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How professional buyers wring out savings


Getting the best value is a constant struggle. Few people know all the markets for various goods and services they buy, or are skilled at negotiating prices and reaping the best deal.

So we turned to experts for help, courtesy of the Institute of Supply Management, the primary industry association for purchasing managers.

These people buy stuff for a living. They control trillions of dollars in business spending, handling everything from buying plastic pellets for manufacturing to hiring financial firms to run 401(k) plans. Many of their purchasing strategies can be used by families for buying consumer goods, from potatoes to life insurance.

Comparison shop

Here are shopping tips reaped from conversations with two veteran certified purchasing managers and ISM members: Jim Haining, director of procurement at Insituform Technologies, a sewer-repair company near St. Louis, and Carol Marks, director of purchasing for an Industrial Distribution Group Inc. facility in Belmont, N.C.

Quick, what's a good price for a Sony 32-inch HDTV television, model KV-32HS420? Of course, very few people would know off the top of their heads. If you went to a Sears recently, you would see a price of $999, which might seem reasonable. That is, until you learn the nearby Best Buy is selling the TV for $949, according to recent prices. But then you see the same model for sale on auction site eBay for $859.

Comparison shopping is the only way to be sure you're getting a good price. It's fundamental for both corporate buyers and consumers.

Think total cost

In the TV purchase above, which would you buy? The correct answer is, "I don't have enough information." Maybe Sears will deliver to your home for free, while Best Buy charges $50 for delivery but throws in a longer warranty. Or maybe you'll avoid $60 in sales tax buying online but have to spend $145 for shipping.

Calculate the total cost of your purchases on an apples-to-apples basis, so you can make a smart decision.

Calculate lifetime cost

For some purchases, the list price is just the beginning. A car's sale price is important, but so are longer warranties, better gas mileage or cheaper repair parts, all of which contribute to the lifetime cost. Meanwhile, a computer ink-jet printer's price is often less important than the cost of replacement ink, when you consider the total cost of the printer's life.

"In corporate purchasing, we look for the lowest total cost of ownership," Haining said. "That isn't always the lowest price up front."

Use technology

The Internet is a wonderful tool for professional buyers as well as regular consumers. For example, pros often use electronic reverse auctions, where they specify what they want to buy. Suppliers submit lower and lower bids to win the contract.

Consumers can use the Internet to survey market prices so they don't overpay. It's especially easy using a search engine, such as Google or Yahoo, if you have a model number. Or try a shopping-specific search at such sites as MySimon or NexTag.

The Internet is also especially useful for some nonproduct purchases, such as insurance.

"In the past, you'd have to spend a lot of time making phone calls and visits," Marks said. "It's a fun time to be buying, in terms of the amount of information you're able to ascertain."

Car Web sites

For car purchases, consumers can find out dealer invoice prices at many automobile Web sites. "Information is power, particularly with a car dealership," Haining said.

Would you buy a case of soft-drink cans for $4.80 or a six-pack for $1.50? In this case, the six-pack is 25 percent more expensive per can.

Simple math converts package prices to cost per pound, per ounce or per paper-towel sheet. Divide the price by the number of units.

Inventory control

Unit price isn't the only consideration, though. For example, common advice for consumers is to stockpile goods they use regularly. Stock up when they're on sale, so you don't have to buy them at full price when you're desperate for them.

That's generally good advice, but even consumers have carrying costs. If you buy a lot of perishable food, it may spoil before you use it, which ends up being more expensive.

And some bulk purchases turn out badly because they become obsolete. If you stock up on vacuum cleaner bags and the vacuum dies, you're stuck with worthless bags. Or you may stock up on ink cartridges for a computer printer that quits on you. "The more successful people know what to keep in inventory and what not to," Haining said.

Gregory Karp is a personal finance writer for The Morning Call, a Tribune Publishing newspaper in Allentown, Pa. E-mail him at yourmoney@tribune.com.

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