Many organizations don’t have efficient procurement management processes in place. Often, this is a result of relying on manual, paper-based processes rather than embracing digital solutions that offer automation. Manual procurement management plans are riddled with high processing costs, lost documents, slow approval cycles, missed discount opportunities, and uncontrolled costs. As a result of the chaos, supplier relationships suffer because of inefficient dispute resolutions, poor vendor management, late payments, and more.
Procurement management is a strategic approach to optimizing organizational spend. It invoices sourcing, requisitioning, ordering, inspection, and reconciliation. It means acquiring your goods and services from preferred vendors, within your determined budget, either on or before the deadline.” Procurement refers to all of the tasks involved in obtaining the optimal product from the optimal vendor, on optimal terms. That said, procurement involves processes that occur before a purchase is made, as it is made, and after the actual transaction has been completed.
Pre-purchase procurement involves:
- Defining your organization’s needs
- Conducting research on solutions offered by potential suppliers
- Determining which of your options poses the best opportunity for success
Procurement during a purchase involves:
- Negotiating terms with your chosen supplier
- Creating a purchase order
- Fulfilling your end of the agreement
Finally, procurement on the other side of the purchase will have your company engaging with your suppliers repeatedly and more intensively over time, both for purchasing and other reasons. For example, you might inquire as to whether a supplier offers related products or services that might allow you to get even more value out of the original purchase. Similarly, to supply chain management, procurement focuses on the context behind the business you do with your vendors, allowing you to move forward in the most mutually-beneficial way possible.
Upon Completion of this course, you should be able to
- Distinguish between Procurement and Supply Chain Management
- Understand the Concept of Procurement Management