What is Procurement?
- Procure to Pay
Running a procurement department is like herding cats. Promoting preferred suppliers, ensuring contract compliance, and searching for savings opportunities are just the beginning of the challenges. Take the first step toward becoming a powerhouse of efficiency and value by gaining a fundamental understanding of procurement and its processes.
You engage in the procurement process more than you think!
Last week I found myself in need of a new white board at my office. I jumped on our internal ordering system, selected the white board that best fit my needs and placed my order. If you’re ordering something online, you complete the procurement cycle all of the time, whether it is in the office or at home. This is procurement at its most basic level.
During the procurement cycle you will prepare and process a request. As a result of your request, you will receive an approval of payment and an end receipt. These processes can be manual or automated.
Procurement is more than meets the eye.
Procurement encompasses all the processes associated with purchasing direct and indirect goods, and services that enable your organization to operate. It can include:
- Identifying and selecting suppliers
- Approving a purchase request
- Establishing payment terms
- Strategic vetting
- Negotiating contracts
- Creating a purchase order
- Managing shipping
- Receiving invoices
- Making a payment for goods purchased
Procurement is a strategic process.
Beyond the physical request and acquisition of products or services, a company can use its procurement strategy to drive specific goals that reflect its financial and cultural roadmap. For example, if you want to order 10 percent of your supplies from green suppliers or small and medium-sized enterprises (SMEs), you can set guidelines for buyers to ensure that your goals are achieved.
Another strategic procurement goal your company may set is making sure buyers purchase on contract for 90 percent of purchases. Your contracts reflect negotiated rates you have with suppliers, which are likely at a discount. When your buyers buy on contract, they are saving your organization money.
Technology can help you achieve your procurement goals.
Procurement is a process that requires strategic planning to guarantee your company is getting what it needs for the lowest cost, at the best quality, with suppliers that meet your broader goals. Remember, savings is just the start of a successful procurement process.
So how can you herd all of these cats and ensure your procurement strategy drives compliance, efficiency and achieves maximum value? The answer: technology. Software-as-a-service (SaaS) companies have solutions that integrate and automate the procurement processes, so you don’t have to worry about checking up on approval workflow or making sure your suppliers are compliant.