How Is Procurement Strategically Important To An Organization? All You Need To Know
If you are aiming for a renowned organization for the future then there are minor steps that need to be taken along the road. These steps are broken down into various legalities and departments. One of the significant help you will get is from your procurement department and with this department, every other department must coexist.
What does the procurement department do?
For an organization to work in harmony and excel, its strategic procurement is the business management process. The sourcing and management of external resources are in their hands. Their main job is to;
- Identify the need for goods and services.
- Assessing and selecting vendors
- Negotiating prices and creating purchase orders
- Identifying suppliers
- Purchasing
For strategic procurement to take place with positive outputs, they need the genuine and mutual interest of all the other teams.
Goals of strategic procurement:
When having a procurement strategy in place, the team focuses on a wider objective that favors the company and business. They have specific reasons and aims to depend on the procurement of the specific organization.
- Matching the best possible supplier for the company’s business
- Aiming to procure higher quality of goods
- Building and maintaining mutual trust and interest with suppliers
- Making mutual interest collaborations with suppliers and vendors.
- Following the supply chain, maintain a success peak by identifying issues and technical problems.
What does the Strategic procurement process include?
a. Needs analysis
Understanding the company’s business or nature of the organization and working in favor of their aim.
b. Spend analysis
It analyses the ‘existing spend by sourcing data’ from both the suppliers and the organization
c. Supply market analysis
Doing market research for suppliers and matching the best one for the business.
d. Procurement strategy creation
- Determining
- company’s supplier requirements
- selection process
- procurement policies
- strategic objectives
e. Supplier selection
After thorough research and matching of suppliers, the one with the most chances of its success is selected.
f. Negotiation
They also make sure the negotiation and contract awarding to the suppliers.
Why is strategic procurement important?
The decisions taken by the procurement department are carefully analyzed and observed for the organization’s success.
Depending on the nature of an organization, being public or private, a change in procurement can be seen. In the private sector, procurement is an important tool for an organization’s success or even a business. For private sectors, the importance of procurement is recognized because their heads are always placed at an Executive Board level.
When it comes to the public sector, the laws of procurement do not apply here but they should matter as the public sector has no shareholders, no dividends, or even publicly claimed profit or loss.
Finally!
Procurement is an important tool for an organization’s success and honest work. Having an eye on the inflow and outflow maintains the integrity of the organization. They have implications that help lower the costs of the entire business. The costs include the total cost of raw material, any repairs, goods, and even services, not only the price paid.
