Retail store purchase department
A company needs goods both for its internal operation and for its external economic activity. Therefore, there is a department that serves as a link between the company and external suppliers: the store purchase department.
The key to the success of this department is based on achieving a balance between the number of components and products, their quality, and having an adequate price range. Supplier management, price negotiations, and payment conditions as well as order tracking, receipt, and verification are roughly the tasks of a store purchase manager. In addition, planning and research are essential to supply what customers will demand in the near future.
Store purchase manager’s goal
He is in charge of establishing the company’s purchasing policy in conjunction with the production and financial department. They are responsible for acquiring goods at the best price without compromising the quality and reliability of their delivery. The store purchase manager must ensure that the supply chain flows transparently, agilely, and efficiently.
Essential competencies of a store purchase manager
In addition to the studies, knowledge, and experience for this position, it is important to highlight the attitudes and ways of being necessary that the position requires.
Strategic planning and organizational capacity
These are the two most important necessary skills. They are of vital importance since this job is a fundamental piece in the development of the activity of a company.
Leadership and negotiation capacity
The Store Purchase Manager aims to close deals with the most advantageous conditions for the company. On the other hand, the supplier is able to sell the merchandise with the greatest possible margin. Both must be able to negotiate a price with which both feel satisfied maintaining cordiality and respect. In addition to negotiating the price, other variables are also agreed upon, such as delivery date, payment terms, etc.
Analytical capacity and decision power
In this way, the purchasing manager will process the information in a way that will subsequently help him make better decisions and obtain better results.
Future vision
Global events can influence the prices of many raw materials. A good store purchase manager will reduce the risks to the minimum possible. To do this, he will use hedging techniques where costs can be predetermined and prices locked before receiving the material.
Store purchase manager tasks
Purchase planning and management
The purchasing manager has to adapt the activities of his department based on a budget. He also has to distribute the work among the members of his team.
Purchases at the best price
Despite not being the only parameter to consider, price is one of the most important elements for this department. Within the organization, the purchasing department (PD) usually engages between 60 and 80% of the company budget. Therefore, in order to remain competitive administratively, the PD must control costs in order to avoid compromising the profit margins.
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Given the responsibility, he/she must be aware of any altercation that may affect the department.
Supplier Management
Extensive knowledge of the suppliers of the sector is necessary. The PM will manage the information related to the material and product catalog, the qualities versus price, delivery times, etc. Getting the lowest price is not always the most important thing for a purchasing manager. Reliability, efficiency, and flexibility are even more important. If a supplier fails at a key moment for the retail store, the job of the purchasing manager could be compromised. It is essential to always look for new suppliers that may be better than those already established.
Negotiation of supply conditions
In addition to having good suppliers, it is very important to negotiate and agree on conditions that are favorable for the company of the purchasing manager. It is very important to reach a balance where the supplier and the sales manager are comfortable with the conditions.
Avoiding stockout
It is vital for the purchasing manager to know the best quantity of a product to order. Falling short can lead to large economic losses and overbuying also has negative consequences since storage space is limited and represents a monetary cost. In addition, investing in the stock of a particular product means that this capital cannot be invested in other products.
Quality control of the merchandise
Once the order arrives, the purchasing manager must verify that the product meets the agreed quality and the quantity is correct. If this is not the case, the supplier will need to be contacted to begin the relevant claim.
Document management of orders
The purchasing manager is responsible for the documentary control of purchases as well as for improving their protocols to save time and resources.
Designing the purchasing department structure
The purchasing manager is responsible for determining the functions of the team members. He/she is also in charge of hiring the best person for each position.
Cooperation between departments of the organization
The PD needs the contact and knowledge of other departments such as production for the supply of materials, finance to manage expenses, quality to verify that the quality of purchases meets expectations, sales, etc.
Purchase process step-by-step
Requisition request
The following information needs to be indicated:
- Products
- Quantity
- Delivery date
- Who makes the purchase requisition?
- Additional information such as vendor recommendations or information about the last purchase made for this product.
Supplier Analysis
The DC must analyze the available suppliers to contact them and request quotations from each of them. In addition, discounts and delivery times will be requested.
Quotation Analysis
Once the offers of the different suppliers have been received, the solvency and reliability, the price, and the quality of the products are studied and considered.
Purchase order
When the supplier has been chosen, the purchase order will be sent and the unit price, quality, payment conditions, delivery date, and order number with the signatures of those responsible will be specified.
Order tracking
The purchasing manager may verify if the order is being transported as established in the agreement.
Reception of order
When the order is received, quantity and quality are verified.
Order Registration
After checking the order, it is established in the company registration system as completed.
Purchase requisition: document requesting the acquisition of a product or service internal to the company. This document is sent to DC and it approves or discards it.
The Kraljic Matrix, a fundamental tool of the store purchase department
This matrix allows locating each supplier based on their cost and strategic needs in the company. Therefore, depending on its position in the matrix, it will be decided if the price needs to be negotiated more, find new ones, or strengthen the relationship with the supplier given the high quality of its products. In this way, the weight of each supplier can be determined within the supply chain.
¿How to create the matrix?
The matrix has two axes:
The risk of supply
The horizontal axis shows the risk from more to less. For example, for products with many suppliers, the risk will be low. However, for products with fewer suppliers, the risk will be much higher. Hence, the RA can have the vision to know with which suppliers you can negotiate harder and with which ones the relationship should be shielded.
The impact of the results on the company
At the top of the vertical axis, we will place the products that have a great strategic value for the company or because of their high cost for the company. For example, if a recycled line is created they add value to the product itself and then, they are more expensive. Its high cost increases the importance of this merchandise within the organization.
The matrix is divided into 4 sections:
- Leverage items. These are the commodities, products of high value for the company but offered by many suppliers. They usually have the same quality and price, so usually, it is not a big problem to change suppliers.
- Strategic items. These are important products for the company and whose offer is limited, making it more difficult to change suppliers. It is essential to shield the relationship to ensure the supply.
- Non-critical items. These are unimportant products for the daily operation of the company, so any change will not have a great impact on the organization. The management of their acquisition should be minimized as it doesn’t compromise the company. An example of them would be office supplies or cleaning supplies. Neither assumes a strategic differential value.
- Bottleneck items. These are the products sold by one or very few suppliers and despite having a low impact on the activity they can be a risk. An example would be for example the implementation of specialized software for the company. They can be a fundamental part of the company and have very few suppliers, so it is important to maintain a good relationship and minimize the linkage.
Although this matrix can be very useful to have a global vision of supplier management, it will be necessary to have experts in the field who have experience in the market.
You can continue discovering more information about the purchasing department in this article.
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