Common policies in procurement department

Common policies in procurement department

To support good governance, the presence of written policies is a must. In procurement, clear policies and guidance will promote good ethical practice and collaboration. Eventually, these outcomes will translate to higher synergy and productivity.

In an organisation regardless of the size, the procurement function should have the following policies:

Policy on roles and responsibilities of procurement officers

Like any other function, procurement should deploy the division of labour. The larger an organisation is, the more important this policy plays. Division of labour ensures that employees know what they must work on and where they can get the support. A procurement function may divide the labour in three ways:

  • Division based on financial thresholds: This type of division answer a question: ‘Which person will review and supervise the small/medium/big purchase order or contract?’ Usually, more expensive project is more complex, thus more senior officer should take responsibility to review and make recommendations to user departments.
  • Division based on tasks: A procurement department can divide its tasks into sub-categories such as: demand analysis, sourcing, relationship and contract management, inventory and warehouse management,…
  • Division based on purchasing categories: In an organisation that purchases wide varieties of products and services, expertise knowledge of procurement officers can be a competitive advantage. In this case, the division of labour within procurement should be based on the categories to be purchased. For example, an automobile company can organise its procurement function by categories. Some procurement specialists only focus on engines and their components, others will concentrate on chassis. These specialists will take charge of every tasks, from analysis to supplier management on their categories.

Policies on procurement conduct and behaviours

The second group of cetegories should focus on what procurement employees should do in particular ethical scenarios. For example, what should procurement officer behave if a supplier offers her gifts or kickback? Policies should give principles and guidance on such situation.

Examples of this group are policies on conflict of interest, on gift and hospitality,…

Policies on social and responsible procurement

Procurement can be a powerful tool to disseminate organisation’s social values. Organisations who adopt CSR policy should also guide procurement on how to source and buy ethically and responsibly. These policies might include how the purchaser supports sourcing from local suppliers or the process for awarding business to minority suppliers.

Policies on relationship with suppliers

Managing supplier relationship is a crucial part of procurement’s day-to-day job. An organisation should have standards on how to approach and communicate with supplier. Also, these policies can provide the procedure for supplier audit and discuss difficult issues (such as labour problems) with the suppliers.

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