A buyer’s primary job is to buy, right? Many companies require that buyers or purchasers simply execute purchase orders; assemble, issue and score RFQs; and negotiate deals with suppliers. That is all low value work!
In most cases, the focus and yield from those activities is getting parts on time so as not to shut down production or miss order shipments, and to try to get materials as cheaply as possible to reduce materials costs. Often companies find that at best, those activities might reduce costs 2 to 5% per year, but in many cases, commodity prices drive materials costs, so even that level of performance is hard to achieve. Not only that, but the best suppliers often don’t respond to RFQs, so quality and performance may be substandard as well.
So what is the best use of buyers? Turn them into Supplier Business Managers, to develop relationships with suppliers that can yield from 5% to 20% reductions in cost! An SBM’s key responsibilities are:
- Rationalize the supplier base to focus on the few key/best suppliers
- Develop and execute the supplier partnership program
- Minimize inventory through use of auto-replenishment systems
- Provide supplier performance feedback
- Conduct supplier visits to review performance, capabilities and opportunities for outsourcing
- Provide forecasts of future demand
- Monitor commodity cost changes leading to adjusted agreements
These responsibilities can lead to much broader cost reductions than just cheaper materials costs. The overall supplier relationship can provide savings in many categories leading to 5 to 20% annual reductions and much lower inventory levels, freeing up cash.
How do you use your buyers? Can they be a major profit producer for your company? If you would like to explore how to make that transition, contact me.
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