A purchasing expert’s response: how does purchasing work and who is who?

As a recruitment agency, we are constantly filling new positions in the purchasing department and so we figured it wouldn’t be a bad idea to find out more about how it all comes together and what processes are involved in supplying material into production. So, we addressed an experienced purchasing expert in the automotive industry and global manager, Mr. Lempera, who transformed the whole process into a story for us.

Summer will slowly turn into fall and many experts are saying that the economic boom, which has been battling with inflation for some time now, may possibly lead to a recession. Although it may sound like bad news, even a recession or an economic crisis, is one of the economic cycles, which alternate just like the seasons. Although true, not so regularly. 

The good thing about this is that there is expansion following a depression. However, we’d be getting ahead of ourselves. The economy has to go through the above-mentioned recession (crisis) before expansion. However, what does this all mean for the purchasing department and for the purchasing manager? It means a lot of good but also some bad.

Let’s start off on a sad note – Omitting the fact that certain companies will be forced to lay their employees off, there’s usually a lot of pressure exerted on purchasing managers during a recession  - whether it’d be pressure due to cost savings or reducing inventory. For many purchasing managers, this means more stress because they have to negotiate more with suppliers. After all, this is what purchasing is all about and those employees, who have to be laid off, would give anything for this kind of stress.

But it’s not all bad – companies really think twice before spending money on streamlining a process during an economic recession. There are still many companies, where purchasing is done by anyone, who “just walks by”. Therefore, the logistics and business end of the purchase seem to be lagging behind or the company owner or CEO take care of it in the evening.

However, it’s not that easy

Purchasing is way more complex than just having someone take care of it before going home. During times of shortages, the company owner and CEO realize that having a healthy supply chain that operates on the basis of contracts and appeals is one of the key factors of a well-established and running business. During these periods, it is clear that some companies are beginning to allocate their purchasing matters and make them more independent.

In smaller companies, assigning one individual, in charge of purchases full-time will suffice. However, in larger companies, it is important to take into consideration a wider spectrum of purchased items, more suppliers, more projects and an overall higher turnover. Not only will one purchasing employee not be enough in these cases, it is also a good idea to divide purchasing into more sections with various tasks, so that the purchasing cycle runs smoothly without glitches. So, what are some of the purchasing sections that we may or even should run into?

There are different stages to buying components

If we say that a well-running purchasing department is something like a sturdy foundation, then strategic purchasing represents robust iron reinforcements that are essential to a sturdy foundation. The purpose of strategic purchasing is to set up the supply chain. It has to find the right suppliers, who meet the company’s general requirements, it has to conclude contracts with them and constantly work on improving their mutual cooperation. Strategic purchasing should evaluate the supply chain on a regular basis, which is motivational for future cooperation. Strategic purchasing should be incorporated into the company’s overall strategy and annual budgets.

If we have a solid foundation, we can start building a home. Project purchasing has the supplier portfolio at its disposal. Best case scenario, it has several suppliers available for every commodity, and his job now is to choose the best supplier within the given project, Metaphorically speaking, strategic purchasing asks project purchasing what suppliers he can address for bricks and which suppliers he should address for fillings. The project purchasing manager’s main job is to nominate the best possible suppliers for the given project, order the supplies, obtain the components for sampling and take care of the given components at least until the project starts, at which time, the baton is passed on to the next in line.

Operative purchasing is next in line and it has already received all the necessary information. This department already knows what to order, who to order it from, what the price is and what the delivery terms and conditions are. This department is somewhat of a roof that protects our home from the rain and ensures that everything is complete. However, this does not mean that the operative purchasing department has it easy – on the contrary. Constantly communicating with production, optimizing warehouse inventory and dealing with complications caused by customer claims can literally turn this job into a roller coaster ride.

This is one of the models that work in reality, although it’s definitely not the only one. However, it’s important to realize how important it is to have correct input processes in place. 

Not as easy as it looks at first glance, eh? Buying components for a company is a bit more complex than buying the weekly groceries for the family. Nevertheless, we hope that Mr. Lampera and this article has helped you get an idea of what the purchasing process entails and you may have even ended up learning something new. If you found this topic interesting, you can look forward to more. We are preparing a lot of other content not only in the area of purchasing but also quality, production, controlling and other professions that we currently have available.