3 areas of purchasing analysis you can't overlook - how to make your business more profitable through purchasing analysis?

Whatever the business, purchasing is one of the most important areas. The overall performance of a company often depends on the results achieved by its buyers. It is therefore worth investing both time and resources in a detailed analysis of the structures of the purchasing departments as well as the purchasing processes themselves.

Like purchase analysis can affect the profitability of a company and how to carry it out correctly? What should the scope of a purchasing analysis cover? In which areas do the greatest potential benefits lie? We present the three most relevant areas worth considering.

1. Analysis of total costs - TCO

Total costs are not only limited to the cost of materials or goods, but also storage, handling, switching, administrative, lost profits or troubleshooting costs and many others. Financial costs are also an element that counts as part of total costs, related to, among other things, payment terms and deadlines. Therefore, the first thing to do is to perform a thorough analysis of the total, actual costs of purchasing.

Depending on the specific nature of your company, its industry or the type of suppliers, the factors influencing TCO may differ from those mentioned above. The analysis should therefore include all those that are relevant to your company. This will make it possible to identify possible optimisation potential and accuracy of purchase analysis will increase.

2. Analysis of stocks and optimisation potential

Another area requiring detailed analysis is stock costs. Such a task will allow inventory levels to be checked and optimal ones identified. Optimal ones in the context of cost analysis are those that simultaneously minimise costs and minimise the negative impact of potential shortages. Unfortunately, in most companies, increasing stock levels, at various stages of the process, serves to hide the problem under the carpet rather than solve it.

After analysing the stock, it is possible to reduce the total cost. However, this is not the only benefit of this exercise. Another plus of it is to know the extent of the stock that will positively affect the entire supply chain and will increase the efficiency of production or sales areas.

3. Supplier relationship management

Having analysed inventory and purchasing costs, we can already define the company's needs and identify areas for optimisation. This knowledge will also allow us to building even better and more sustainable relationships with suppliers.

However, the results of the cost analysis should be compared with the results of the supplier evaluation. In this way, we will be able to select those with whom cooperation is most beneficial for our company - also in the long term. Why does this issue concern the purchasing department? Increasingly, its competences and responsibilities within the company also include ensuring the provision of innovative solutions, which also translates into end customer satisfaction.

It should be remembered that purchase analysis should not be a one-off activity; in order to sustain and increase the company's efficiency, it should be carried out periodically. In order for purchasing managers to be able to carry out such analyses efficiently, it is therefore also worth ensuring that regular business training.

Would you like to find out more about purchasing analysis carried out by Eveneum's experts or business training to improve your team's competence? Feel free to contact us.