The purchasing paradigm
There are so many organisations that leave purchasing to anyone that has the time to do it. Even quite large organisations with a turnover of say £30 million can have a disparate and dysfunctional purchasing function.Part of the problem is that we all buy. Everyone buys. Just walking into a supermarket means we are buyers. Because we all buy something, somewhere, most weeks of every year, we all assume we can buy commercially.
Nothing could be further from the truth. Consider that you buy something tomorrow for £100. The real cost to the organisation is a combination of negotiated trade discount, settlement discount and length of credit. So if you agree 2.5% trade, 5% settlement and 60 days account with a supplier, what is the true cost of the deal?
If you have any managers that have a particularly cosy, long standing relationship with any of your major suppliers, try asking them that question.
Be fair though. The answer will depend on your current Cost of Capital.
posted by Tim @ 12:46 AM
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