Procurement Management: Methods and Process
Procurement management is a essential leg of the operations stool that includes budget control and finance management.
Any physical based business requires supplies and materials from 3rd parties, outside sources, to finish projects and allow numerous departments to function effectively.
A highly trained procurement manager beneﬁts every sector of a business by being skilled in the nuances of the procurement process.
Valuable skills of an experienced procurement manager include:
- Contract negotiation
- Market research
- Due diligence
Enterprises must develop the talent with these crucial proficiency to remain competitive in a world of global supply chains, where the person holding this position must be able to consistently negotiate and create contracts with vendors and suppliers worldwide.
Pieces of the Procurement Puzzle
The procurement puzzle spans the broad scope of essential business activities, such as:
- Acquisition of technology software
- Purchasing equipment
- Renting equipment
- Purchasing services
Most projects require the procurement of additional man power with defined end and start dates for specific projects.
The accurate forecasting of the requirements for each project remains a key skill experienced procurement managers can bring to the table, ensuring that budget restraints are met.
Negotiation is a Lifestyle for Procurement Managers
Vendor negotiations assist you in arriving at the ﬁnal details of each aspect of buying.
The total cost of ownership of each item or service to be rendered must be determined.
A low price product can become a high price product quickly when the associated shipping charges undermine its profitability.
The maintenance of the product, where applicable, must also be negotiated.
Moreover, the method of ordering, delivering, returning, and terms of payment must be agreed upon.
No order or acceptance of product can occur prior to signing the contract.
Procurement Strategy When Global Sourcing
The complex territory of global sourcing and procurement requires thedevelopment of a procurement strategy encompassing all the nuances involved in the scope of the project:
Such as tariff regulations, currency risks, political risks, and - for the world of 2019 - trades wars and piracy to name a few of the not so subtle but highly nuanced nature of a bulletproof procurement strategy that accurately deals with the reality of today's world.
Deﬁning the project is also necessary to determine the best solution, if at all possible; A Plan B, C and Z - too - to account for the multitude of variables touched upon above.
From Simple Scenarios (Rare) to Solid Long Term Procurement Strategy
There are occasions when, after thorough research is conducted, a conclusion is reached that outsourcing the project provides the greatest ﬁnancial benefit to the company and a rapid project completion.
This is rare for an enterprise.
Equipment rental rather than purchase is a practical solution when the project has a limited scale and time requirement.
Numerous vendors can handle materials and supplies for small-scale projects however comprehensive research is mandatory for large ongoing projects where long-term inventory availability is critical.
It comes without saying for any procurement professional: Developing a strong relationship with your chosen suppliers is a vital necessity.
Proposals are best when they contain language highlighting that both the company and the vendor shall beneﬁt from working together.
Solid business relationships contribute mightily to the viability of your
- Keep in touch with the vendor throughout the acquisition process.
- Let your willingness to help be evident in any correspondence or phone calls.
Implementing a formal procurement process is wise for several reasons. It is a time saving technique that will ensure you are not missing vital procedural steps that can come back to bite you later.
The New World of E-Procurement Is a Game Changer for Procurement Managers
The complexities of globe spanning supply chains, dealing with multiple time zones, a multitude of vendors, and for the major retailers - thousands of factories - keeping track of everything can be a nightmare when the outdated methods of spreadsheets and email are used, as Visichain has seen is the case in many sourcing offices.
With the latest advances in digital transformation, supply chains, sourcing and procurement are rapidly undergoing, and this is not understatement, a revolution.
Some have even forecast the death of supply chain management from the rapid advances happening thanks to digitization and other technologies.
What's at play in this Procurement Revolution?
First and foremost, it's the promise of the digitization bringing automation, real-time reporting, vendor management, communication, and data integration to allow for true digital procurement.
You are sure to be familiar with the efficiency gains this revolution has unleashed, as noted by incredible cost reductions in companies such as Wal Mart, Amazon, and and early adopter that we don't hear about much anymore Dell Computers.
Most of the cost reductions that consumers have experienced from these organization are due to advanced e-procurement systems that weave complex supply into an elegant tapestry - procurement dashboard are a prime example - that turn procurement management into engine for growth and profit in major enterprises.
Don't Get Left Behind
Schedule a free consultation with Visichain to ensure your supply chain and procurement operations continue to evolve and remain competitive in today's dynamic environment.