• April 05, 2021
  • 4

Understanding Cost Management in purchasing

Understanding Cost Management in purchasing is one of the very important factors that can affect your complete business cycle. As a Purchasing manager, you should know the techniques to manage the cost of purchasing.

Here are some important bullet point you should focus on one

  • Selecting your supplier
  • Extra expenses
  • Product Validity
  • Creating purchase contract/ Purchase Order
  • Return Policies

Selecting your supplier

Selecting the correct supplier for your purchasing is basic, it direct effect your cost and budget purchasing cost. While selecting your vendor or supplier you should consider the below important points.

  • Try to choose local supplies
  • In case you're dealing with an international supplier then you should focus on return policies and shipping cost
  • Do a quick background check about supplier company
  • Be very specific in your agreement 
  • Choose low cost shipping 
  • Negotiate on total which includes product+shipping

Extra expenses

This will hurt your Cost Management, extra expenses are tricks from vendors to gain more profits. They can charge you extra on basis of extra cost which they generally show in the shipping or packaging of your product. To get rid of this, your agreement/contract must mention a clause for extra expenses. This is a good point for Understanding Cost Management in purchasing.

Product Validity

Well, Product Validity is another important factor that can hurt your spend/cost management. You should know each and every detail of the product that you are purchasing. You must get details of validity from the supplier. The validity of the product must be written and signed by both parties. 

Creating purchase contract/ Purchase Order

While creating a Purchase order you must include a proper legit contract with terms and cond conditions, Always take legal help while drafting a contract. 
The contract must include a return policy, validity policy, tax deductions, Shipping policies etc...

The more better contract the more smooth purchasing. Include your contract and terms in PO and get it signed by both parties.

Precautions are always good than accidents, well these are not just lines but key to any successful business. If you are a business owner or a professional you must understand that doing a manual process will be dangerous and can have a lot of errors and mistakes.

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