Procurement Management

Procurement management is one of the vital processes in any commercial organization, since procurement is an essential part of the production and marketing chain. Through this article, we will talk about procurement management, learn about its importance, responsibilities, goals, problems and how to develop it, as well as we will learn about the stages followed by procurement management in completing the purchase process.

The concept of procurement management

Procurement management is defined as the process that consists in purchasing goods and services that an organization needs for production or business. They also include determining the need for goods and services, negotiating prices, selecting suitable suppliers, making purchases, quality control and inventory management.

The importance of procurement management

Procurement management is one of the key factors to ensure the success of the organization and the achievement of its goals, as it helps to achieve the strategic goals of the organization and achieve saving time, money and effort. They also contribute to achieving quality improvement and efficiency in production and the provision of materials necessary for production processes.

Procurement management responsibilities

Procurement management responsibilities are one of the basic aspects that managers and business owners should pay attention to, as these responsibilities include many important aspects such as identifying supply sources, conducting searches for suitable suppliers, identifying the required materials and services in cooperation with other departments, developing relationships with suppliers, managing procurement contracts and contracting with them, following up the delivery of materials and services in the required form and on time, in addition to managing the procurement process, inventory and analyzing data related to these areas. It is important that the procurement department has high skills in organization, planning, communication and negotiation to ensure the achievement of the desired goals and the provision of materials and services of the best quality and appropriate prices.

Objectives of procurement management

Procurement management is an essential part of any organization that seeks to achieve success and continuity in business. The importance of procurement management is to provide the necessary resources to the organization at competitive prices in the labor market. To achieve these goals, the procurement department needs to identify and implement the appropriate goals that support the strategic goals of the organization in general, these include:

Providing the necessary materials and services: one of the objectives of the procurement department is to provide the necessary materials and services to the organization with high quality and at affordable prices. This requires evaluating and selecting the right suppliers and conducting the necessary negotiations to obtain the best prices and quality.
Achieving cost savings: achieving cost savings is one of the most important goals pursued by the procurement department. It works to find effective ways to reduce the costs associated with the procurement process, whether by negotiating prices, developing new suppliers or optimizing supply processes.
Improving the quality of products and services: improving the quality of products and services is a major goal of procurement management. It works to ensure the availability of appropriate materials and services that meet the requirements of the organization, with high quality and At Reasonable Prices. This requires identifying suppliers who can be relied upon to provide high-quality materials and value-added products and services.

Moreover, procurement management is also aimed at achieving efficiency in the use of material and financial resources. By optimizing procurement processes and improving its relations with suppliers, the procurement department can get the best deals, discounts and negotiate the best prices, saving more financial resources that can be used in business development and improving the overall performance of the company.

The procurement department is also developing strategies to ensure that the required materials and products are available at the right time and in the right quality. These strategies ensure proper storage of inventory, disposal of unwanted products, evaluation and improvement of the quality of the supplied products.

Finally, the procurement department aims to improve cooperation and communication between all other departments within the company, to ensure the highest levels of efficiency and effectiveness and to improve the overall performance of the company. By achieving these goals, procurement management can significantly contribute to the success of the company and achieve a long-term competitive advantage.

Procurement management problems

The procurement department is faced with many problems that it must deal with effectively to achieve the desired goals. Below we review some of these problems:

Quality: the procurement department must ensure the quality of the purchased materials and products, and it is possible that you may encounter problems in this regard such as low quality of the purchased materials and not meeting the specified quality specifications.
Prices: the procurement department should be able to obtain the best possible prices for the purchased materials and products, but may face problems such as a sudden price increase or inability to negotiate effectively with suppliers.
Insurance: the procurement department must ensure that the required materials and products are available on time, and it can face problems in this regard such as delayed delivery of materials or unavailability in the markets.
Logistics management: the procurement department should be able to effectively manage logistics, and it is possible to encounter problems such as the unavailability of shipments in time or high transportation costs.
Reliability: the procurement department must rely on reliable and reliable suppliers to maintain continuity in the supply of materials and products, but it may face problems such as the unavailability of reliable suppliers or the suppliers ' failure to supply materials in a timely manner.
Supplier challenges: procurement management can have problems dealing with suppliers, suppliers may have problems meeting the required specifications or delays in delivery, this can affect the production and marketing process and thus affect the company's profits.
Prices: the procurement department can have a problem in obtaining competitive prices from suppliers, and prices can be affected by economic fluctuations or changes in supply and demand, and this can affect production costs and profits.
Procurement process: buyers can face problems in the management of the procurement process, as they must identify needs and requirements, identify suppliers, review prices and specifications, issue purchase orders and follow-up delivery, this can require considerable time and effort and can lead to delays in production and marketing.
Quality: the procurement department can have problems ensuring the quality of the products or services being purchased, and this can affect the reputation and credibility of the company and lead to loss of customers and a decline in profits.
Inventory: the purchasing department can have problems with inventory management, as it must balance between meeting needs and avoiding excess storage that leads to additional costs and a deterioration in the value of products. The company may also suffer financial losses.

How to develop procurement management

We have previously learned about procurement management, its importance, responsibilities, goals and problems. You will also learn how to improve the performance of Procurement Management in your organization and achieve competitive advantages.

The development of procurement management requires several steps and procedures, including:

Improve the planning process: the needs must be determined accurately, the quantities required and the specifications required for products and services must be determined by studying the market and analyzing the needs.
Improving the procedural process: this consists in developing the procurement process through the preparation of unified and integrated procurement procedures that allow reducing costs and increasing efficiency and quality.
Improve supplier relations: the procurement department should develop its relations with suppliers through the exchange of information and experience, provide the necessary technical support and establish long-term cooperative relationships.
Improve the use of technology: you should take advantage of modern technologies in the field of procurement management, such as cloud computing, artificial intelligence technologies, etc., in order to improve efficiency and reduce errors and costs.
Training and development: the procurement department has to provide continuous training and development of the work team, in order to improve their skills and increase their efficiency in the implementation of their tasks better.
Analysis and evaluation: the results achieved from the procurement department should be analyzed and evaluated periodically, in order to identify strengths and weaknesses and take the necessary measures for continuous improvement.

Stages of the purchase process

The procurement process is an essential part of the production process and its impact on the overall performance of the company is very large. Therefore, the procurement department must carefully carry out all the steps and stages to ensure that the required products and services are obtained at the best quality and affordable prices.

The procurement process in procurement management consists of several stages, and these stages are usually followed to ensure that the purchase process is completed effectively and on time. Below we briefly review these stages:

Determining the need: this stage includes determining the actual needs of the products or services that the buyer wants to purchase, after studying the future needs and strategic planning of the company.
Supplier search: this stage includes the search for potential suppliers who can provide the company with the required products or services. This is done by searching databases, communicating with local and international suppliers.
Supplier evaluation: this stage includes evaluating potential suppliers and choosing the best among them, based on several factors such as price, quality, on-time delivery and customer service.
Issuing the purchase order: at this stage, the purchase order is issued to the selected supplier, including specifying the products or services to be purchased, their quantity, and the conditions related to delivery and payment.
Approval of the purchase: at this stage, the purchase request is reviewed and approved by the responsible authorities in the company, in order to ensure that it complies with the specified requirements and standards.
Follow-up and verification: at this stage, the delivery of the purchased products or services is followed up to ensure that the needs and specifications specified in the purchase process are met. The invoices are also validated and matched to the agreed prices, and to ensure that there are no delays in the delivery of products or services.
Evaluation: at this stage, the performance of suppliers and business partners is evaluated to ensure compliance with specifications, quality and delivery on time, as well as the performance of the procurement department itself is analyzed to identify weaknesses and possible improvements in the future.
contract management: at this stage, the contracts signed with the suppliers are tracked and managed, ensuring their compliance with them and meeting the specified conditions and specifications, and the contracts are reviewed and updated periodically to meet the changing needs of the company.
Inventory management: at this stage, inventory management is carried out and ensures the availability of materials and products necessary for production or services on an ongoing basis, and reduce the costs associated with storage and supply.

The procurement process is a vital process for any company that requires great attention from the procurement department to achieve the company's changing goals and requirements. Procurement management should be developed periodically to keep pace with the challenges and changes in the market and achieve greater efficiency and effectiveness in operations.

After identifying the needs, identifying potential suppliers and sending inquiries, the next step in the procurement process comes to negotiating with suppliers. The procurement management team must negotiate the terms of the contract with suppliers, specify the terms of payment and determine whether the whole amount will be paid in advance or will be paid upon receipt of the goods.

After negotiating with suppliers and signing contracts, the order is confirmed and prepared for delivery. The order is sent to the selected supplier and the status of the order is followed until it is fully delivered. After delivery, the procurement department must check all the goods and services and make sure that they match the signed contract.

At the end, the whole process is evaluated and it is determined whether it was successful or not. Past performance is analyzed and areas that can be improved and developed are identified. A report is prepared that includes all the data and information that can be used in the development of the purchase in the future.

Nashed Daniel

July 12, 2023