Smart procurement procedures are critical for firms in any industry, to further ensure efficient operations and a healthy bottom line. Yet, to proceed further in the same context, we first need to understand the overall phenomenon of Procurement management. What is Procurement management? Simply said, procurement management refers to all of the actions and procedures involved in obtaining products and services from third parties. Everything from office supplies, furniture, and facilities to heavy equipment, consulting services, testing, and training may be included. Managing all procurement processes properly not only ensures that corporate operations go along smoothly, but will also save money, time, and resources of the firm. Procurement management ensures that all products and services are purchased correctly, while allowing projects and procedures to run smoothly at the same time. Procurement Management: Key Steps to its accomplishment Specification and planning — prior to proceeding any further, businesses must develop a comprehensive procurement strategy and identify the services and commodities that will be required, for its internal and external operations. Locating and finalizing suppliers — after that, you must locate and finalize suitable suppliers. Doing that, one must be careful enough to ensure that these suppliers can precisely fulfill your company's demands, and comparisons should be conducted to assess particular supplier benefits and drawbacks. Requesting, negotiating, and contracting for proposals — after you've shortened down your list of possible suppliers, you can start obtaining quotes and negotiate as needed. The negotiating process might reveal the reliability and credibility of potential suppliers. Control and Delivery – Once you've signed a contract with a vendor, it's up to your accounts department to ensure that all deliveries and payments are handled appropriately. Smooth procurement procedures need regular meetings with suppliers, diligent delivery tracking, and a thorough assessment of all orders against set specifications and quality standards. Analysis — lastly, an established set of key performance indicators must be used to assess the whole procurement process. This will aid in determining the process' performance, cost efficiency, speed, and efficiency. Procurement vs Purchasing Procurement and purchase are two different terms that are sometimes used interchangeably. Despite their similarities, their meanings are quite distinct. One is concerned with transactional tasks, while the other is concerned with the strategic process of product sourcing. Purchasing refers to the process of ordering products and services. Creating and fulfilling purchase orders and arranging payment for items are few of the examples in same context. Procurement, on the other hand goes beyond the task of creating and fulfilling purchase orders. Here, the procurement manager needs to deal with the creation of purchase orders, short listing vendors, negotiating prices, receiving the delivery, analyzing invoices and releasing the payment. Procurement vs. purchase has another significant distinction in addition to the ones listed above. Procurement management focuses on strategic, long-term goals like gaining a competitive advantage or aligning itself with corporate strategy or goals, whereas purchasing focuses on short-term goals like fulfilling the existing requirements of goods and services for the organization. Firms should choose a strategy based on their own requirements. Small firms may opt to acquire with the goal of keeping the process simple and transparent, whereas corporations may desire a full-fledged procurement procedure just to make it a fundamental element of their corporate strategy. Read More: https://www.sap.com/resources/procurement-vs-purchasing
Overview of Procurement Management and Procurement Vs Purchasing