My experience as buyer started at 2001. In that time I was working as Logistics Technician (the most ungrateful job that I have ever done) and the company needed a person (they called a talent) to set up and develop a new working position: general expenses buyer (it also knows as overheads buyer or indirect family buyer).
All the products regarding to finish good, work in progress and raw material were clearly defined. However the company needed a control over the general expenses as for example cleaning, phone (fix and mobile lines), shipping and carriage, business trip, indirect labour, investments, facilities,...
Scope of the general expenses.
The first step to develop this new position was regarding the amount of purchases clasified as general expenses (I mean the total turnover). To know that, I had to "invest" some time with the financial department, more specifically with management control. The target was to identify all the direct purchases and the rest (it is something like the "black box" of Adam Smith) would be classified as indirect purchases.
Detecting the families.
Once you have your "black box" the next step must be classified the costs by families. In this time the identification must be done supplier by supplier. You must identify, for example, all the logistics suppliers and one by one, determine the costs from transportation (when the cost is out of production), package (when the cost is out of the cost break-down of any particular production reference), customs, express deliveries, additional inventories or warehousing needs.
When I was working in this company I have to use a clasification created for this purpose: the bosard code. In last clasifications that I have had to prepare, I have been working with the Spanish General Accounting Plan (group 6).
This step is very important. Why? If you have a clear scope of the total amount of overheads purchase you can organize the families to negotiate with the suppliers. However, before of start the negotiations with the suppliers there is a pending task to be done.
Market research.
In my first job, when I started to identify the suppliers and the families, I realized about the quantity of suppliers able to deliver the same good or service.
For example the company had two suppliers to deliver two different kind of papers, one of 80grs and another one of 100grs (the first one to print in black and white and the second one to print in colour).
My first task was to look for a supplier in the market able to deliver this products and any other potential ones (as office supplies) in order to compare my current prices with the market prices. The second task (with the market price in your pocket) was to have a meeting with the suppliers (separately) and try to get the best price if one supplier deliver everything and compare with the first one.
As consequence, before to negotiate with any supplier it is very important to know the market and the prices. If you do not know the real situation of the market it will be very complex to reach a good price with the supplier, remember your credibility it is very important. You must be honest in order to reach the best agreements.
Knowing your suppliers.
During the time you are preparing all the information regarding turnovers, familities, prices,... you must foresee some time in order to have a first meeting with your current suppliers to know more about the products or services they are handing. It would be very interesting to prepare a panel suppliers with the current situation and the potential with your expectatives and the supplier ones.
Try to know if the supplier is happy working with you, if the supplier wants to deliver more references or prefers not to work with you anymore. Look for references and news of the supplier and try to guess why this supplier is working with you.
With the market study and knowing your suppliers, there is still pending any other task before to negotiate with the suppliers: meet company needs.
Communication with your customers.
If you know the market, current suppliers and potential suppliers, you must know the needs of your company before to negotiate with the suppliers.
A buyer must be a very balanced person. By one hand the buyer must work with suppliers and try to not to lose the negotiation power, but by other hand, the bust must be helpful and careful with the needs of the company.
The needs of maintenance department are very different from the needs of Human Resources, Quality or IT deparments. A meeting with all the departments to collect the needs, claims, improvements, doubts, quality of the products, delivery conditions,... is mandatory. If you decide to purchase a new product regardless your customer needs, your negotiation is "doomed to die".
With this four steps you are able to be in the conditions to start to prepare the negotiation with your suppliers, so you already know the families, the suppliers, the customer needs and the market situation.
The next step is work deeply to prepare your trading schedule (your target, evaluate the stakes, assess the forces in play, prepare the document, set up the planning, plan the strategy and build an escenario for the meeting).
What do you think?
Please, let your comments, suggestions,impression, ideas,...
(*) Note: All this information has been prepared regarding my experiences, different trainings and courses.
