Purchasing Planning is a daily activity of most companies and it is a complex aspect of any production. In a well-established strategy, the goal is to find the best cost benefit of the product you need to buy.

That means, with the lowest cost possible while maintaining the quality and the delivery time that contemplate the needs of the operation. The purchasing planning impacts directly at the financial health of a company and it’s essential to define all commercial activities.

If you are able to find the best prices while keeping the appropriate schedule, you will establish a competitive advantage. Also, it helps reduce costs and therefore raise profitability and improve efficiency.

In this article we’ll talk more about the importance of purchasing planning and how it can help your business.

Definitions of Purchasing Planning

Basically, purchasing planning is the act of forecasting supply necessities of a company and establishing ideal conditions of order. So, it must define dates, payment, quantity and quality of products for each acquisition.

If you are able to forecast demand and previously define available values, your team will have more time to look for better suppliers and conditions. A direct effect of purchasing planning is the reduction of waste and a bigger return of investment.

It also positively affects the customers that receive their orders faster while maintaining quality. So, the consumer satisfaction raises and your operations become more efficient and assertive.

Finally, that planning must be done according to the goals of your company, so you can have positive effects throughout the whole supply chain.

How to develop a Purchasing Planning

Now that you know purchasing planning and the main goals and benefits, it’s important to follow some steps to implement it right. Firstly, you need to constantly look for ways to optimize your system.

Finding the problems that you can easily eliminate will have a positive impact in the agility of your process and raise productivity.

Demand Survey

So, a good first step is to make a demand survey, defining what are the monthly orders and quantities. Also, it’s important to establish the materials needed for every department and the frequency of orders. All of this must be inside your predictions for the inventory policy you use.

Order periodicity

Another overlooked factor of negotiations is the periodicity of the order and how much you buy in each acquisition. With larger quantities you have greater chances of finding good deals. Suppliers negotiate less with lower orders.

Again, it must be on your inventory policy how you want to maintain your warehouse. If you wanna order on a weekly basis and keep a minimum quantity of stock. Or have a bigger space of time between orders and maintain more items on stock.

Determine your budget

A clear notion of your procurement’s department budget is helpful when deciding an inventory policy and making a purchasing planning. With that information you are able to define how much is spent and how you can reduce loss of money and increase profit.

Then, it’s also important for performance indicators, because you are able to register how your procurement is doing over time.

Determine merchandise values

Finally, it’s important to define the actual value of the merchandise you are ordering. See how the market is behaving for that product. So you can see if the prices are right and your estimate is suited to the market.

In sum

An efficient purchasing planning is important for the whole operation and will raise profit, reduce wastes and establish a more optimized workflow. If you want to maintain yourself competitive and stay in the market you need to prioritize your procurement activity and inventory policy.

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