Procurement activities have led to the evolution of procurement from traditional purchasing and supply to what is currently the procurement profession.
It has been mentioned that purchasing is reactive rather than proactive, transactional rather than relational, tactical instead of strategic, all of which are based on the traditional way purchasing and supply was looked, and so along came procurement.
For the purpose of understanding where we are let us start by procurement definition.
WHAT IS PROCUREMENT?
Procurement in its simplest version is the process of obtaining goods or services in any way, including purchasing, leasing and borrowing.
Of course that definition also suggests that theft, fraud or even coercion, if used as a means of obtaining goods and services will amount to procurement.
Except as a procurement specialist you can quickly tell that such vices are against professional ethics in procurement.
Procurement activities in supply chain are broad, they go beyond p2p cycle whose main highlights are: purchase order, expediting (monitoring and chasing delivery), receipt of delivery into stock and payment of supplier.
Irrespective of the type of procurement you are thinking about, the activities will start before the actual purchasing activities through things like, identification and definition of business needs, market survey to identify qualified suppliers, sourcing, negotiation and development of contracts.
Procurement goes further into after purchase activities where important job functions of a procurement department include things like on-going contract management, supplier relationship management, dispute resolution, contract review and so on.
In short, procurement is, as pointed out earlier, proactive, rational, and strategic and plays an integrated role in an organization. It is as a result, more strategic and high status term compared to purchasing.
Based on all these we can say that procurement is: the process undertaken by the organizational unit that, either as a function or as part of an integrated supply chain, is responsible for procuring or assisting users to procure, in the most efficient manner, required supplies at the right time, quality, quantity and price, and the management of suppliers thereby contributing to the competitive advantage of the enterprise and the achievement of its corporate strategy.
PROCUREMENT ACTIVITIES AND WHAT THEY MEAN TO YOUR BUSINESS
The best way to understand procurement is to look at what people involved in it actually do and what this may mean to your business.
Obviously what you will find may vary widely according to the department you look at, the specific roles and descriptions parties are given, the type of organization you deal with, but even with all that you still find some, if not all, of the following procurement activities:
- Monitoring the supply market
This activity will allow the business to identify the potential sources of supply such that going forward you do not have to waste time going after supply markets that won’t meet your business needs
- Supplier evaluation and selection
It is one thing to know the supply market it is another to ensure you have a list of pre-qualified suppliers that are willing and able to meet your business input needs. Doing this will help you save time and money as the business grows.
- Handling requisitions and stock replacement
A business is only as profitable as its ability to meet the paying customers’ demands, so if the sales department keeps on accepting orders and the production department cannot keep up due to stock shortage, which is an issue. This is where procurement comes in to ensure inputs required are availed.
- Helps with definition of requirements
Procurement helps with preparation of specifications for new purchases this way no business needs are left out when purchasing goods or services.
- Negotiation, buying and developing contracts
It will help with setting terms that are favorable to your business and help build relationship with suppliers
- Contract management
Ensuring that suppliers deliver according to the purchase order or contract
- Clerical and administrative tasks
Such tasks will include things like record keeping, report generation and processing documents to show how business is progressing from a procurement point of view
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