Key Inventory Purchasing Strategies You Need to Know

Things should be simpler 

You lead a business, determine what products you need based on the demand, purchase the materials, and that's it.

The job is completed

In an ideal world, that's it.

In the real one?

Inventory purchasing sometimes feels like an act of magic.

You don't only have to figure out exactly what your customers want in an ever-changing market, you need to play forecasting to consider factors that could disrupt your whole supply chain, while at the same time bearing in mind that there's a budget to follow. 

So how can you maintain that perfect stock level without going a bit crazy?

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What's Inventory Purchasing?

Nothing too complicated here.

Inventory purchasing is the process companies use to buy all the goods and materials needed to create or sell their products.

So it's just like any other purchase?

Not quite 

A good inventory purchasing process involves 3 core questions. 

• What do you need to buy? 
• How much do you truly need to purchase?
• When it's the right time to place the order?

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One answer precedes the other, because that's how you build a strategy that guides you to plan your requirements beforehand, forecast demand, and even negotiate with your suppliers to obtain better deals. 

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Good inventory purchasing is crucial for any business that seeks to avoid the long list of problems that come with running out of stock and overstocking. 

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What Three Factors Must Be Considered When Purchasing?

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Just like we mentioned above, inventory purchasing needs special consideration, and the more specialized your product or industry is, the harder it is going to be to find that ideal balance. 

That being said, there are some key things you should always be aware of to make sure your purchasing decisions are aligned with your business goals 

Demand forecasting 

But I know what my customers want 

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Okay, great, but what your customers want at this moment might change completely by next week. 

Understanding the complexity of customer demand is the first and most important step in making sure you're not buying too much or too little.

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Having a solid knowledge of industry and years of experience is helpful, but good old instinct is rarely enough; you need to rely on trustworthy information. 

Look at your past sales data, check for any seasonal trends, consider upcoming events that could spike demand…the more data you have available, the better. 

Costs and budget 

Okay, so demand is important, but that's only a part of the puzzle 

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When you're purchasing inventory, your budget should determine what options you are going for. 

Remember that even the smallest purchase has the power to impact your cash flow, so it's absolutely important to go beyond the amount on the price tag and evaluate the TCO., This will allow you to understand how much you are actually spending in the short and long-term.

Storage availability

Depending on the situation of your business, buying bulk inventory might seem like the best alternative, but do you really have sufficient space to store it?

Saving money is important, but so it's to not over-ordering when you know that there's not going to be room available.  Inventory takes up space, and if your storage area is limited…well, that could be a problem.

Keeping your storage organized and easy to access is fundamental for the success of any warehouse management strategy.

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The Process of Inventory Purchasing 

Needs identification 

Buying blindly is the worst thing that can happen for your company.

Before rushing to make a purchase, it's essential to figure out what you actually need.

Obvious, right?

But without taking into consideration factors like the ones above, you could waste money on things you don't need or worse, underestimate your demand and fail to meet your customers' expectations.

Take a look at your past and current inventory level so you can determine with certainty what goods need to come in more and what goods are just collecting dust.

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Supplier selection 

Next up is finding the right people to buy from. A good supplier can make your life so much easier, while a not-so-great one can cause delays, quality issues, or unexpected costs.

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When searching for a new supplier, make an effort and don't limit yourself to only seeing the price as a determinant factor. There are other things that are perhaps more important, like reliability, consistency, and, of course, quality. 

This is the moment when you get the right to be a bit selective and careful about whom you choose to work with. 

Procurement 

Because purchasing doesn't happen on its own.

Once you know what you need and who you’re buying from, it’s time to actually place your order. This part involves creating purchase orders (POs), getting approval if needed, and tracking the progress of your order to make sure everything arrives on time and in good shape.

This is also where organization really matters. Keeping records of what was ordered, when, from whom, and for how much becomes quite useful if you want to use the data for future purchases.

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Inventory control

Okay, so you made the purchase, it's the job done?

Partially 

Now you need to keep an eye on your stock levels and make sure that there's a match between what's in your warehouse and what's recorded in your system 

To make this step simpler, it's a good idea to start working with digital solutions like the IoT so everything becomes integrated 

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Main Inventory Management Techniques

ABC Analysis 

Do you have a categorization system for the products stored in your inventory?

Then you could benefit from this method. 

Working under an ABC analysis means that you can prioritize your company's items based on how valuable they are for your business.

• A items: High-value, low-quantity items, so you need to pay close attention to these.
• B items: Mid-value, mid-quantity, worth checking regularly.
• C items: Low-value, high-quantity items don’t overthink these. 

Economic order quantity 

Do you want to summarise the main problems with inventory management?

Order too little, and you’re constantly reordering,and thus paying extra for shipping. Order too much, and you're stuck with storage issues and higher holding costs

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EOQ is the kind of method that comes into play when you need to discover the ideal order size so you are working to minimize important costs like ordering or holding.

It's useful if you want to feel smarter when deciding how much materials your company requires and when.

Just in time inventory 

JIT is all about efficiency. The idea is to receive inventory only when you need it sooner. 

This method helps reduce storage costs and waste, especially if you’re dealing with items that expire or become obsolete quickly.

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That said, JIT works best when you have reliable suppliers and a steady, predictable demand. It’s a great system when everything’s running as expected, and there are no risks that could cause disruptions in the supply chain.

Materials requirement planning 

Does your company create amazing products using multiple pieces of equipment?

Keep reading on because this technique is ideal for those cases.

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Using MRP software, you can plug in your production schedule, current inventory levels, and lead times from suppliers. The system does the math and tells you when to order each material to keep production running without delays or excess inventory.

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Final Thoughts 

When you take the time to understand what you need, plan ahead, and use the right tools and techniques, you’re not just working to keep your shelves stocked, you’re also setting your business up for better cash flow, fewer headaches, and happier customers.

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