What are the importance of procurement?

by Next Level Purchasing SPSM® Certification

Procurement is mandated to execute the understanding and translation of customer needs and requirements to the selection of capable suppliers, to realize the cost-effective acquisition, receipt and payment of vital inputs and raw materials. Factors impacting the Total Cost of Ownership such as quality, efficiencies, delays, stock outs, obsolescence and carrying cost are heavily emphasized in the procurement discipline.

Procurement Departments are responsible for 3 critical functions:

1. Management of Spending

2. Supporting of Operations

3. Protection of the organization from Risk

Here are some things that would happen in an organization if it decided to not have a purchasing department:

The organization would pay too much for the goods and services it buys, which would severely impair its financial health
The organization would get unreliable performance from its suppliers, which would threaten the ability of the organization to do what it exists to do
The organization would have its personnel performing tasks outside of their most valued specialties – think of engineers calling suppliers about late deliveries instead of designing innovative products, or attorneys auditing invoices for errors instead of preparing for important cases, or doctors struggling to identify suppliers of needed products instead of saving lives
The organization would be inefficiently spending the time of its resources, as each person making a purchase would have to figure out how do it the right way instead of relying on well-defined processes repeatedly executed by well-trained people
The organization would risk becoming the subject of a news scandal due to doing business with suppliers who act socially irresponsible by engaging in activities such as using child labor, threatening animal welfare, and engaging in bribery.