Successful businesses shouldn’t wait for a recession to examine their purchasing practices, but it certainly does concentrate the mind, said CPI chief executive Mike Taylor, who is experiencing his fourth recession since founding Fulmar in 1971.

In one of the quotes of the year, he said that he was horrified to find that we’d let our roller towel price slip. While  musing, the comment indicates how seriously Taylor takes the purchasing of even apparently insignificant items, and he urges all business owners to do the same by dedicating an appropriate amount of management time and attention to this key area. Purchasing is an activity for professionals – the amounts involved are likely to be similar to a company’s wages bill and, therefore, it requires a great deal of focus.

Although Taylor runs a large organisation, he firmly believes that size doesn’t matter when it comes to the benefits offered by good buying.

Yes, bigger companies can save bigger amounts, but small companies can save big percentages relative to the size of their operation. Purchasing is not ordering. Profit is hard earned and bad buying is just burning money. In this respect, buying is as important as sales.

It’s important to collect good data on expenditure and suppliers over time in order to benchmark effectively. Ask yourself: are you dealing with the right number of suppliers, and how easy is it to beat your current deals?

Mind over matter
A structured approach to major capex items is, of course, imperative, and it’s vital to have a comprehensive checklist. Thrash out the details of all the relevant aspects, such as installation costs, training, consumables, warranty and  maintenance. And do this when the buyer is in the most powerful position: before any deal is struck. It’s hopeless to go back and try to renegotiate such details subsequently. Taylor described the CPI approach as psychological warfare, urging buyers to move up the hierarchy at supplier organisations in order to gain the most beneficial transaction, adding that even when negotiations get tough, there is always a better deal – don’t believe everything you are told and don’t send a boy to do a man’s job.

Taylor’s team has also created a standard tool for evaluating digital printing kit in order to have a meaningful way of comparing formats, running speeds, running costs, and break points. He espouses the benefits of preferred supplier agreements where appropriate, citing the example of a new ink contract that reduced ink waste by 30% but also provided additional benefits such as faster ink matching, reduced packaging waste, and reduced transport costs.

However, it’s the seemingly small items and routine purchases where serious long-term savings can be made. I urge you to spend some time looking at the purchase orders. Take a really good look at what you buy in your company. There’s an awful lot to be saved on small deals.

As well as the aforementioned roller towels, Taylor also highlighted fire extinguisher maintenance as an expense that can be totally out of control. His list of smaller deals to target also includes mobile phones (we made a 75% saving), machine wipes, photocopier deals, portable appliance testing, fixed wire testing, and cleaning contracts.

Taylor’s presentation included a pithy phrase that neatly sums up the benefits of buying to the very best of one’s abilities: Every pound saved by good purchasing is a pound of additional profit.

THE SESSION CONDENSED
• Purchasing is not ordering. Are you buying well? It’s important to have good data on expenditure and suppliers over time in order to benchmark effectively
• Take a structured approach to major purchases, and be sure that all critical aspects are covered during the negotiations. Something like training will end up costing a lot more if it’s tacked on afterwards
• Set some time aside to read through your company’s purchase orders – you’ll be amazed at what you find. Paying more attention to smaller deals can result in big savings over time
• Assign one person to manage the buying function, then delegate the ongoing ordering
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