures. With well-established processes and specialized equipment, manufacturers can achieve higher levels of uniformity and reliability in their products. Moreover, economies of scale can provide resources to invest in improved raw materials and quality assurance practices. However, it's important to note that while scale can contribute to product quality, it is not the sole determinant. Other factors, such as design, engineering, and overall manufacturing expertise, also play significant roles in ensuring high-quality products.

2. Raw Materials Used in the Product:

Understanding the raw materials used in?a product is essential for effective costing. Mapping out the specific raw materials allows you to identify reliable suppliers, compare prices, and evaluate the quality and availability of materials.?

At Ideas91 , we help our clients create future-ready solutions by acquiring raw materials at the lowest?cost. Not only that, we also go above and beyond by procuring sustainable raw materials at a competitive price with PEAK (Procurement Excellence Achieved through Knowledge).

We at PEAK map all the components of any product and work to ensure the best pricing is delivered to the customer based on the detailed spec sheet.?

3. Packaging:

Before I jump into this, I would like you to go back to the number of times you have made a purchasing decision based on packaging. Many of us IGNORE the importance of packaging and the perceived value it gives.?

Product packaging is the first impression your customer gets of your brand and what it stands for. The product presentation and quality play important roles in building the customer base. Mapping packaging requirements enables you to source suitable packaging materials, consider sustainability factors, and comply with regulatory requirements as well as create a “WOW” at the unboxing time.?

4. Branding:

Assessing branding considerations in the purchasing process involves aligning the products with the brand's values, aesthetics, and messaging. It helps create a unique identity and perception around a brand, enabling consumers to develop preferences and make informed purchase decisions. This is why selecting suppliers who meet brand standards, ensuring consistent quality and design, and maintaining brand integrity throughout the procurement journey is important.?

5. Minimum Order Quantity (MOQ):

This is a big one! It is important to map the MOQ requirements of manufacturers? to ensure that purchasing decisions align with operational needs and inventory management goals. MOQs help us determine what kind of working capital we will require as a brand - Lower the Minimum Order Quantity (MOQ), the lower will be the working capital requirement. By understanding MOQs, you can evaluate supplier capabilities, negotiate better pricing and terms, and optimise order quantities to minimise costs and avoid excess inventory.?

6. Lead Time:

Mapping lead times is crucial for effective planning, inventory management, and meeting customer demands. Lead time is the period between placing an order for a product or service and its delivery or completion. By understanding the integrated process, you?can anticipate delivery schedules, plan production and service delivery accordingly which helps in aligning accurate expectations with customers as well. The lower the lead time the better it is for you as an organization as it makes you order just in time and keeps your inventory carrying cost to the minimum.?

The ultimate goal of assessing the above-mentioned factors is so you can streamline your procurement process. These factors, if taken into account, will help?identify inefficiencies, bottlenecks, and areas of improvement, allowing for process optimisation and resource allocation.?