Procurement generally involves the process of acquiring materials that a company needs to support its day-to-day operations. This includes the process of negotiating terms, sourcing suppliers, receiving and examining the quality of goods, and documenting each step of the process.
With that said, the role of a procurement department in a business organization is very important. Its efficiency ensures that the day-to-day operations and manufacturing process can achieve maximum productivity. With poor procurement tactics, however, businesses may have to pay costly transportation fees, lack purchase control, and deal with delays in the production process. This significantly affects the growth of the organization.
This article explains the five most important roles of a procurement department in a business organization:
Table of Contents
Take Charge Of The Bidding Process
Since procurement deals with sourcing suppliers and manufacturers, a bidding process is necessary. Going through a bidding process allows the business to choose the most cost-effective supplier, giving it access to quality materials at the best prices possible.
To improve the bidding process, your procurement department might find a contract bidding platform useful. This platform can help procurement teams keep track of the bidding process and easily document each step. It also helps the department prepare the bidding process and coordinate with contractors more smoothly.
Aside from facilitating the bidding process itself, the procurement team is also in charge of preparing vendor contracts, negotiating for lower prices, and forging a good business relationship with bidders and other potential suppliers.
The procurement staff has to keep up with inventory updates to make sure supplies are enough for the business to run. Typically, departments have an advanced system that could notify them when stocks are running low, or when the inventory is too full and the business might have to deal with a surplus.
With advanced inventory management systems, orders and delivery of supplies could be automated. Orders can be automatically set whenever the system detects that a certain supply is running low. As a result, the business can keep a healthy level of inventory without manually accounting for all the stocks that were delivered or received.
Inspect Materials And Control Quality
Another critical duty of the procurement department is controlling the quality of raw materials and supplies by pulling random samples for inspection. The department is in charge of conducting on-site testing to determine issues that might affect the products’ performance and safety.
The procurement department has to make sure that raw materials and supplies that were purchased by the company pass quality control and are not substandard. This is necessary to ensure the overall quality of the end product or service. After all, substandard materials cannot create durable and high-quality products. This is also a way for the procurement department to check if the chosen supplier has complied with the contract agreement.
Monitor Vendors’ Performance
Vendor monitoring is a systematic program that allows the procurement department to ensure suppliers are fulfilling their obligations. This activity includes organizing vendor deliverables, managing invoices, and streamlining the warehouse system.
The procurement team can also make use of key performance indicators (KPIs) to evaluate the performance of its vendors. These metrics may include supplier lead time, compliance rate, defect level, on-time delivery, and availability.
The management can provide the procurement staff with innovative tools for optimal vendor performance tracking. With a good tracking system in place, it’s easier to monitor vendor compliance and anticipate logistical issues that may arise. On top of that, it helps the company determine if there is a need to find new vendors to supplement the company’s demand.
Analyse Suppliers’ Competitors
The procurement team is also responsible for market research and competition analysis. But unlike marketing departments, their research is focused on the business’s suppliers and vendors. Researching and analysing vendor competition help the business see the bigger picture and get more insights.
The information can help the procurement team negotiate for better prices. Additionally, this helps the business compare and contrast product quality among competitors—by simply learning who their vendors and suppliers are.
As an entrepreneur, you should support your procurement department by providing them with advanced resources that will help them perform their duties more efficiently. As mentioned above, the procurement department is mainly responsible for handling suppliers and vendors, managing inventory, and performing quality control.
With the right tools in place, they can easily track vendor performance, maintain a healthy supply system, facilitate a smooth bidding process, and gain insights that can help the business save on costs and maximize production.