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Targets and Budgets

Seneca

'If a man knows not what harbor he seeks,
any wind is the right wind'.

Lucius Annaeus Seneca.

How a buyer knows if he (she) did a good job ?
The answer seems very simple: A buyer did a good job if he (she) did better than the target. So, a Purchasing Target serves to measure the Purchasing Performance.

A Purchasing Target has a 2nd mission.It serves to keep and survey the profitability of the company.

The question is how to fix a correct purchasing target.

In this section, you will have some information about this fundamental point.

Purchasing Targets and Budget

Francis SOLER R

If you are spending some of your time defining your Purchasing Targets by Item, you will save later a lot of time while calculating your purchasing budget.

Let's go step by step.

First, you define your purchasing targets by item, manufacturing and logistics.

You can say at this moment that it represents a lot of administrative tasks.

Let's look closer at this point.

I will make two assumptions:

Purchasing Budget Construction

Francis SOLER R

Maybe you think that fixing purchasing targets by item is a time-consuming task for nothing, I already wrote a post about the benefits, but now I would like discuss this point in relation with budget construction.

In my opinion, defining Purchasing Targets by Item is the best way to build your purchasing budget. This budget will be realistic and transparent, and will constitute a valuable tool.
Think about how your purchasing budget is built today. I am sure that you are using a 'top-down approach', considering last year’s expenses, the news from the market and expectations from your marketing and sales staff. With this kind of 'top-down approach, nobody knows what is behind the figures at the end of the day, or at me middle of the year.

I am proposing a bottom-up approach where the final result is the consolidation of all the needs and targets item by item.

Let's see how to build your budget with your purchasing targets.