Understanding Procurement Management?
In any kind of business or professional setting, there are multiple roles that need to be played in order for things to run smoothly. Whether it's the boss at the top of the hierarchy, the menial laborer at the bottom, or anywhere in between, all have a purpose. Depending on the circumstances, some of those roles are going to hold more value than others. Things may not completely descend into chaos when those roles are left unfilled, but they are not areas that business leaders and owners want to leave vacant for long.
One such area is procurement management, which is how many businesses and companies get the items and services that they need to operate. Absence of or difficulties in procurement management can be especially problematic for any business. As a result, it is important to understand procurement management and all that it entails. This article will discuss the basics of procurement, including its usage, any specializations involved, common goals, and the reasons for its inclusion in business.
By definition, procurement is the process of buying or obtaining materials, goods, and other similar items. Procurement management can include requesting or purchasing items, identifying the need for those items, and aspects of paying for those items. In business, this entails anything that a company needs for its operations and can include supplies for merchandise that the company produces (e.g. raw materials). The monitoring of inventory and the company's needs will also often be a part of the procurement management process, as that information is necessary to begin with. Some may refer to this as "supply management" rather than procurement, but it's largely the same thing regardless of what name you call it.
The full extent of responsibilities that are involved in procurement management can vary by company, as aspects of size and industry can impact what the company needs. A company with a workforce of 10,000 is, of course, more likely to need more of a particular item than a company with a workforce of 100 in the same field. In some cases, procurement could extend past just the obtaining of items and include procurement of staff or personnel, and services regarding things like IT or marketing. This may mean that those responsible for procurement in a business will need to work with other departments and personnel in order to get those particular services (e.g. Human resources). Again, what it is that a person or persons working in procurement management may do as a part of their job in a company will vary from company to company.
Is It Necessary For All Businesses And Companies?
It's kind of impossible for a business or company to not have procurement present in some aspect of their operations--the process is there whenever they need to get something. For the most part: yes, it is necessary. The degree of that necessity and how a business or company views it is what's going to be a bit more ambiguous. Some businesses may treat procurement as the responsibility of each department regarding their particular needs. For smaller businesses, it may be a more practical and cost-effective to do this rather than dedicate staff or a separate department to procurement for the entire business which larger companies may do. The concept is still present, just not in a more obvious or openly thought of way.
Why Should It Be Used?--As stated, procurement is present in most businesses but it's not always acknowledged. The conscious usage of procurement management can actually be a smart and strategic practice that can be beneficial to the company's performance. Procurement management often requires paying attention to the specifics of the business' needs, including when something is needed rather than just what is needed. This means ordering more of a necessary item when it's running out rather than waiting until it's been used up. Effective procurement management can help avoid wasting time, resources, money, etc. in regards to supplying the business' needs and operation. For many private companies, this is hugely appealing and has become a more common practice due to its value; it is less so in the public sector, where profit and value is to the benefit of certain individuals rather than the organization itself.
The Role It Plays--To put it simply, the role that procurement management plays in a business is that of a supplier. A much more complicated explanation of the role it plays is a combination of multiple roles that include advising, support, research, technical/technological application, transport, and manufacturing, amongst others. Basically, procurement plays whatever role that is necessary for it to be successful within the business. The role itself is ever-changing, as new needs, industries, and services develop in the business world and new challenges develop along with them. Whatever role that procurement management currently plays in a particular business is likely to be different in another business, or in the same business but one, five, or even ten years from now. The task of identifying how those roles may change over time may also fall to those in procurement, as those changes will likely be tied to the changes within the company.
Specializations--Technically, there are no specializations in procurement management beyond what is necessary for a business and its needs. A company that has a separate department for its procurement may have staff members who are specialized for certain needs, such as someone who only handles procurement of raw materials. Specialization can also appear in regards to the industry, e.g. a retail company versus a technology production company. In terms of a degree or other certification, procurement or supply management is its own specialization in academics.
As suggested thus far, procurement is more than just supplying things that the business needs. While that is certainly the basis of the process, there's usually a little more in mind for those working in procurement management. Common procurement goals often are in place to help things go smoothly and to provide the best results possible. Some of those goals can be in regard to what is being procured, or even the process of procurement and how staff conduct themselves in their efforts to get things. Those goals can include:
Cost--Usually, the first goal in procurement management is to be as cost effective as possible. It's not so much "pick the cheapest option" but rather choose the option that is budget-friendly and meets needs. Some cheap options can actually turn very expensive as they are not that great to begin with and can easily breakdown or fail to meet the expectations required of them. The idea is to save money--and possibly prompt profit--without compromising too many other factors in the process. This may mean that those in procurement management may need to shop around and/or have some financial savviness in order to find what they're looking for with a reasonable price tag that isn't going to blow the budget. Taking the care to do so can prove to be highly beneficial for themselves and the business as a whole.
Sustainability--Sustainability comes up quite a bit as a goal in the business world and it can be very applicable to procurement management. It's typically heard in context of the environment but sustainability is defined as maintaining or supporting something as it is being used. With procurement, sustainability can still be used in that way; for some industries, sustainable resources hold their own value in terms of cost, quality, etc. However, it usually is applied as a means of creating a supply chain--a direct access to a resource that can be continuously controlled without depleting it or forcing it to bypass its restrictions. You're maintaining that access to a resource instead of using it once and then discarding it or using it until there's nothing left of it. Doing so can be especially advantageous as it can help during times of market fluctuations and industry changes where access to certain resources or services isn't very feasible.
Prompt Growth--All parts of a business often want to avoid any kind of stagnation, so actions that can prompt growth for either a part of the business or for the company overall are usually encouraged. For procurement, prompting growth can be done by making connections with new suppliers or finding better resources or services for the business. It's being innovative with what is being procured and how it's being done so that there is an increased benefit for those involved. Achieving such a goal may require some degree of creativity and the ability to collaborate with other departments in order for the procurement team to find something that still fits the original idea.
Ensure Quality--As mentioned, there is a need in procurement to take note of the quality of the items and services being procured in order to avoid unnecessary waste. You want to get the best that is out there while still meeting all of the needs that an item is required to meet. The underlying reasoning behind ensuring quality is that it makes things easier in the long run for the rest of the business and for those who will be using those resources and services that have been procured. A company may already have a set of standards regarding quality that procurement team members need to adhere to, or they may collaborate in order create a set of their own. This is another goal that will require careful attention and additional efforts on the part of members of the procurement team, but it can have significant benefit if successful.
Reduce Risk--There are a lot of things that can go wrong in the world and not all of it is easily preventable. Businesses are not exempt from this and neither is procurement management, although there may be disastrous occurrences that are specific to those groups. There is a certain amount of risk involved with every action, and any steps that can be taken to reduce the chances of something going wrong should be taken if possible. In procurement, those risks can include problems with suppliers (e.g. unreliable), lost or damaged goods, scams, poor quality, etc. Precautions can be taken to help prevent the business from being at a disadvantage if there is an issue with procurement, regardless of if the problem is something that can be controlled or not. While you will not be able to completely prevent things from going wrong, you can at least reduce the risk of that happening and have a plan in place for when it does.
Be Efficient--While it may be a byproduct of the other goals listed here, efficiency should also be a standalone goal in procurement management. It sets a standard of expectations for members of the team and can act as a motivator for them to do their best work every time. Encouraging efficiency and promoting it as a goal can help streamline procurement efforts and reduce problems over time. However, it needs to be done right--no punishments for little mistakes or placing high amounts of pressure and stress to do things without making a mistake. There's no benefit in prompting efficiency that way as it's based on fear rather than genuine encouragement. Efficiency should instead be prompted by efforts to identify hindrances and their solutions, as well as feasible motivators for procurement team members.
This article serves, more or less, as an introduction to procurement management . Much of what was discussed here will be expanded upon later on, including how to implement the above goals into effective procurement strategies. How procurement is used, specifically the process that is involved and the different elements that you will need to take note of during that process. .
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