What are the primary operational objectives of procurement?
One of the general objectives of procurement is to obtain ‘inputs’ required by an organization or business for its operations. The principle is more or less the same whether it is a manufacturing organization that requires raw materials and components to make their products or a retail organization that needs finished goods to sell to the customers. The key thing to take a note of is whether the inputs are direct or indirect.
RELATED: Understanding Direct and Indirect procurement
Your organization is a system
As a specialist who is really bent on understanding the operational objectives of procurement in your business, a starting point would be to look at the business or organization as an open system through which input such as, labour, finance, information, raw materials etc., taken from the environment or context it exists in and flows in through processing. The processing could be in the form of design, manufacture, assembling, selling etc., all of which leads to output such as product, services or even profits.
What this means is that the procurement department has to provide the ‘right’ inputs through this process. The question then becomes, what does the right inputs mean? Traditionally this would mean:
- Inputs of the right quality
- Delivered in the right quantity
- To the right place
- At the right time
- For the right price
Exactly what is often referred to as the five rights of Procurement.
RELATED: The role of procurement on business needs
Other objectives of procurement
There are other objectives that procurement intend to achieve in the organization and such include:
Taking care of their internal customers– Given that procurement department aims at providing the right kind of inputs required by other departments or production units in the organization, then this can be seen as internal customer service. The service goes beyond mere provision of inputs but also advising these departments and production units on the best inputs, sources and prices available.
RELATED: Procurement and your business needs
Minimizing supply failure risks– the procurement department has to put in place procurement procedures that help the organization not to be caught off-guard should there not be inputs, particularly the kinds that are essential to production of goods or services, due to scarcity or sudden supply fail. These contingencies are seen through risk management process that help avoid over depending on a single supplier or even through developing proper relationship with dependable suppliers.
Controlling or Reducing costs – Whether the objective is to make profit or provide cost-effective services all organizations will have to learn how to control their costs. Procurement steps in to remedy the situation through controlling, reducing or even minimizing the cost related to inputs needed in the business or the undertaking. Since vast proportion of money is spent on acquisition of inputs the end result is cost control and reduction thanks to effective procurement policies.
Relationship and reputation management – as one of the interface between the business and the rest of the world (suppliers and the likes), procurement team has to maintain a constructive relationship with suppliers and those with whom it engages, so as to promote and protect a positive reputation for the organization.
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