Purchasing service, cost reduction, procurement outsourcing
Based on professional knowledge I offer my services to the companies wherepurchasingis not the strongest business area, or theprocurement processesare not clear, or they have no reliablebaseof suppliersorcontractors, and operate with less favorableconditions. I hope that together with my clients we can establish and maintan such acooperation which can grant financialbenefits for themand can take off the the burden of the purchasing function fromtheir shoulders.
I believe that more and more companies are primarily focused on their core business, and the related workflows, such as accounting, payroll, information technology will be carried out by external experts. Nowadays there are more and more examples for it! In the future, the purchasing will be one of the such areas.
What is the purchasing itself?
Dr. Pal Majoros, Hungarian Head of Department and College Professor of Budapest Business School, defined the concept and functions of the purchasing in the following way (1998):
“The purchasing is such a process, which is much beyond a simple buying. It includes the planning of procurement and the development of procurement strategy. The purchasing itself means the proper supplier selection, contracting, continuous monitoring and development of suppliers, and the coordination of the activities established with the company’s other areas. This way the purchasing contributes to the corporate income.
The primary role of the procurement is ensuring the short and long-term supply, as the absence of raw-material and service supply may interrupt the continuity of the production, and therefore the original purpose of the company, that is the profit.
The cost reduction of supplied materials, goods and service can result in significant cost savings, and therefore in profit growth.
The following contradictions can be occurred during achieving the safe short-term material supply combined with price reduction:
- By buying bigger quantities, discount price can be achieved.
- High stock level improves the security of the supply and helps to solve the problems occurring in the connection with the qualitative and quantitative fluctuations.
- Due to high stock level the storage costs increase and the working capital deposit may cause loss of interests.
The safety and the quality of long term supply can’t be provided without concluding long term contracts. In case of short-term supply the cooperation between the supplier and producer is not appropriate, it doesn’t contribute to the developing of new products, modernization of production process or to the further cost reduction. The mutual trust and cooperation is on low level.
The reason of the above contradictions is that on the one hand the aim is ensuring the supply, but on the other hand this safety costs money. Therefore, in order to achieve the optimal level of supply there is needed to consider and align different factors.”