Understanding the Procurement Process
Learn How to Understand the Procurement Process
PurchTips Edition #408
The Procurement Function is one of the most critical Supply Chain Processes, which is vital for the survival and competitive advantage of any business system.
The Scope of the Procurement Function spans from:
The translation of customer requirements into the selection of highly capable suppliers, to timely, accurately, cost effectively deliver high quality, mission critical inputs and raw materials to internal customers. As well as assuring the accurate receipt and timely payment of all accrued invoices
The Mandate of the Procurement Function:
The assurance of three primary things called the 3 Main Functions:
- Managing Impact of Proper Process Execution – Procurement Managers are responsible for various performance measures, the most critical being the Total Cost of Ownership (TOC). Effective execution of the Procurement Process Variables will result in the effective management of spending.
- Supporting Impact of Proper Process Execution – Procurement Managers must effectively support all Supply Chain and Enabling Operations by assuring the acquisition of high quality inputs and raw materials, on time, and at the agreed upon cost structure. Failure to execute this portion of the procurement mandate leads to delays, rework, generation of defects, low first pass yield and consequently increased Total Cost of Ownership.
- Protecting organizations from risk. Impact of Proper Process Execution – Procurement Managers must effectively manage and neutralize risks that the procurement function can impose on the supply chains of their organizations. A clear understanding of the degree of the severity and occurrence of Supply Chain Risk Factors must be met with robust Mitigation Strategies. Failure to manage supply chain risks leads to increased Total Cost of Ownership.
The Next Level Purchasing Body of Knowledge underpins, integrates and enhances the essential components of The Procurement Process in simple how to do steps. This cutting-edge BOK is designed by practitioners for practitioners.
The Procurement Process:
- Identifying Customer Requirements (Big Picture)
- Translating the Customer Requirements conduct the next step (Big Picture)
- Determining a need (Tactical)
- Communicating the need (Tactical)
- Reviewing the need (Tactical)
- Finding potential suppliers (Tactical)
- Conducting bidding and/or negotiation (Tactical)
- Selecting a supplier (Tactical)
- Formalizing the commitment (Tactical)
- Following up (Tactical)
- Closing out the transaction (Tactical)
Best Procurement Practices:
Procurement must improve the value of their procurement processes by leveraging the following best practices.
- Utilizing an Annual Buying Plan
- Utilizing Commodity Teams
- Managing Supplier Performance
- Optimizing Strategic Supplier Relationships
- Qualifying Suppliers
- Implementing Risk Management Practices & Policies
- Systemizing Operations
- Embracing Technology
- Measuring Purchasing Performance
- Developing Staff Capabilities
- Utilizing A Strategic Plan
NLPA Library: Looking for authoritative procurement templates, tools, webinars, and more? Stop trying to create resources from scratch and start taking advantage of having exactly what you need right at your fingertips in the NLPA Library.
Copyright 2018. This article is the property of the Next Level Purchasing Association and may not be copied or republished in any form without the express written consent of the Next Level Purchasing Association. Click here to request republishing permission.
By David Millington, SPSM, SPSM2, SPSM3 - Director of Education (Next Level Purchasing Association)
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