Introduction to Procurement

A world-class procurement staff must continuously work to improve the efficiency and effectiveness of what we call the procurement process. This is the process used to:

1. Identify opportunities.
2. Identify business requirements.
3. Analyze the business, supply chain and suppliers to generate options.
4. Create a strategic sourcing plan.
5. Implement the plan through negotiation of value-adding agreements.
6. Establish on-going supplier management and continuous improvement in performance.

Role of Procurement within Organization
The objectives of a world-class procurement organization move far beyond the traditional belief that procurement’s primary role is to obtain goods and services in response to internal needs. To understand how this role is changing, we must understand what purchasing is all about, starting with the primary objectives of a world-class purchasing organization

Objective 1: Support Operational Requirements
Supporting this flow requires purchasing to:

• Understand business requirements
• Buy products and services
• At the right price
• From the right source
• At the right specification that meets users needs
• In the right quantity
• For delivery at the right time
• To the right internal customer, Internal customers of purchasing include:
• Manufacturing
• Physical distribution centers
• Engineering and technical groups
• Research and development
• Information technology
• Transportation and other service

Objective 2: Manage the Procurement Process and the Supply Base Efficiently and Effectively
To manage the procurement process and supply base efficiently and effectively procurement must follow the following key steps:

• Identify opportunities
• Manage internal operations
• Achieve objectives

Identify opportunities where the procurement team adds true value:
1. Evaluation and selection of suppliers

• All purchases should go through the approved procurement processes
• Engineering and other functional inputs are part of this process
• Sales personnel should not be allowed to enter contractual agreements without procurement’s involvementv - Increasing use of sourcing teams

2. Review of specifications or statement of work

• Review the requirements for the material or service being provided
• May be able to suggest alternative standardized materials that can save the organization money
• Periodic review of requisitions can allow greater leveraging of requirements

3. Acting as the primary contact with supplier
4. Determining the method of awarding contracts
5. Managing the supply base

• Current suppliers are competitive
• Identification of new potential suppliers and develop relationships
• Improvement and development of non-competitive existing suppliers

Manage its internal operations efficiently and effectively, including:

• Management of procurement staff
• Developing and maintenance of policies and processes
• Introducing and leveraging appropriate technology and systems
• Defining procurement strategy and structure
• Developing plans and measures
• Providing procurement leadership to the organization
• Providing professional training and growth opportunities for employees

Achieve this objective through :

• Leadership of procurement for the organization
• Sourcing management
• Ownership and accountability for sourcing processes
• Communication of purpose, process and pay off
• Collaboration and partnering
• Teamwork



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