Saved yourself £200 on the price? Great! But how much has it cost you?

We all feel pleased to negotiate a discount and save the firm some money. But if price is the most important part of your purchasing strategy, you may be missing hidden costs elsewhere. The Chartered Institute of Purchasing and Supply has identified Six Rights of Purchasing to guide all those involved in buying. And guess where 'Price' comes? At the bottom of the list...

Price is clearly an important factor in helping you decide between supplier A and supplier B, but it's not the end of the story. The Chartered Institute of Purchasing and Supply recommends you follow their Six Rights of Purchasing:

1. Quality. The goods or services you are buying must be correct to the specification you have outlined to the supplier, and therefore fit for the purpose for which they are required. Sounds obvious, but adapting goods which don't quite meet your brief can be very costly.

2. Quantity. If you are buying a specific amount of certain goods, then you need that exact amount to be supplied. Over-delivery is often as bad as under-delivery - do you fancy asking your boss where you can store several crates of unexpected goods? Storage costs money!

3. Delivery. The supplier should be informed about what is required, when and where and should deliver accordingly. In other words, you need to have control of the delivery of your goods. Having them arrive on the day your supplier was delivering in the area, but after the date you needed them, is hardly sensible buying!

4. Legality. The terms and conditions of contracts must be fair to all parties, and you should be aware of the remedies available in law for a breach of contract. Do your homework, read the small print, and check with a legal adviser if necessary. If in doubt, query any points with your supplier before signing.

5. Source. These days, goods and services may be supplied from any part of the world and you should be aware of international aspects such as currency, exchange rates, lead times, difficulties in inspection and communication as well as cultural differences, acceptable working practices and different national holidays. Also, ask yourself what additional costs - such as import duties - might land on your bill.

6. Price. Suppliers must pay for materials, labour, overheads, commissioning, insurance, transport and distribution, etc. so the price charged must be a true reflection of costs plus a reasonable profit. Price is your last consideration - not your first.

Skilled buyers make a real financial contribution to a company so it's vital to get a source or supplier which won't let you down.

But this is where you really do your homework! Check the credentials of potential suppliers before doing business with them. You should assess a supplier's:

•Financial standing. Is the company profitable? Companies' House can provide annual reports of incorporated companies while firms such as Dun & Bradstreet can undertake detailed analyses of a company's finances.

• Capacity. Can the company handle the volume of your order within the stated lead time?

• Capability. Does the company have the experience and technical knowledge to do the work you specify?

• Systems and procedures. Will the company handle and process the order efficiently?

• Conformance to legislation. How does the company stay within the law? What about the Health and Safety at Work Act? The Data Protection Act? Consumer Protection regulations, etc?

• Transport and distribution network. How are goods handled, packed and labelled? How does the company deliver- through its own fleet of vehicles? By post? By courier?

• Management style. How is the company run? Is the senior management capable? Enthusiastic? Efficient?

• Personnel. Are the staff well motivated? What about morale? Productivity? Industrial relations?

• Flexibility. Can the supplier adapt to fit the way you want to operate?

Investigating the way a supplier works weeds out those which are unsuitable before reaching the stage of inviting tenders or seeking quotations. Asking these key questions can save you making costly mistakes.

CIPS is an international organisation, based in the UK, serving the purchasing and supply profession. With over 35,000 members worldwide, CIPS is dedicated to promoting best practice, and provides a programme of continuous improvement in professional standards, raising awareness of the contribution purchasing and supply make to corporate, national and international prosperity. View the website or contact 01780 756777 or

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