In the past, procurement was considered as a secondary function of which the only job was consuming the organisation’s budget. Recently, due to the development of professional bodies who educate and improve procurement’s competencies, more and more organisations pay attention to procurement and supply chain, consider these functions as strategic parts to achieve long-term objectives.
What makes procurement so important? We believe that procurement can play the following roles within an organisation:
- Profit generator: When talking about procurement, most people will think about cost savings. The more costs are reduced, the more profit the business enjoys. Indeed, procurement is in charge of cost management. By managing organisational spends effectively, the function helps the business gain profit to re-invest and expand.
- The conveyor of organisation’s values to the supply chain: In public and third sector organisations, gaining more profits is not the prime objective. Cost saving is still an important task, but more crucially, these organisations aim at the betterment of the whole society such as elimination of poverty and gender equality. Their values can disseminate throughout the supply chain by procurement. If an organisation promotes gender equality and purchases products/services from businesses run by women, their message will be double stronger.
- The bridge between the organisations and its supplier: Communications between suppliers and buyers are crucial to make plan and decisions. Procurement is the function which communicates with suppliers most frequently. Any information on supply shortage or ideas on new products can be extracted from the suppliers. These information and ideas can make the differences between success and failure.