What is the purpose of Procurement in Supply Cha?

What is the purpose of Procurement?

It’s not uncommon that some businesses have used the term procurement synonymously with purchasing. But now, purchasing is often seen as just one stage in a larger, more strategic procurement process. Procurement involves every activity involved in obtaining the goods and services a company needs to support its daily operations, including sourcing, negotiating terms, purchasing items, receiving and inspecting goods as necessary and keeping records of all the steps in the process.

What is Purchase in Supply Chain?

Purchasing is the process of buying or acquiring goods and services to make supply chain management more efficient. Goods, materials, and equipment procured in this process play a key role in improving the quality of products/services produced by the organization. Ultimately, the purchasing process impacts the product quality and helps in optimizing costs in the value chain.

Key functions of Purchase department

Identify business requirements for goods, materials, and services

Find reliable suppliers to meet these requirements

Negotiate prices, build quality, and delivery terms

Set up the order quantities and making bid requests on supply contracts

Coordinate delivery and storage operations

Run quality control and product testing

Manage budgets based on ROIs and payments

Difference between Procurement and Purchase?

Procurement process are as follows:

Surveying the market

Spotting potential suppliers

Creating an approved list of vendors

Spotting internal needs

Creating a purchase order online

Requesting proposals and evaluating quotations

Selecting the right supplier and negotiating effectively

Receiving goods and performing quality checks

Developing and managing contracts

Obtaining invoice approvals and fulfilling payment terms

Establish good supplier relationship

Purchase process are as follows:

Obtaining a purchase requisition

Requesting proposals and evaluating quotations

Dispatching official purchase orders

Receiving products and services

Checking the quality of delivered items

Effecting payment to vendors

Purchasing focuses on short-term goals such as fulfilling the five rights in a transaction (right quality, right quantity, right cost, right time, and right place), whereas procurement management focuses on strategic, long-term goals like gaining a competitive advantage or aligning itself with corporate strategy or goals.

Procurement KPI(Key Performance Indicators)

Compliance rate

Supplier defect rate

PO and invoice accuracy

Rate of emergency purchases

Supplier lead time

PO cycle time

Vendor availability

Cost per invoice and PO

Spend under management (SUM)

Procurement ROI and benefits

Price Competitiveness

What is e-procurement?

E-procurement, or electronic procurement, is a digital transaction process that involves using the internet to buy and sell goods and services. The aim of e-procurement is to dematerialise commercial transactions between businesses and their suppliers via digital solutions in order to optimise the procurement process. eProcurement started in the 1980s when electronic data interchange (EDI) was developed. EDI allows files and documents to be shared between people in business and, at the time, it was revolutionary. Businesses no longer had to physically send documents, as instead they could be sent electronically.

Main Functions of?E-Procurement

Automates processes to free up resources and reduce errors.

Improves communication between stakeholders and partners to streamline the procurement cycle.

Provides a single platform for all procurement activity, giving stakeholders and managers a centralized platform for managing and auditing.

Offers real-time updates for vendors, management, stakeholders, and partners, as well as the chance to curate and store procurement data.

Allows for streamlined negotiation between multiple partners and stakeholders.