MODULE OUTLINE

Purchasing

Capital equipment Materials for manufacturing Ready made goods for resale

PURCHASING

The topic of Purchasing covers three areas:

• Capital equipment, which consists of items that will not be replaced frequently — machinery that you will use to manufacture your products, office equipment, vehicles, and so forth.
• Materials for manufacturing, which includes raw materials that you would use to make products that you will sell, packaging materials, office supplies such as stationery, postage, utilities, and other services.
• Ready made goods for resale

Here are some guidelines to help you make decisions in each of these areas.

Matthew 6:33
Seek first the Kingdom of God and His righteousness… 

Capital Equipment

When purchasing capital equipment, aim to purchase the best quality items that you can afford. When you’re starting up and you have limited funds available, it is a temptation to purchase inferior used equipment. In the long run this will cost you far more than you might save initially. Equipment that is too cheap for whatever reason, will probably need frequent maintenance and repair which will cost you money, and while it is being repaired you will not be able to use it.

Ask about warranty terms: will the individual or supplier that you are buying from guarantee the product by offering you a refund, free service, or free repair in the event that the equipment breaks down within a reasonable period of time. And be sure to get the details of the warranty in writing.

Materials for Manufacturing

When you are purchasing materials for use in the manufacture of your products, always try to deal with the same supplier over a period of time. This will ensure that you can depend on consistent quality of the materials, which in turn will enable you to produce products at a constant quality. This, in turn, will help you to develop your reputation and attract new customers by referral from satisfied customers. Also, developing a good relationship with your supplier is a good idea — you may be able to negotiate better prices once you have established your relationship, and you will have more control over the quality of the materials that you buy.

Here again, as with Capital Equipment, avoid using inferior materials in your products. Using inferior materials will quickly result in earning a poor reputation for what you are selling, and you will soon lose customers.

Always shop around for the best prices or rates for services that you need. Be aware of your options. Don’t be reluctant to negotiate with service providers to get a better price. At the same time, make sure that both you and the service provider have a clear understanding about the terms of this service. For instance: what will happen if there is a problem? How quickly will they respond to repair the problem? How much notice will they give you if they plan to make changes to the service?

Ready Made Goods for Sale

In this case, you are purchasing items from someone else at a certain price, in order to be able to sell them at a higher price. Be sure to do your homework and calculate how much a customer would be willing to pay for the items. These two pieces of information will help you to determine what kind of price you should be willing to pay to purchase the items. We will discuss pricing and how to establish your selling price in a later module.

As before, it is a good idea to ensure that you will have steady access to the supply of the items you are planning to sell. As your business develops, customers will want to return for more of your merchandise, and refer friends and family members to your business. You need to be assured that you will be able to continue selling these items for more than just a few days or weeks. Also, make sure that the items that you buy are covered by some form of warranty in case a customer of yours has a complaint, so that you can pass it on to your supplier.