Industrial B2B purchasing -procurement- is most probably the most critical phase of the industrial sales process. First, you need to fully understand industrial B2B markets characteristics to comprehend industrial purchasing. Industrial markets are unique structures compared to other markets. Products have complex technical features, and customer behaviors may be demanding. The purchasing power of the companies should be analyzed carefully.
Understanding industrial purchasing
If you want to be more valuable to your company, you should be an effective sales professional who understands B2B purchasing mechanisms, continuously finds valuable customers and sells to them — a devoted professional who struggles to expand the customer portfolio and revenue.
The most significant point that differentiates industrial markets from others is the complex and multi-variable purchasing process and purchasing power of the companies. Industrial sales have a higher risk than consumer sales due to the high-value products. The products purchased are goods or services that ensure an industrial company’s functioning and continuity, which may cost a substantial amount of money.
Industrial purchasing is a complex process
Buyer companies prefer products with the most suitable price/quality ratio to maximize their operating performance. Technical experts and purchasing officials do extensive research and evaluations to ensure that preferred products are the best choice for them. Eventually, B2B purchasing converts to a long and complex process.
Industrial procurement teams
Ordering low-risk consumables (Ex: pencil or paper) can be the responsibility of any office staff. However, the B2B purchasing of an expensive automation system, which is vital for the operation, can be achieved by a procurement team’s intensive work. However, in this case, different dynamics are involved. Every procurement team member desires to arrange sales terms according to their demands during the procurement process.
The purchasing executive wants the lowest price and extended payment terms, as usual. The technical executive demands the best performance and fastest delivery. The logistics chief asks for transportation support while the HSE officer insists on compliance with safety regulations. Everyone requests individual demands. Each procurement team member wants to play an active role in the decision-making process, forcing the other to embrace his/her personal views. This makes industrial B2B purchasing process complex and hard.
Purchasing is not a one-man decision
You have to convince more than one person, when you want to sell to industrial companies. Each of them may have different individual views, requirements, and reasons. No matter how the purchasing converts to a complicated and challenging process, you must be patient and persistent. Know that, industrial B2B purchasing is a unique operation from the perspective of a sales expert.
Industrial procurement department’s objectives and functions
The industrial procurement department’s primary functions and responsibilities include the following:
1. Market Information
Due to the rapid changes in market conditions, the industrial purchasing department must have current market information. This information is on price fluctuations, technological variables, delivery schedules, supply reliability, and the different arrangements under which items can be provided.
Only an effective marketing information system enables the purchasing department to reap the benefits of the most excellent available chances. This is especially true in industry segments such as steel profile manufacturing, where the primary expense is the cost of steel.
Due to the volatility of steel prices, timely and effective industrial procurement significantly influences profitability. Therefore, apart from market data, the purchasing department should be predicting market changes, particularly in light of the changing economic landscape.
2. Industrial purchasing procedures
Industrial purchasing process only can be carried out effectively with the support of a well-managed and competent procurement/purchasing departments.
The following is an explanation of a systematic B2B purchase procedure:
- Establishment of a budget for purchases.
- Getting the purchase requisition forms.
- Identifying the possible suppliers.
- Evaluation, negotiation and deciding
- Delivery of ordered products
- Invoices verification.
3. Knowing what to do
Choosing the best purchase frequently presents many difficulties. Therefore, the purchasing manager should have the extensive technical expertise to make the best purchase.
4. Identifying suitable sources of supply
The procurement manager should have a list of suppliers who can supply materials of the required quality, quantity, and on time, based on his prior experience and market knowledge.
5. Quality and quantity control
When products are received, the purchasing department must check that they’re of the same quality and quantity as requested. This can be accomplished by inspection or lab testing.
6. Analysis of industrial purchasing
Many corporations require their purchase managers to trade in the forward markets. Due to the wide-scale variations in prices, they must stay current on market trends. Therefore, the historical behavior of pricing must be thoroughly analyzed to prevent the business from large-scale losses caused by price changes.