In constructive terms, planning is – as far as possible – a systematic process for setting goals and determining future actions. In destructive terms, planning replaces chance with error.

But why is purchasing planning so difficult, and what can be done to make it easier with a few tricks and tips?

Precisely because procurers account for more than half of total costs in most companies, business planning reliability relies primarily on the informative value of purchasing. Whether this is in-house or at the supplier is irrelevant. Purchasing planning is widely regarded as the “unloved child,” and the reasons for its neglect are often similar: too time-consuming, lack of base values or quantities, dependence on demand drivers. But how do you tackle the issue correctly?

Before we dive into the purchasing planning process, it is important to first discuss the fundamentals of a functioning goal-setting process:

  • All planning targets must be objectively measurable and suitable for setting purchasing targets: Simply requesting that the number of suppliers be reduced is not enough.
    It is important to know by how much and by when.
  • For all planned values, actual values must be collected in the same structure to enable a plan/target/actual deviation analysis.
  • 3. Purchasing planning is not a rigid construct and should be reviewed at least once a year, or even adjusted.

Purchasing planning step by step:
1. Determining the current situation: At what prices and in what quantities are purchases currently being made? The quantities and prices can be obtained from various reference sources. Ideally, quantities are determined based on reliable sales figures. If this is not possible, a reference year from the past can be used as an alternative. A wide variety of invoice or info record prices are used as prices. This step provides an overview of the current situation. Initial trends can already be identified by comparing the first invoice price of the current year with the last invoice price of the previous year.

2. Planning for the future: We then look at the possible development of markets, products, manufacturing processes, and competition, partner, and supplier strategies during the planning period. In this step, changes in quantities and prices are incorporated into the planning.

3. Regular comparison of planned and actual figures: A constantly updated forecast illustrates the extent to which the annual target will actually be achieved based on the current status and immediately reveals any undesirable developments. It is important that price changes during the year that affect the current year (EBIT effect) are reported down to the material level and that the carry-over effects for the new year and the full-year effect are precisely quantified. If the result deviates in an undesirable direction, a precise analysis of the reason should be carried out and further cost-cutting measures initiated or brought forward in order to achieve the set targets.

Challenges:
New parts are just as difficult to plan as bonus payments agreed with suppliers. And what happens to discontinued parts? This has to be done manually. In mature purchasing control systems, however, new parts can be added in just a few steps via an Excel import. Bonus payments agreed with suppliers are planned at the supplier level and therefore do not affect the individual part price.

Conclusion:
Purchasing planning is a process in which the future of a purchase is analyzed and influenced to achieve the desired result. If purchasing planning is carried out as part of a well-structured process, it provides important support for purchasers. Reliable forecasts are also essential for purchasing management.