Key Takeaway: Purchase planning is the difference between buying because you have to and buying because you decided to. The second one is almost always cheaper.
What's on This Page
Reactive vs. Planned Purchasing
Reactive purchasing waits until stock is low, often forcing rushed orders at worse pricing and longer effective lead times. Planned purchasing works from a forecast (see Inventory Forecasting Explained) and buys ahead of known demand.
Building a Simple Purchase Plan
- Forecast demand for the upcoming period, adjusted for known seasonality
- Compare against current stock and anything already on order
- Calculate the purchase quantity needed to reach your target stock level by the time demand arrives
- Check supplier lead times to know how far ahead the order needs to go out
Early-Order Discounts
Suppliers frequently offer better pricing for orders placed ahead of peak season, in exchange for the supplier's own better production planning. A wholesaler in our case study captured meaningful savings simply by planning purchases far enough ahead to qualify for these terms.
For further reading, see the Association for Supply Chain Management (ASCM).
Checklist
- Forecast demand for the upcoming period
- Compare forecast against current stock and anything already on order
- Calculate the purchase quantity needed to hit target stock levels
- Check supplier lead times to know how far ahead to order
- Ask suppliers about early-order or volume discount terms
- Finalize the purchase plan before the reactive-order deadline arrives
Common Mistakes
FAQ
How is purchase planning different from purchase forecasting?
Forecasting predicts demand. Purchase planning turns that forecast into an actual buying schedule, accounting for current stock and supplier lead time.
Do early-order discounts really make a meaningful difference?
Yes, especially for seasonal or high-volume purchases, since suppliers often reward advance commitments with better pricing than last-minute orders get.
How far ahead should purchase planning look?
At least as far as your longest supplier lead time, plus enough buffer to capture any early-order pricing windows.
What's the biggest risk of not planning purchases ahead?
Reactive, rushed orders that come with worse pricing and longer effective wait times than a planned order would have had.
Calculate This For Your Business
Related Guides in the Purchasing Academy
- Purchase Forecasting. the demand-side input this plan depends on
- Purchase Order Guide. turning the plan into an actual order
- Supplier Selection Guide. another guide in the Purchasing Academy