The Pros And Cons Of Purchasing Strategy

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Part (A) Purchasing is basically the act of acquiring goods and services of optimal quantity and quality in a timely manner at the lowest cost possible. Purchasing plays an important role in the operational function of a business. Organizations purchase a numberous number of items ranging from raw materials to property. Throughout the years the strategies used for purchasing have evolved significantly to match the requirements of the companies. There has been a transition from traditional purchasing strategies to modern purchasing strategies because nowadays, the process of purchasing is considered to be a key strategic function which is used to control costs and increase output. In their review of literature (Michiel et al., 2006) says that…show more content…
In modern purchasing strategy, employees of the purchasing department are continuously analyzing the buyer’s market to discover innovative ways to reduce costs on purchases. Instead of only aiming on the rates of raw materials or products, purchasing analysts take into consideration many different factors such as taxes that would influence the true cost of the transaction. Strategic sourcing is one of the methods that are being currently used by purchasing departments. Here a deep analysis is done on the product that the company purchases in bulk, in order to develop a strategy to easily procure those products. For this strong relationships with vendors are created through carefully studying their business…show more content…
 Risk management – Having a backup plan in order to face natural and human disasters. Countries like China and India export products to numerous foreign countries but are highly concerned about these risks because a break in supply may result in a heavy losses to the countries who receive Chinese products and services.  Vendor development – Some organizations accept the fact that they are closely associating with their suppliers. Hence they spend some amount of time and money helping them to develop their own supplying processes. Similarly purchasers must help their suppliers in improving their process which directly influence on purchasers profitability.  Global sourcing – The practice of sourcing from the worldwide market for goods and services despite of geographical boundaries. Global sourcing often aims to exploit global efficiencies in the delivery of a product or service.  Supplier optimization – The organization selects an optimum mix of suppliers who can supply goods and services for the lowest price at best terms. So the suppliers who fail to meet the required conditions are rejected. A very common strategy used in many

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