If you are a buyer or purchasing manager for business, which of the following ways do you buy MRO items (maintenance, repair, and operating supplies)?

Buy only when immediately needed.
Buy expected amount needed for a month or two.
Buy amount depending on cost and price breaks.
Allow suppliers to estimate our needs and buy and store that amount.
Have supplier store amount for us that we use in a reasonable time.
Store amount by item category depending on cost and usage.

Companies may not be soliciting business during this slump in activity. They may have laid off salespeop..." />

Make Your Deals Now

Date: 10/01/2010

Companies may not be soliciting business during this slump in activity. They may have laid off salespeople and cut back on their labor force so they don’t need as many orders to keep afloat. They are likely to assume that buyers don’t have orders to place so they should not waste effort trying to obtain the impossible.

In addition, short-term business loans and credit are very tight. Suppliers can’t afford to increase inventories or expand. But this may work to the buyer’s advantage, if the buying organization has cash available to help finance needs. Even if the buyer doesn’t want to provide any funds, the seller can take firm orders to the bank as proof of business obtained. This will help them get financing.

If the buyer is confident of future requirements of a particular product or group of products, especially long-term needs, this may be the time for a rare opportunity. It is the time to shop and make proposals to lock-in low prices (see Lesson 120 article on page 10) or other favorable terms and conditions for an extended period.

Sellers are not particularly interested in long-term pricing during periods of high inflation, but inflation is presently low and companies are more willing to make deals if they are approached with attractive offers. It may be an ideal time to purchase an expensive piece of capital equipment with long lead time.

All of this does not mean you shouldn’t shop. Neither does it mean you necessarily must change sources. The best approach is to use traditional purchasing best practices by getting numerous bids, negotiating for the best offers and make innovative counter offers that include things that are not likely to be accepted during boom times.

Those who buy from low cost international sources may find that domestic sources now are more competitive. The cost of products from countries such as China have gone up because their economy has been doing so well. Their labor rates have increased. Buyers should not assume that products once purchased overseas because of their low cost are still more expensive domestically. Foreign sources are not as likely to be receptive to long-term agreements because of exchange rate uncertainties and other factors.