In the beginning, procurement can seem somewhat abstract. You study about supplier selection, lead time, cost, and purchase orders, but nothing seems to stick in your brain. This is usually because your studies are stuck in the realm of definitions. It might help to think of procurement as a series of decisions under constraints. What? From Whom? When? With what constraints? And what are the trade-offs? Once you get into working directly with these questions, the material will become much less abstract.
I think a really good exercise would be to pick any one consumable that an SMB would need on a regular basis, (tape, paper, soap, etc.) and then invent a small scenario for buying it. Imagine you’re running low, you have steady demand, and you have two suppliers. One is cheaper, but will take longer to ship. The other will ship it to you faster, but it’s more expensive. You aren’t looking for the “right answer”. You’re just trying to articulate your decision with a few relevant data points. This type of exercise will help you develop the core skill of procurement, which is balancing trade-offs rather than looking for the “right answer”. One error a lot of people make when first starting out is choosing a supplier solely on cost.
At first blush, it makes sense to do this because you are saving your company money, right? Well, this isn’t always the case. Often times, the cheapest price will mean a longer lead time. Or a minimum order size. Or a supplier who ships you crappy products. Your exercise here is to ensure you aren’t falling into the trap of considering cost as the only factor in your purchasing decision. Every time you evaluate two or more options for a purchasing decision, I want you to write a paragraph. In the first sentence, describe the cost implications. In the second sentence, describe the time implications.
And in the third sentence, describe the reliability implications. When you discipline yourself to consider more than one factor in a purchasing decision, you’ll ensure that you’re not overlooking something that may cost you in the end. If you find yourself getting bored with your studies, try to shorten the amount of time between learning a concept and applying it to a scenario. Take 15 minutes and work out one scenario. Use the first 3 minutes to describe the item you’re purchasing and the immediate need. Then use the next 7 minutes comparing two suppliers in prose (not using technical terms).
Then take the last 5 minutes writing a sentence that describes your purchasing decision and another sentence that describes the risk you just took on. This should give you a nice condensed activity that you can use to evaluate different products throughout the week. The key here is to do it over and over again, so your purchasing judgment can develop through comparison and not memorization. Another area that seems to trip up new students is that they over-think things. There seems to be a lot of anxiety about making the “wrong” decision.
When you’re just starting out, try to approach your studies as editing rather than publishing. Take 5 minutes and make a decision. Then come back the next day and change your mind. What made you change your mind? Was it the lead time? The minimum order quantity? The storage problem? The supplier’s consistency? When you ask yourself these questions, you’re practicing the decision-making process that is used in purchasing, and you’re developing your judgment by seeing how it changes as new information becomes available.
Eventually, your purchasing studies will become much less about memorizing terms and much more about anticipating risks. A long lead time can affect your inventory turns. An amazing discount can affect your inventory turns. A really convenient supplier can affect your inventory turns if they’re really inconsistent. When you start to notice these connections, your studies will no longer seem abstract. They will seem like a skill that is developing from practice, from editing, and from making simple purchasing decisions.