Supply Chain Management Pt 2: Procurement

The Council of Supply Chain Management Professionals (CSCMP)’s definition of procurement:

“The activities associated with acquiring products or services. The range of activities can vary widely between organizations to include all of parts of the functions of procurement planning, purchasing, inventory control, traffic, receiving, incoming inspection, and salvage operations.”

There are several facets of procurement.  The main job is to procure raw materials, finished product or services to create the final product.

Who? – Finding Suppliers

Procurement has the responsibility to develop positive relationships with suppliers.  This can be particularly difficult as many suppliers have different business values.  Many companies adapt to their customer’s procurement procedures and offer a wide variety of eProcurement communications.  Procurement teams heavily rely on suppliers and those suppliers rely on their suppliers, supply chain comes full circle.

Good suppliers will keep track of how their materials are used and procurement will want to know how the materials are made.  With this type of relationship, the procurement team can predict performance on quality and reliability.  Making business easier and adding value to each party.

Procurement can also score their suppliers based on performance and work together to see where they can improve.

When the procurement team has a good relationship with a supplier it brings office morale up.  If the supplier provides quality product at a consistent basis, then this makes both the customer and procurement successful.

Image from Oracle + Netscape Blog

What? – Inventory

Another responsibility of procurement is understanding inventory.  The team has to keep up with customer supply and demand.  The question is always asked, “Why not keep a lot of inventory?”.  There is cost associated with keeping this inventory.  It costs money to store, insure, deliver and purchase access inventory.  Procurement has the responsibility to communicate with suppliers the different requirements for stocking their products and keeping up with the ever changing demands of customers.

The procurement team has to set quality goals and standards of incoming product and deal with the situation of bad product.  How to dispose of the bad product and issue claims with the suppliers.

Controlling inventory levels can set companies apart from their competitors.  Customers rely on their suppliers to have the sufficient inventory to fulfill their needs.  Procurement has this power in their hands.

There are many responsibilities of procurement even further than the duties explained here.  Suppliers and buyers depend on each other for profit, progress, and improvement.  Up next we will review another section of supply chain management, Manufacturing and Operations.  Stay tuned!

Cover photo from Procurious: Blog for Procurement Specialists 

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  • General Interest

    Supply Chain Management Pt 2: Procurement

    The Council of Supply Chain Management Professionals (CSCMP)’s definition of procurement: “The activities associated with acquiring products or services. The range ...
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