Procurement; How important to an organization is it?

Although most organization don’t realize this, procurement is as important as sales and marketing in
every serious minded organization.

Procurement is a strategic function that aims to improve the organization profitability. It involves
deploying a robust buying plan, leveraging a robust forecasting, market and economic analysis,
creating a well-defined purchasing process and smart cost reduction methodologies.

Many decisions taken by departments have a procurement implication that can impact on the
overall cost of carrying out the decision. Here cost includes the total cost of the good or service and
not simply the price that is paid. Organizations require a good governance structure and strategy.

To produce the procurement governance structure and strategy it is necessary to know exactly how
procurement is currently being conducted and what opportunities for improvement exist.
This will involve an information-gathering process that will inform future procurement decisions. It
will also help you to decide what information will be needed for the procurement board to monitor
procurement activity effectively. The following process are important;

Audit and review existing practices
Auditing and reviewing existing financial regulations and procedures and processes related to
expenditure is critical. The procurement board needs to address the following questions:
 Are the companies’ rules governing procurement expenditure ‘fit for purpose’?
 Do existing processes and procedures encourage and support good procurement practice,
 Do the existing processes encourage procurement staff to monitor and review what is being
bought, spotting trends and anomalies to identify opportunities and manage risks better?
Conduct a spend analysis

 A spend analysis enables organizations to ascertain what they are buying, how much they are
spending with suppliers and the number of transactions being processed. This delivers a
number of benefits:

 It improves management information.
 It allows the identification of expenditure patterns as well as suppliers and prices for basic highvolume, low-cost items such as fuel, catering and stationery.
 It helps colleges organizations procurement tasks to maximise opportunities for savings and
efficiencies.

Review or establish a contracts register
A contracts register provides easy access to relevant contract information and can help you plan
procurement activity by, for example, putting in place a new contract (if necessary) before the current
one finishes. A contracts register includes the following information:
What the contract is for.
 Contract manager’s name.
 Supplier name.
 Start and finish dates of the contract.
 At what intervals the contract is to be reviewed.
 Value of the contract (sometimes known, sometimes an estimate).
Conduct a risk analysis

A key priority for every company is to ensure it is exposed to as little risk as possible. A clear view of
the risks and any potential consequences that could arise from procurement malpractice is essential.
Financial and legal risks will almost certainly be high if:

 Large numbers of untrained staff are authorised to make purchases and negotiate contracts.
 Procurement processes are not compliant with state public procurement regulations.

 The company does not have an established process for dealing with contracts if, for example:
procurement contracts are verbal; it does not operate an electronic purchasing order system;
and supplier relationships are based on their terms and conditions rather than those of the
organization.

Conclusively, a good procurement and sourcing system helps organization control spend, prevent
corruption, block leakages of expenses and in general protect your business and brand. Successful
procurement programs are often managed by people/ organizations that are able to combine these
traits {Capacity, Innovation and influence} and at instinct resources, we have demonstrated time and
again that we poses these traits and are perfectly poised to handle your procurement needs.

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