How To Set Up a Purchasing Program

If you run a small to medium enterprise, chances are you are about to embark on your own business for the first time, or you are already running your business and are looking for ways to help streamline your processes. Setting up a purchasing program is a vital and relatively easy thing to do for your business.

If you are in the retail business, you are probably concerned with inventory, shipping, cost or labor and materials. There are a number of purchasing systems out there that you can buy or download - these systems track your inventory, costs and all other financial aspects related to purchasing, prior to actual sale.

If you are in the business of manufacturing your own products for sale, a number of other factors will now come into play. Take note that you will now be assessing factors on a per-component level. The factors to consider would be labor cost, cost of raw materials, and shipping or deliver costs. These costs should help you determine your price point. Now that you have a price point, how much profit do you stand to make, should you be able to move your inventory out on a regular basis? How much of your product should you produce - remember, you will have to walk the thin line between producing too much or producing too little, so make sure you watch the behavior of the market you are serving.

In setting up the purchasing program, first thing to do is to identify all the major components in your operation. Once identified, take an exhaustive inventory of all these materials, and assign serial numbers for tracking purposes. After production, assign another serial number to the finished product, also for tracking purposes.

Next, identify all the components you purchased which you needed for production. Take note of the number, cost and suppliers of these raw materials, and if possible include them in your tagging. You will now have a more complete idea of how much it costs to create your product, and which suppliers provide you with the raw materials.

For the operation as a whole, also be sure to take an inventory of the other office supplies that you have, which facilitate your operations. Give serial numbers to PCs, fax machines, telephones, printers, any physical tool of work that enables your operation to function. The main idea is to come up with a system that gives you the most detailed picture of your operations possible. You need to know exactly how much it costs you per component used in production versus actual income generated.

You now have an idea of both your running costs and your expected profit margin. Do this on a weekly basis so that you can track both cost and production. Striking a balance between the two can be tricky at first, but if you are able to study all of the factors, including the market behavior in terms of demand for your product, you should be able to come up with a stable purchasing program for your operations.




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