What is procurement management?
Procurement management is also referred to as the source-to-settle process. It encompasses the evaluation, selection, and creation of formal contractual agreements as well as managing the company’s ongoing supplier relationships.
Procurement is a complex discipline spanning many interrelated activities. The procurement management process includes the transactional purchasing of goods and services, and integrates with accounts payable to complete the source-to-settle cycle by providing supporting documents to help with the processing of supplier invoices for payment.
Procurement management is the strategic approach to managing and optimizing organizational spend. Procurement management involves acquiring quality goods and services from preferred vendors within a stipulated budget, on or before the deadline. The procurement management process includes sourcing, requisitioning, ordering, expediting, inspection, and reconciliation.
Types Of Procurement
Direct procurement is the purchase of the input that a business requires in order to manufacture its end product. This is the raw material that is required usually for a manufacturing-related business. The input cost and efficiency of direct procurement is a vital factor in the profitability and performance of the company. When there is a block in the process of direct procurement, it impacts the ability of the company to manufacture its product.
Indirect procurement is the procurement of the services or input that are not directly used in the manufacture of the company’s product but are essential for the day-to-day operations. It could include office supplies or maintenance services for the equipment that is being used for manufacturing. Blocks in indirect procurement affect the operation of the business.
Difference Between Indirect, Direct And Service Procurement
Direct procurement is sourcing the goods, materials or services that serve as the input for the organization’s manufacturing process. Direct procurement is a vital process that directly impacts the company’s own output of goods or services. The direct procurement strategy has a direct impact on the quality and price of the final goods and services.
When Is Direct Procurement Used?
Direct procurement is common in manufacturing companies. The procurement team endeavors to create and sustain a good relationship with the direct procurement vendors.
The day-to-day operations of an organization also require goods and services that are procured for internal use and this process is called indirect procurement. They are usually obtained through short term contracts with suppliers.
Services procurement in IT could be for software licenses. This type of procurement is called services procurement and is usually a one-time short term contract.
What is the procurement process?
So what is the procurement process? The procurement process refers to the identification and implementation of certain steps by businesses to ensure they can acquire goods and services to meet their requirements and achieve their objectives. A procurement process is important because it has a direct impact on how much a business can save. When businesses assess the procurement process regularly, then it ensures their goals are being met. Changes can be made to the process when it is not working as planned or when problems crop up for the business. As the procurement’s main aim is to boost efficiency, businesses must ensure they are deriving maximum value from their process.
The procurement process isn’t the same for all businesses because it can vary according to needs. Each business has its own set of needs and so it will have a different procurement process compared to another business which has different requirements.
Stages of Procurement
The actual steps involved in a procurement are as follows:
- Identification of Requirement
- Determination of the Specifics of the Requirement
- Negotiation and Finalization of Price and Terms
- Purchase Requisition and Order
- Delivery of the Purchase Order
- Product/Service Supply And Inspection
- Payment Process
- Record Keeping And Review
The Importance of Properly Managing Procurement Processes
Maintaining good relationships with your suppliers and staying organized throughout every step of the procurement process are both crucial to ensure the success of all business operations, allowing you to meet your specific goals while easily meeting all stakeholder expectations. In establishing smart procurement processes, companies can avoid costly downtime while boosting their bottom lines.
As technology continues to advance, digital procurement management techniques are becoming increasingly popular, cutting down on delays and errors while helping skilled buyers do their jobs more efficiently. Low-cost computing and data storage systems are reshaping the way companies handle purchasing and procurement, allowing for more advanced cloud and mobile capabilities, while the Internet of Things (IoT) is rapidly changing the way all company operations are conducted.
Where can i get the best procurement management training in Nigeria?
After reading the benefits and importance of procurement management training, the question is where can you get procurement management training in Nigeria? The answer is simple, JobSkills Training Institute. They are professionally trained to teach procurement management training, and are have been awarded with recognized certificates.
JobSkills training institute has branches for procurement management training in Lagos State, Delta state, Rivers state, Edo state, Ogun state and FCT Abuja.
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