Procurement management is a business function that involves the acquisition of goods and services from external sources. It is a complex process that includes careful planning, execution, and control to ensure organizations obtain the right products at the right time, cost, and quality. This article will cover the procurement process and the roles in procurement management.
Organizations use a similar procurement process regardless of type, size and industry, which typically includes the steps of identifying needs, selection and evaluation of suppliers, negotiation and awarding of contracts, ordering goods and services, receiving updates, payment processing and performance evaluations.
The procurement process starts with recognizing the need for goods or services. This includes assessing the volume, quality, and characteristics of the items necessary to achieve the organization’s goals.In order to identify potential suppliers providing the necessary goods or services, it is essential to undertake research, solicit bids, and evaluate suppliers on criteria such as capabilities, reputation and pricing.
The organization evaluates potential suppliers and chooses the one which meets the criteria of quality, cost, delivery time, and other factors most closely.Upon selecting the supplier, the organization will enter into negotiations to establish a binding agreement in terms of price, delivery schedule, warranties, and other contractual provisions.
Upon completion of negotiations, a contract will be signed by the organization and supplier detailing the terms of the agreement, which include delivery schedules, payment terms, warranties and other stipulations.
Upon signing the contract, the organization will place an order with the supplier for their required goods or services.
Upon delivery of goods or services, the organization will inspect them to verify compliance with the desired quality and quantity specifications.Upon acceptance of the goods or services, the organization will make payment to the supplier according to the predetermined terms.
Procurement management comprises of various roles and job titles responsible for different parts of the procurement process, such as roles essential to the process.The Procurement Manager is responsible for managing the procurement process and obtaining the most advantageous products and pricing.The role of the purchaser is to locate suppliers, negotiate terms and issue orders for materials and services.The duties of the Contract Manager include drafting, negotiating, and overseeing contracts with suppliers.The Supplier Relationship Manager is responsible for overseeing supplier performance and the adherence to contractual obligations, as well as building strong relationships with suppliers.The role of the Logistics Manager entails overseeing transportation, warehousing and distribution of goods.
Effective procurement management is an important business process that requires careful planning and execution to acquire the right goods at the right time, cost and quality. The correct roles and job titles must be included in procurement management to guarantee that the best goods and services are sourced from the best suppliers.