Procurement is involved in the vast majority of business that deals in goods and services, yet lots of us don’t fully understand exactly what procurement is or why it’s important to businesses to keep them operating.
It may be the case that, in your business, it is called something different. Maybe you have heard the words acquisition or purchasing, as it is often referred to in some industries. The phrases can be used interchangeably and generally mean the same thing.
What is procurement?
In simple terms, procurement is the action of buying goods and services in order to allow a business to continue to operate efficiently and appropriately.
What is the role of procurement?
A procurement and supply specialist is a person who is responsible for the acquisition of raw materials, goods and services that are needed for a business to function. Their role is to manage and negotiate relationships with suppliers of the business.
Examples of procurement and supply
Let’s take a look at a few real world examples of procurement and purchasing in action.
1. Procuring Wholesale Equipment & Ingredients
Say you work in a bakery. As well as equipment such as industrial ovens and ingredient mixers, there is also a need for raw ingredients like flour, eggs and butter. These ingredients will be ordered in wholesale amounts and it is the responsibility of a procurement specialist to find adequate providers of these materials and equipment and negotiate the best prices.
2. Securing Supply of Network Resources
Another example would be the purchasing of network resources for a company such as broadband or company mobile plans. The procurement specialists would scour the market to find the best available contracts at the right price and get in touch with providers to discuss their requirements and negotiate a deal. It largely involves managing relationships and contracts with these providers to make the most suitable and profitable deals that they can.
What makes procurement so important to business?
Procurement is important in business because it directly affects the profitability of a company. If you’re spending more on raw materials than what you make when selling your product then your business is not going to be profitable. That’s why it’s important for a procurement specialist to negotiate the right deals at the right prices and maintain these business relationships going forward to sustain a businesses profitability.
What is the responsibility of the procurement manager?
As well as sustaining business contracts and relationships and making sure that the business remains profitable, procurement specialist also need to consider legal and ethical factors of procurement and supply.
What is difference between purchasing and procurement?
Procurement is the focus on strategy of searching for a product or service, whilst the purchasing process pertains to how the products or services are bought, including ordering and payment.
Contract and Relationship Management/Negotiation
The primary responsibility of a procurement and supply specialist is to manage business contracts and relationships with their partners and suppliers. Much like that of a salesperson, this duty entails building and maintaining professional relationships with these suppliers and ensuring that the contracts offered are beneficial for both the supplier and their own business. It also entails keeping on top of these contracts and relationships by regularly reviewing their performance and making adjustments where necessary.
Ethics in procurement
Whilst maintaining business profitability through procurement and supply management, a procurement specialist must also consider ethics. They must ensure, at every step of the way, that the process is impartial, fair and transparent, from the negotiating of contracts, the logistics process, purchasing and adherence to any rules and regulations that are in place. This is especially true when doing business in other countries with potentially more relaxed rules and regulations, particularly when it comes to human rights.
Before all of this takes place, a procurement specialist must conduct extensive market research to determine the best and most profitable moves to make in relation to procuring goods and services. The results of this research will determine the profitability and suitability of these goods and services and distinguish what is the best option for the company at any given time.
Consider a career in Procurement with SRSCC
If you’re interested in a career in procurement and supply or simply have some further questions on what procurement is, please contact us today and we can help you determine whether procurement is the career for you.
Take a look at the latest procurement courses, available to study online.
Just starting out in your procurement and supply career? Here’s the perfect entry point with our CIPS Level 3 course.