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Most PCB shops loose more money in the purchasing department then they realize. The whole idea behind making money is to keep some of what you bring in. If we can save 10 percent alone in the purchasing department in a $10-million-a-year company, that means a $300,000 profit increase. After all my years in PCB shops, I have seen so many poor purchasing practices, yet I can scream at the top of a mountain and no one listens. So I asked myself, why? Is it because it’s smaller dollars every day and no one sees the damage? Is controlling purchasing such a minor problem that it is overshadowed by huge problems such as poor yields, late deliveries, employee problems, or a lack of cash flow? If your company is suffering from low profits or wishes to make more profits, we need to first slow down, and then reduce the outgoing money. We all know the poor friend that is always buying the next toy or car. He goes out all the time for dinner, spends tons on the next cell phone and other frivolous items, and is always broke. Profitability needs to take control.

To control purchasing in all departments takes a solid system, which you stick too, without compromise. It can be a tough ride until you learn to say, no! Many times the problem with extra controls in departments is the actual person running the area. Oh, don’t try to tell Fred to do something different, he will fight back. So you need to ask the question, will you let one or two hard headed people drive your company to bankruptcy. I hope you’re strong enough to not let one person, and their attitude, stop you from making the company profitable.

Do not buy from the industrial catalog companies, their prices are very high compared to shopping around. For example: exactly the same 50-ft. extension cord from Granger Catalog Company—$52; From a big-box retailer—$39.78. The same 800 lb. shop dolly-truck from a catalog company—$165.75; From a big-box retailer—$49.98. A Skil power saw from a catalog company—$225; From a big-box retailer—$189. All of these examples can be ordered on the Internet, with free delivery, and many big-box retailers have a full-replacement guarantee, where as the catalog company does not. You may hear the purchasing personnel say they don’t have time to shop around for better prices. As the purchasing person, let’s say, you make $18 per hour and can save $120 on a hand truck in 10 minutes by shopping around. What’s hard to understand here? Three dollars of your time saves the company one hundred and twenty dollars.

To control purchasing you need a requisition form to be signed by the owner or high-up manager. On your purchasing request form, have a box to check that specifies “need exactly what’s specified,” in case the product they need must be something special. Have monthly meetings where purchasing personnel review purchases and prove where they shopped around, compared prices, and saved you money.

An easy trick to learn and push is to ask, no demand, a discount. One company I was consulting for had a purchasing guy who did not want to listen; he did not want to hear one word I said, so I made him a deal. I could get a lower price on any item he was buying next or I would walk out the door. I won. The next purchasing item on his list was dry film.

I called the company and asked for the manager. I introduced myself, informed him I was hired to lower purchasing costs, and told him I would be looking to move the large dry-film account to someone else, unless I got a reasonable discount. After a few minutes, we negotiated a five-percent discount. I worked a bit more, adding that I would move some fr4 laminate his way if he could do better. The agreement was that I would buy my base .062 fr4 from him and he would reduce dry-film by 7 percent. We agreed, setting up a meeting in a few days to discuss other possible deals. I gave him the base fr4 because I had already shopped around and his price was better than what we were paying now.

By giving the sales manager a new potential sales opportunity, we saved $20,000 a year, just on the dry film, and an additional $5,000 on the fr4 laminate. I train the purchasing personnel to always ask for a discount. You may think some companies will not give a discount, but would it surprise you to learn that I get 10 percent across the board at a big-box retailer for my construction company because I concentrate my buying at one store, with one manager, in big buys.

The act of becoming a good customer requires a bit of thought. You need to show your loyalty, buy enough to be a good customer, and never be a pain. I save and plan my next buy, list every item the construction company needs, search stores and the Internet for the right part number, and place a significantly large enough order to be a good customer. But I demand a discount. I tell them there is a store right down the road who wants my business. You need to be pushy. You can save your company a hundred- or two-hundred thousand dollars a year by simply implementing a better purchasing strategy. Not all people have the moxy or know-how to get discounts or buy at better prices. Get help. Hire a consultant, someone who has the knowledge and street smarts to help.