By Shruti Agrawal
One of the most important business practices in any industry is procurement. This has become even more prominent in today’s global economy where every company is looking to procure goods from China, among other countries, for their operations. This is a process that has over the years been confused with purchasing. In most business reports these terms are lumped together and this threatens the business process.
If procurement does not receive the prominence it deserves in any organization, there are bound to be problems which make it imperative to get insight on the same. Whichever industry you are heading, you will have to deal with procurement because it is at the core of every business cycle.
The best way to start is by defining this business process. According to the International Federation Purchasing and Supply Management (IFPSM), procurement is a business management function that ensures identification, sourcing, access and management of external resources that a company needs to fulfill its strategic objectives.
It is an overarching function that goes beyond supply and delivery. It involves establishing requirements, strategic sourcing activities including market research, supplier assessment, contract negotiations and much more. Procurement services exist to explore opportunities in the supplies market and implement effective resourcing techniques to deliver the best possible supply options for a business.
Procurement starts with identification of need, China sourcing agent identification, supplier communications, negotiation, liaison and logistics management, which includes shipping and delivery.
Unlike purchasing, this function does not deal with a single function or process but rather covers a broad range of events starting from identification of a need in the company through to the fulfillment of this and then supply. Purchasing on the other hand just refers to the single process of ordering and receiving goods or services.
Benefits of Procurement
From this definition, it is obvious that any successful business must leverage effective procurement to achieve its objectives. Some of the benefits your company will accrue include:
- Best Value for Money
The intensive process involved in procurement ensures that your business gets only the best product or service from the market. Through the entire process, from need identification, the process aims at identifying the best supplier at the best price while not compromising on quality. Whether you are looking for local or international sourcing, this process is fundamental. At the end of the day you will lower costs of running operations.
- All-rounded Research
While lower costs and enhanced value are at the core of a procurement process, there is also emphasis on other aspects of a product or service to be purchased. For instance, the product or services you buy will be analyzed against industry standards, local and state and federal regulations. You will also assess the supplier to ensure they can consistently provide the same.
- Streamlining Inventory
An effective procurement process ensures that your company does not have extra inventory which will escalate storage costs. At the same time, your procurement team also averts any shortages by streamlining the process such that what is needed is available when needed.
- Enhanced Quality
Without the procurement process, products and services would be accrued from any supplier. This gives room for poor quality which eventually diminishes your productivity. This evaluation procurement process ensures shoddy contractors and suppliers are eliminated through a systematic process thus ensuring only quality goods and services.
- Seamless Logistics
Procurement is an engaging activity and if not carried out effectively it can bring operations to a halt. With an effective procurement division, the entire process runs smoothly as communication channels are better defined while roles are well understood. Every department in your company will have what it needs to run effectively when you have a functioning procurement team and this improves productivity.
Strategic sourcing when done professionally can be the main underpinning for your business. It is the foundation upon which most successful businesses today are built on and you can get the most out of the process by investing in procurement services provider.
As the Director at Excella Worldwide, Shruti Agrawal is a strategist with an Electronics Engineering background and always on the lookout for ways to challenge and disrupt business models to make them better.