Strategies for Cost Reduction in Purchasing: A Detailed Report

This report provides an overview of purchasing principles and strategies for cost reduction. It explores various methods employed by buying agents to optimize services and minimize costs. The report delves into techniques such as planning, outsourcing, and just-in-time inventory management to enhance efficiency and reduce expenses. It also covers the importance of coordination with production departments and suppliers, as well as the application of tools like KANBAN. The report further addresses challenges like insufficient manpower and resource constraints, and emphasizes the significance of unbiased results through consultancy. Finally, it concludes with strategies to reduce transportation costs by consolidating shipments and negotiating prices.

PURCHASING PRINCIPLES
Running Head: PURCHASING PRINCIPLES 0

PURCHASING PRINCIPLES 1
Table of Contents
Introduction................................................................................................................................2
Steps to reduce costs..................................................................................................................2
Planning..................................................................................................................................2
Outsourcing............................................................................................................................2
Just in time..............................................................................................................................2
Forecast...................................................................................................................................2
Coordination with the department of production...................................................................2
Coordination with suppliers...................................................................................................2
KANBAN...............................................................................................................................3
Insufficient manpower............................................................................................................3
Resources constraint...............................................................................................................3
Unbiased result.......................................................................................................................3
Conclusion..................................................................................................................................3
References..................................................................................................................................4

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Introduction
Buying agent decreases the cost by delivering services at the desired level. Risk of
supply is one of the significant factors for any business (Pollak & Drucker, 2016). Buying
agent with effective strategies provides perfect desirable services from supplier to business on
time without any backlogs.
Steps to reduce costs
There are many management tools used by buying agent to get the desired service.
Following are the tools:
Planning
The good planning within a time of operations include production schedule, pick up to
delivery (time of transit), and routes of shipping that is imperative. The choices and decisions
at last level lead to delays and missed deadlines and reflected badly in organization finances
and image. Planning at a smart level builds the account of business at an international level
by shipping schedules and time of delivery.
Outsourcing
An operation of supply chain regarding storage or transportation is the reason behind
the outsourcing includes reduction of costs, increased efficiency, and convenience of
entrusting that are a significant aspect of work towards efficient and skilled professionals.
Just in time
One of the important aspects is just in time that is the procedure helps to provide
immediate material to the business without any delay and decrease the cost of inventory
carrying.
Forecast
Many methods of forecasting used by buying agent like exponential forecasting,
weight moving average method, historical analysis, and so on.
Coordination with the department of production
Buying agent continuously updates by the department of production for the
requirement of material.

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Coordination with suppliers
Buying agent regularly maintain built coordination with suppliers for issues of
quality, buying order, delays, and quotations, etc.
KANBAN
This is known as a Japanese tool to control the inventories and very useful tool for
material scheduling. In today's time buying agents use the KANBAN to cover the backlogs.
Buying agent design KANBAN on weekly base or design according to their ease. For
example, in the assembly of production sixteen parts needs in one month or four parts need
every week. A buying agent can design the four KANBAN every month and deliver to a
supplier to complete the order on time without any delays. This depends on the consultation
for the outside source or not (Holder & Steyn, 2011).
Insufficient manpower
Many time organizations do not hold sufficient manpower to provide desirable
service.
Resources constraint
Many time organizations hold no resources to complete the service or task within a
hundred percent on full time.
Unbiased result
Many time organization requires to appoint a consultancy to answer the difficult
problems or logistics or transportation or supply chain to gain the unbiased result (Smith &
Gill, 2013).
Conclusion
The strategies to reduce the cost of transportation carry by decreasing the carrier’s
number. The decreased number of carriers with the remaining carriers will provide a higher
load and enable to lower transportation charges. The second approach would be consolidating
shipment. This increased the load of each trip and decrease the trip number. The third
strategy to reduce transportation service by a particular organization where the manager of
transportation will be capable to negotiate prices at the best level.

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References
Holder, J., & Steyn, M. (2011). Strategies For Reducing Logistics and Supply Chain Costs.
Retrieved 09 19, 2019, from https://aacb.com/reducing-logistics-costs-supply-chain-
costs/
Pollak, S., & Drucker, P. (2016). Inbound logistics. Retrieved 09 19, 2019, from
https://www.inboundlogistics.com/cms/logistics-glossary/
Smith, S., & Gill, A. (2013). The Balance. Retrieved 09 19, 2019, from
https://www.thebalance.com/reducing-transportation-costs