Supply Chain Management

Procurement Goes Far Beyond Managing Spends

When we think about procurement, we think of purchasing parts and managing spends.

But procurement far surpasses that role. In reality, procurement leaders provide real business value by looking at an organization’s needs and the supply market capabilities that exist. Procurement involves delivering value by lowering costs while increasing quality, and it’s a role that requires much negotiation, tact, and communication.

Procurement leaders are managing performance and implementing unique sourcing strategies while doing so. They’re even on the forefront of innovation within the company.

It is true that, at its core, procurement practices are the same as they’ve always been. It is a profession that has existed as long as there have been trade deals, but the role is evolving. Specifically, the strategy involved in carrying out those fundamental tasks is evolving. Today, the industry calls for better quality, lower prices, shortened lead times, and ideally no risk. That’s a large amount of responsibility and pressure sitting on the shoulders of those in the field.

This role is not just about obtaining parts.

Here is a list of just a few of the key responsibilities of procurement professionals:

  • Identify need
  • Negotiate contracts
  • Select suppliers
  • Maintain relationships
  • Order and track
  • Manage risk
  • Keep costs low

Here are some critical skills that these professionals must possess:

  • Project management
  • Research
  • Analysis
  • Communication
  • “Go-getter” attitude
  • Resiliency
  • Negotiation

And it is not merely a matter of getting contracts signed. There is also a significant amount of work that comes after, including managing and collaborating to maintain established relationships.

Procurement’s responsibility, in a nutshell, is a matter of making sure the following is aligned: quality, quantity, place, time, and price.

Ideally, the right price will be the lowest available price, but without compromising other variables such as quality, time and quantity. Purchasers are looking for affordable, reasonable, and competitive pricing to fit into their strategies.

Factors that may affect a buyer’s decision include how much bargaining power they possess, the number of suppliers in the market, the type of procurement at hand, competitor costs, and the benefits of deciding on a specific supplier.

Other Important Considerations

In addition, lead times need to be considered and must be realistic. Environmental impact has become a significant issue in the field, as well, and something procurement professionals must consider when selecting suppliers.

Quantity, in terms of how much stock should be kept, is crucial to avoiding production shortages. Questions to consider when it comes to quantity considerations include your organization’s inventory policy, demand for the final product, the importance of the part in question to product development, condition, and discounts. Efficient planning will assist in determining this since there are certain costs associated with housing stock

Procurement specialists must consider who they are buying from, even after considering the factors mentioned above. Does the supplier have a good reputation? Are you able to negotiate? Are delivery schedules realistic? Do they understand the supply chain and importance of lead times? Is expediting a possibility?

Overall, procurement drives business relationships that can actually help boost the organization. A procurement professional’s role is far from merely purchasing products, it’s a vital organ in the organization’s operations.