Base Your Purchasing Decisions on a Landed Cost

A vendor’s quoted price of an item is commonly referred to as the “replacement cost”.  Many organizations make the mistake of basing their purchasing decisions and profitability analysis on this amount.  But, in many cases, other costs are incurred when buying a...

Evaluating New Technology

On an average workday, I receive five to 10 emails advertising a new technology.  Each of these “revolutionary advances” promises to: Lower operating costs Increase sales Improve profitability How do you decide which of these opportunities is a worthwhile investment? ...

Average vs Anticipated Lead Times

Maintaining a high level of customer service is primarily dependent on when you reorder a product.  For example, let’s say you sell two pieces of a product per day, and the item has a seven-day lead time.  That is, it takes seven days to receive a product once it has...

What Your Buyers Should be Doing – Part V

Determine the Best Forecast Formula Last month, we discussed the fact that a single forecast formula will not accurately predict future usage for all your stocked products.  But how do you determine the best forecast formula to use for each item? We have found that...

What Your Buyers Should be Doing – Part IV

Understanding the Elements of a Forecast A demand forecast is a prediction of the quantity of a specific product that will be sold or used in an upcoming time period (usually a month).  The accuracy of your forecast is a determining factor in whether or not you will...

What Your Buyers Should be Doing – Part III

Monitoring Your Forecast Accuracy Replenishment capabilities in most computer software packages answer two vital questions:   When a stocked item needs to be reordered to avoid a stockout? How much of the product should be ordered?   A critical factor in answering...

What Your Buyers Should be Doing – Part II

Most organizations are continually buying new products.  Unfortunately, part of the quantity of many of these items is “D.O.A.” or dead on arrival.  That is, you do not sell the entire initial purchase quantity.  For example, you might buy a case of 48 pieces of an...