Elements of a Procurement and Supply Function

Elements of a Procurement and Supply Function

Definition of Procurement

  • Procurement is the business process that involves obtaining goods, services or works from an outside external source.
  • This process is vital in ensuring that everything required for the company’s operations is obtained at the best possible cost.

Roles of the Procurement Function

  • The procurement function is typically responsible for ensuring the businesses has a consistent supply of goods or services.
  • It also oversees the purchasing process, which includes identifying requirements, supplier selection, negotiation, contract enforcement, and finally, managing and reviewing the overall purchasing process.

Sourcing in Procurement

  • Sourcing is a key aspect of procurement where the procurement team is tasked with identifying potential vendors or suppliers.
  • This often involves obtaining and comparing quotations, negotiating terms, and determining the best supplier based on factors such as cost, quality, and reliability.

Negotiation in Procurement

  • Negotiation is an important skill in procurement, as it can lead to favourable terms and conditions, better prices or improved service levels.
  • The objective of negotiation in procurement is to develop an agreement that satisfies both the buyer and the supplier while optimising costs and quality.

Supplier Relationship Management

  • Supplier Relationship Management (SRM) is a systematic approach to assess suppliers’ contributions to the business, determine tactics to maximise suppliers’ performance and develop long-lasting and mutually beneficial relationships with suppliers.
  • SRM can help the business procure better quality goods, achieve cost reductions and lead to innovations that improve products and processes.

Procurement Technologies

  • Today, procurement activities are often supported by technology, such as e-procurement systems that streamline and automate many procurement tasks.
  • Technology can aid in vendor evaluation, facilitate faster procurement processes and provide better visibility into spending data, improving overall procurement performance.
  • Ethical procurement involves the consideration of environmental, social and economic impacts in the procurement process.
  • Procurement professionals need to be aware of the laws and regulations that apply to the procurement process, such as those related to competition, corruption, and conflict of interest to ensure operations are compliant and ethical.