Purchasing managers oversee the work of buyers and purchasing agents. They plan, direct, and coordinate the buying obtainment of products, services, and materials for retailer organizations and wholesalers. They also handle complicated purchases and negotiations. They are also responsible for the supervision of purchasing and buyer agents as well to ensure the best procurements, products, and services are provided. This includes setting processes in on how often their department will get price quotes for items, how many bids to accept, and which vendors to consider.
Watch a video to learn what a purchasing manager does.
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How to Become a Purchasing Manager
Purchasing managers typically require a bachelor’s degree in business science, logistics, electrical or mechanical engineering, or business. Some employers desire candidates seeking advancement to top-level purchasing manager jobs to hold a master’s degree. Work experience of at least 5 years is usually expected as a purchasing agent or buyer before one can advance to the purchasing manager.
In addition, some employers require certification, while others do not. The certification involves written or oral exams and have requirements for education and work experience. Certification varies and can be obtained through a variety of organizations. Some examples include the Institute for Supply Management, American Production and Inventory Control Society (APICS), American Purchasing Society, or the Institute for Public procurement just to mention a few. All of the organizations have different requirements therefore we encourage you to research which one may be most beneficial for you.
Job Description of a Purchasing Manager
Purchasing managers coordinate the activities of buyers and purchasing agents in buying equipment, supplies, or materials for the organization they work for. They evaluate potential suppliers on the basis of quality, price, and speed of delivery. He or she has the job of interviewing vendors and visiting supplier’s plants and distribution centers to see what services, products, and prices they offer. In doing so they determine the best avenue and products for the organization or business they are representing.
Purchasing managers attend meetings, conferences, and trade shows to remain current with industry trends and make contacts with suppliers. They analyze financial reports, price proposals, and other information in order to make the best price decisions. He or she may also negotiate contracts, delivery of products, and ensure suppliers and vendors are in compliance with the terms and conditions of the contract.
Purchasing Managers work full time and primarily in offices. On occasion travel and overtime is required especially for those working for global and national markets. According to the Bureau of Labor Statistics the majority of purchasing managers work for manufacturing companies followed by enterprises and wholesales organizations.
Purchasing Manager Career Video Transcript
Purchasing managers, buyers, and purchasing agents have two major goals: to buy goods their company can sell at a profit, and to increase their customer base by offering products that consumers want. Purchasing agents buy items that support an organization’s operation, such as chemicals or industrial equipment for a manufacturer. Buyers purchase goods for resale to consumers, such as clothing or electronics.
Purchasing managers oversee the work of buyers and agents and handle more complex tasks. The most challenging part of the job is predicting which items will be popular, and which might end up left unsold in a warehouse or hanging on a store’s markdown racks which takes a combination of good planning, decisiveness, and the confidence to trust their intuition. Buyers and purchasers research industry trends, study past sales, and listen to customer feedback to identify buying patterns. They carefully select product suppliers that will meet the quality, cost, and delivery date promised.
Most buyers, purchasing agents, and managers work in offices full time, with some travel to see suppliers. Overtime is common. The largest employers of these positions are in the manufacturing industry, wholesale and retail trade, and the federal government. Buyers and purchasing agents often need a bachelor’s degree and related experience, though a high school diploma suffices for some positions. Purchasing managers usually have at least a bachelor’s degree, and several years’ work experience as a buyer or purchasing agent.
Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, Purchasing Managers, Buyers, and Purchasing Agents.
National Center for O*NET Development. 11-3061.00. O*NET OnLine.
The career video is in the public domain from the U. S. Department of Labor, Employment and Training Administration.
Purchasing is responsible for the procurement process. This means it ensures the supply of goods, production materials and equipment so that a smooth production and sales process can take place. For this, goods must be procured at the right time, in the right quantity, and of the right quantity. If the purchasing process falls down, there's a risk that the business will not be able to manufacture products or keep the shelves stocked with sufficient volume to meet customer demand.
All businesses need specific goods, materials and equipment to manufacture products, offer goods for sale to customers, or perform the services they are selling. Someone has to ensure that these goods are bought into the company, in the right volume and at the right time, to meet the company's requirements. That role falls to the purchasing, or purchase, department.
The role itself is a broad one, covering such areas as market analysis, negotiations with suppliers and producers, transport, storage options, procurement technologies and order times to ensure that goods are bought as economically and time-efficiently as possible. Specific functions include:
Since the role of the purchase department is so varied, we tend to divide it up into two sub-functions: strategic purchasing and operational purchasing.
Strategic purchasing is responsible for planning all the high-level tasks and decisions that go hand in hand with procurement. In this role, the purchase department will set the overall direction of procurement based on the company's needs and goals, evaluate suppliers and develop long-term relationships across the supply chain. The objective is to source goods as economically as possible whilst ensuring the lowest possible risk to the business. This might include decisions about whether the products or components are manufactured in-house or purchased from external suppliers.
Operational purchasing, also known as tactical purchasing, takes care of the administrative aspects of purchasing. It's a short-term, transactional role which focuses on repeat ordering, receiving inventory and invoice payments as well as the handling of returns and complaints. With its operational hat on, the purchasing department will be more concerned with keeping the production line running than with understanding supplier capabilities or supporting the company's long-term needs.
Now that you know what the purchase department is, let's look at some of its key roles and functions.
The starting point for strategic purchasing is to benchmark how the business is currently performing, how resources are being used, and what the purchasing costs are per department, team or job function. The purchase department will then look at the company's growth trajectory and come up with a plan to help the business perform better and/ or save costs.
At the same time, the purchasing department will analyze the supplier's market to see if the company is using the right supplier, at the right price point, to meet its business needs. The team might compare multiple suppliers, including those based in other countries, to prepare a shortlist of possible suppliers.
Each business will have its own requirements but generally, the team will be looking at each supplier's cost, quality, reputation, reliability, production capacity and delivery schedules before awarding a supplier contract. Technological capability may be a consideration in some industries. A supplier's inability to meet any of these requirements could result in significant losses for the company so it's important to get these decisions right. In large companies, the department might also be making decisions about whether to make the products in-house.
Finding the right goods at the right price can be complex and time-consuming, and the purchasing department may use a competitive tender (bidding) process to choose a supplier. This normally involves the issue of a "Request for Proposal" which invites interested suppliers to submit a quote or bid and explain how they meet the selection criteria.
The team might also call for financial statements, references and credit reports so they can assess the health of the bidding company. Price negotiations may follow as the purchasing department tries to achieve the best possible unit price. This might include negotiating discounts based on volume, tiered or graduated pricing depending on the company's needs.
It's not unusual for larger companies to have multiple suppliers on their books, and an essential role of the purchase department is to manage and maintain these relationships. Close cooperation with key suppliers means you can share knowledge about market shifts, new products and technologies or other factors that could help you stay ahead of the competition.
A retail business, for example, should be sharing feedback from customers about existing products and using this knowledge to innovate new and improved product offerings.
At the operational level, it's essential to have the right quantities of raw materials in the warehouse or the right quantities of products on the shelf at exactly the time when the customer walks through the door. Running out of products means you lose sales and your customers may turn to competitors to get the products they needs. Overstocking means you potentially will have to pay more in storage costs and you run the risk of the product becoming obsolete before you have the opportunity to use or sell it.
Generally, the purchasing department will have systems in place which trigger a stock order whenever a certain quantity of inventory is reached. For those that use a merchandise management systems, the minimum stock and the order quantity are generally predefined and are automatically ordered by the software.
This means a well-stocked warehouse is guaranteed, and the purchase department can focus on checking items and invoices for accuracy, and coordinating delivery dates with the warehouse team.
Quality control is an essential part of the procurement process. The purchase department needs to continually inspect the quality, performance and reliability of the supplier to ensure they do not lapse into complacency. For suppliers in other countries, this might include monitoring workers' right, compensation and working conditions. It's important to be clear where accountability lies.
It's often said that "what gets measured gets done." One essential role of the purchasing department is to analyze and measure performance data to ensure that suppliers are achieving the desired outcomes, in accordance with the company's procurement strategy. For example, the department might measure:
These metrics enable the purchase department to assess how well suppliers are fulfilling the company's requirements, how well they respond to urgent demand, and whether to company is over-relying on just one or two key suppliers which could leave the company vulnerable if the supplier goes bust. Armed with this data, the purchasing department can then revisit the strategic plan and make adjustments as necessary.