Start Management in Practice The Importance of Trading in Purchasing Management

The Importance of Trading in Purchasing Management


From the skills that a purchasing professional needs, negotiation is perhaps one of the most important. A good buyer knows that having a good relationship and a good trading strategy can be differential to closing a good buy for the company.

Below I will list some reasons of the importance of knowing to negotiate for the professional of the area of ​​purchases.

Best prices

This is perhaps the first reason that comes to anyone's mind when talking about negotiation: the best price. The good buyer already knows that the price must be negotiated, especially taking into account the strategic interests of the company, for example if it will have enough cash to finance the purchase and the level of urgency and priority of the item to be bought.

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However, a trend that must be followed is that of not forcing the negotiation on prices very much, so that the purchase is only a gain relation for part of the buyer and loss for part of the supplier. Nowadays, a much more win-win relationship is expected between the parties, because it is easy to understand the harm that a more aggressive practice of seeking lower prices can bring, as the supplier does not have working capital because it has not received the sufficient to maintain its operation, for example.

Best Deadlines

Another important advantage of the negotiation in the management of purchases is to achieve better terms of payment and receipt of the product or provision of the service.

A practical example I like to give: Imagine you have an industry that manufactures any product. For this example I will wear shoes. You have a supplier of the material needed for this, but he wants to renegotiate the price of the raw material he sells you. As you can not go without producing, and it is irreducible in relation to the price, you start to negotiate a better payment term and if before you paid in 15 days, now paid in 30 days. Now, despite the higher price, you can pay the obligations to your supplier after having completed the entire manufacturing process of your product, sell the first units and can already pay you with the money you got using the raw material itself to manufacture this lot. So you have been able to turn your cash flow better and have not paid any obligations before you have sold the product.

Deadlines are essential because of this: you have more capillarity to pay your suppliers including paying them after you have produced your product and already put it on sale in the market.

Alignment with company strategy

In the past, the purchasing sector could be synthesized and recognized in the bureaucratic activity of only making the purchases demanded by the sectors of the company and it was simply to meet all these demanded demands. Nowadays, however, the buyer is already seen as a new key piece for the company to achieve its strategic objectives.

Purchasing management, currently, can not be seen outside the strategic context of the company. To better understand this, let's imagine another simple situation:

You, as a purchasing manager, have several calls to be answered in a single day. If you followed the old mindset, you would solve them by maturity, going from the first call received until the most recent call. With a strategic approach to purchasing, the area manager needs to prioritize purchases in order of importance and impact on the company's strategy, leaving less important purchases off the prioritization list.

In this new context, negotiation is essential since it is an instrument by which the buyer will devote himself to bringing the best conditions to the extremely important items for the company's strategy and thus manages to make a better defined trading strategy for each of the items to be bought, always prioritizing the most important and focusing on the best price and term conditions for these essential items.

As important as the negotiation in Purchasing Management is the organization and control of the process in this area. For this you can know the Purchasing Management Worksheet of LUZ, which allows you to register products and suppliers, make automatic price quotation and generate several general reports on the purchases made. You can check the LUZ Purchasing Management Worksheet and test it for free by clicking here!

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