Each and every business, irrespective of its size is required to have a formal process to spend money. Procurement management plays an important role in any organization by enhancing the visibility of all spend activities and has a huge impact on the bottom line of your company.
The Procurement Management Process is the core of business operations across industries. A clear understanding of the fundamentals of Procurement Management is important for professionals working directly or indirectly in any business process operations coming from sourcing to purchase,Guest Posting and finally to payment.
This quick guide helps to polish all you need to know about Procurement Management right from scratch.
So, what is Procurement &how it relates to Sourcing and Purchasing?
Procurement is often confused with the functions like Sourcing and Purchasing. Well, all this depends on the process involved with the Business.
While sourcing is particularly concerned with finding suppliers, vetting & contracting them to build the initial links of the supply chain, Purchasing is about acquiring goods or services in need, creating their orders, and arranging for the Payments of these suppliers, Procurement Management is a way more than these.
Sourcing answers the questions for WHO will be supplying and for HOW MUCH. Purchasing answers for WHAT is required and WHEN, and HOW to arrange for the payments involved. Procurement is the overall process that governs these two functions with answers to all the W’s and H’s involved here in the most strategic way possible.
The procurement process begins right from identifying the needs of goods and services, then moving on with a full-fledged sourcing and purchase process, to final payments. Procurement Management also involves eliminating the possibility of any fraud, by conducting various match techniques (especially a 3-way match) with the purchase orders (PO), goods receipt notes, and the supplier’s invoice, finally organizing and keeping all records for every single transaction for further references.
Now, what are the types of Procurement you should know about?
Based on the types of requirements of goods and services in the Business Process, the Procurement Process can be of three major types -
Direct procurement is more into the regular supply chain of goods and materials that drive profit as a core operation of a business, whereas indirect procurement is about any expenditure on maintenance to keep up with the day-to-day operations. Service procurement is about procuring the people-based services your company might require, which can be anything from on-site security services, law, and compliance resources, or on-equipment training.
Why is procurement important for your Business?
Procurement is no more just another process running out in your Business. It has proved to be the backbone of all commerce associated with the Business.
After the Covid-19 outbreak, the Supply Chain and Procurement industry have seen a vast disruption that collided head-on with the Business Operations and left a big void of losses to cover up, for the Business finances.This had a direct impact on the business profit margin as well.
The procurement management process if done strategically, can help cut costs of procuring goods and help in ensuring the goods for the best possible price by the Company.
Procurement Management is considered to be among the most critical units for any Business model to leverage success.
The standard procurement management process flow -
The Process of Procurement Management specifies the standard procedure involved in Procuring goods/services for any business model. Standard procurement management procedure consists of seven main stages:
Identifying the requirement for goods or services
Identifying and evaluating vendors/suppliers
Negotiation of contracts with the selected supplier
Raise purchase requisition (PR)
Generate purchase order (PO)
Quality checking of requested goods
Invoicing and payment
To get a detailed idea of all these stages, read – steps involved in procurement management process?
How to streamline the Procurement Management Process?
The procurement Management Process has to be error-free and highly transparent at all levels and to ensure this, there is always a requirement of end-to-end Procurement-to-pay software that can help streamline all the processes and act as the ultimate data-mine on any transaction held at any time and any level of the process.
The Procurement Management Process automation can help in various ways, like-
Eliminating all sorts of paperwork and physical storage.
Transparency and Control.
Shortened Business Cycles
Increased Productivity and much more!