Answer to Question #202102 in Management for zile

Question

Examine the various ways in which efficient capital equipment purchasing can contribute greatly to the overall profitability and prosperity of a farming company. Include examples to support your answer. 

Answer 1

Centralize purchasing

This is a commonly used strategy whereby purchasing for the entire company is made by one department. It allows for a lot more control over purchasing on all levels and helps minimize waste.

Plan for purchases

Identify preferred suppliers in different categories based on criteria such as quality, price and delivery history. In this way, your company will have options and can make better informed decisions on purchases.

This is valuable in the event a main supplier raises its prices or ceases production of the product in question. Buying exclusively from one supplier can be risky, unless the product is highly specialized.

Focus on quality

Companies need to go beyond working on the quality of their own products to ensure their suppliers are just as vigilant in their operations.

Evaluate and analyze the quality of your suppliers’ processes and products, and then choose those that will consistently deliver on their promises to you.

Purchase locally

If it can be done without compromising quality or price competitiveness, look to purchase locally. It will help you to create close relationships with your suppliers and reduce shipping costs.

Build long-term supplier relationships

Developing long-term relationships with suppliers creates a mutually beneficial partnership.

Better quality products and price reductions are the principal advantages of strong relationships and longer term contracts. Open communication between buyer and supplier can also lead to more tailored services.

Explore outsourcing some purchasing

It’s important that companies recognize their core purchasing competencies.

They may be effective at acquiring supplies they commonly use. But if a special project calls for unfamiliar products, it can be helpful to seek the advice of a purchasing consultant that specializes in the product in question.