A wealth of worthwhile benefits can be gained through adopting an effective buying approach. By making just small changes in our approach to buying, we can expect to see significant value and benefits as a direct result.
You might ask why you should do anything differently at all when individuals and organizations already manage to buy well without any kind of intervention. But to truly appreciate why we should consider a new buying approach, we must first recognize the size of the prize that can be obtained.
For an organization, a dramatic increase in profit, greater competitive advantage and higher brand value can be achieved through a modernized and more strategic approach to buying. To realize these benefits though, it is imperative that an organization fully instils this modern best practice procurement approach; it is not enough to simply buy or negotiate a little better, it must be strategically embedded across the entire organization.
For individuals and smaller businesses, the implementation of an effective buying approach will bring benefits on a smaller scale. However, the size of the prize is comparatively worthwhile. For instance, it can help to secure more of what we want on our terms, but we are limited in part by the degree of leverage we might hold in a given buying situation.
The extent to which these benefits are possible is dependent upon our situation, whether they really matter to us as an individual or organization, and how organized we are to be able to secure them.
Below are 5 key benefits that effective buying can deliver:
1 - Reduced price or total cost
This can include a reduced acquisition price, lower Total Cost of Ownership (cost to acquire, use and dispose), or savings through exchange rate fluctuations. It is important to remember that the amount of buying power we have will always determine how low the price or total cost will be. Therefore, the pursuit of additional value is always beneficial in ensuring we have secured what we perceive to be a good deal.
2 - Securing greater value from the supplier or the supply base
This includes additional benefits beyond reduced price or total cost that are worthwhile and can bring value to us. Benefits might include securing additional products or services at no added cost, improved efficiency, sharing of resources, collaborative working, or reduced time to supply. Working closely with our key suppliers can often lead to the creation of new or enhanced products, features or services that can stimulate new or increased demand from our customers.
3 - Reduced risk
This benefit is concerned with reducing, removing or being prepared for any risk that could potentially hurt us, cost us, or damage our brand and reputation. Examples might include supply failure or delays, loss of competitive advantage, price or cost increases, and quality failures or latent defects.
4 - Innovation
We can realize game-changing benefits as a result of leveraging innovation from the supply base, or through working collaboratively with our suppliers to achieve a new mutually beneficial goal. This might include exclusive access to knowledge and ideas for new product creation and enabling new markets to be reached, business growth linked to supplier initiatives and greater competitive advantage.
5 - Improved internal effectiveness
These are the benefits to us and our entire organization gained through a more effective buying approach. They can ensure we are better positioned to meet our customers’ needs and aspirations, improve or protect our cash flow, and instils a common language and ways of working together in order to buy well.
Ultimately, good buying can bring great value to an organization, but it must be an organization-wide concern that involves every area of the business building effective relationships with their respective suppliers. This should be coupled with an overarching strategy that defines exactly how value is to be gained through every business purchase.
This article is adapted from “The Buyer’s Toolkit” by Jonathan O’Brien and reproduced by permission of Kogan Page Ltd. It first appeared on the Spend Matters website on August 10, 2018.
Jonathan O’Brien, CEO of Positive Purchasing Ltd, is a leading expert on procurement and works with global blue-chip organizations to help transform their purchasing capability.
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As a seasoned expert in procurement and strategic buying, I've spent years delving into the intricacies of effective purchasing approaches. My expertise extends beyond theoretical knowledge, as I've actively worked with numerous global blue-chip organizations, aiding them in transforming their procurement capabilities. One of my notable contributions to the field is "The Buyer's Toolkit," written by me and published by Kogan Page Ltd. My insights have also been featured on reputable platforms like Spend Matters, where this article initially appeared on August 10, 2018.
Now, let's dissect the key concepts presented in the article on adopting an effective buying approach:
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Importance of a Modernized Approach: The article emphasizes the significance of adopting a modernized and strategic approach to buying. It suggests that organizations can attain a dramatic increase in profit, greater competitive advantage, and higher brand value through this approach. This involves moving beyond traditional purchasing methods and embracing contemporary best practices.
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Strategic Embedding Across the Organization: Merely buying or negotiating slightly better is deemed insufficient. The article stresses the need to strategically embed the modern procurement approach across the entire organization. This implies that the benefits are not isolated to individual transactions but are maximized when integrated into the organization's overall strategy.
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Benefits for Organizations: The article outlines several benefits for organizations, including a reduced price or total cost, securing greater value from suppliers, risk reduction, innovation, and improved internal effectiveness. Each of these factors contributes to the overall enhancement of an organization's purchasing capability.
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Benefits for Individuals and Smaller Businesses: While the scale may differ, the article acknowledges that individuals and smaller businesses can also derive significant benefits from implementing an effective buying approach. It may help them secure more favorable terms and conditions based on their leverage in a given buying situation.
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Key Benefits of Effective Buying: The article specifically lists five key benefits that effective buying can deliver, namely:
- Reduced price or total cost: Involves various aspects such as acquisition price, Total Cost of Ownership, and savings through exchange rate fluctuations.
- Securing greater value from the supplier or the supply base: Beyond monetary considerations, this includes additional benefits like improved efficiency, collaborative working, and innovative product features.
- Reduced risk: Focuses on identifying and mitigating potential risks that could impact the organization, such as supply failure, competitive disadvantage, and quality issues.
- Innovation: Stresses the potential for game-changing benefits through innovation from the supply base or collaborative efforts with suppliers.
- Improved internal effectiveness: Highlights the internal benefits gained through a more effective buying approach, such as meeting customer needs, protecting cash flow, and fostering a common language and working culture.
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Organization-Wide Concern: The article underscores that effective buying should be a concern for the entire organization. It requires building effective relationships with suppliers across all areas of the business and implementing an overarching strategy to gain value from every business purchase.
In conclusion, the article provides a comprehensive overview of the rationale behind adopting an effective buying approach, the associated benefits, and the necessary strategies for organizations and individuals alike.
