How to Manage Purchasing During Crisis?

According to Eberhard, "crisis" is defined as a situation that threatens the basic objectives of organizations, endangers the integrity of the organization, and creates tension and confusion among members due to unclear source and limited time for decision making.

What is crisis management? In crisis situations, crisis management will become more difficult due to insufficient preventive and compliance mechanisms. The process of intervening in this process is called crisis management. It is important to translate uncertainties experienced during a crisis into opportunities. Especially that you will benefit from the training you received in advance. Forecasts and predictions are also useful in order to avoid hazards. During a crisis, purchasing management is crucial in controlling your business costs and reducing the losses your business will suffer.

An Example of Successful Procurement Management during Crisis

One of the most successful examples of purchasing management during a crisis is what happened at Petkim. During the global crisis of 2008, many companies were affected by the economic crisis. Prices were falling rapidly and there were still high costs in the inventory and production processes. High-cost inflows and low-price sales have caused many companies to survive the crisis. Petkim survived the process safely by following predictive strategies.

The company has sold high-cost products with minimal losses following the fast price decreases, and has decided to stop the inflows of raw materials. Canceled orders and decreased capacity utilization of the factories. Sales strategy is followed first, then production strategy. This means that the high cost items available have been reduced and subsequently focused on sales. Its continued pursuit of high-cost orders could have prevented it from the 2008 financial crisis. However, a successful purchasing strategy has made the company’s business easier. Of course, the company's projections and on-the-spot forecasts in this direction helped it weather the crisis.

To weather the crisis, predictability and accurate forecasts help minimize risks. Sometimes minimizing stocks may help overcome this process.

Strategies for Successful Purchasing Management in the Crisis

Although changing exchange rates have created small waves of panic for buyers, one of the most important things is to remain calm and not to panic. Given that trade wars have fueled the crisis, collapses in the pricing mechanism are inevitable. Additional customs duties impose challenging consequences for companies as a result of quotas on raw materials. Global issues and sectoral uncertainties are the root of the issue.

• Businesses should properly stock-control to manage their purchases during a crisis. Flexible production activities should be avoided and unnecessary stocks should be prevented from creating financial costs.

• They should focus on dynamic procurement plans, and production plans should be carried out well.

• The supplier pool needs to be expanded and competition between suppliers needs to be increased.

• Instead of purchasing prices from a single supplier, pricing must be received from at least 3 suppliers.

• The relations with suppliers should be improved and improvement of them should be ensured. Relations with suppliers who are not open to development and do not want to improve should be terminated.

• Forecasts and predictions should be made for the control of fluctuations in exchange rates and in the market. Automated systems should be deployed for these insights and forecasts instead of manual processes.

SmartProcure can see all the data in one place, on one screen, detecting missed errors by your team and helping you to prevent potential damages. To be prepared for every scenario, this software monitors the budget you spend on your project and allows you to take precautions in advance. SmartProcure ensures predictability by addressing change in exchange rates, commodity dependency and external factors as a multiplier. Compares the differences and helps to identify pivot points. You can monitor your supplier relationships and conduct analysis for your suppliers with historical data. Makes purchasing management easier for you in times of crisis.

*** https://www.capital.com.tr/yonetim/basari-oykuleri/unutulmaz-kriz-yonetimi-415903 (Source of information for Petkim sample)