Importance of Procurement :-
Procurement is considered as important because nowadays in the private sector , procurement is seen as a strategic version trying to work to improve the company’s profitability. Procurement helps mainly to streamline processes,raw materials reduction and cost reduction , and also helps in identifying good sources of supply. Procurement officials can also help in negotiating lower unit prices for bigger-volume purchases which helps in reduction of cost of goods and services. This method,in return allows the business to reduce the price of their goods further down and increase in profit.
The objectives of procurement by the year 2020 are of the below :-
These objectives are going to reshape the procurement function by the year 2020 :-
- Value Drivers- Mitigation of risk and cost of savings have been the two most important value drivers. By the year 2020, new procurement objectives, like Business insight with speed of execution are set to replace them. Procurement is all set to adopt technologies for insights into supply market, performance of supplier, & business buying behaviour. The shift in this objective from mitigation & savings of cost to the speed execution and the insight of business means the leveraging of procurement insight about markets, suppliers and spends to the identification of new sources of value generation. A centralized data repository will help in benefiting procurement. From this method, it will result in acceleration of execution while procurement will fulfill its role in relationship with supplier and management of risk.
- Role of Procurement- Executors of sourcing has to transform into advisors of sourcing. If an company’s procurement department remains limited to sourcing ,by 2020 and thereafter the procurement department assumes full responsibility as a advisory of sourcing with priority focus on top,middle & lower level type buys. This shift ensures that the procurement department delivers more higher value work than just mere transactional deliverables. This process will help in developing of process expertise and also provide necessary skills to train fresh people. Due to this, managers of the category section can focus on their top tier purchases in the process of developing new strategies in category management.
- Role of Business – Businesses also play an important role here. From acting as a mere customer ,it has to be replaced by a new procurement objective where the objective will be procurement will act as a sourcing agent fully disciplined to the business partners.This will provide greater freedom and responsibility in making right decisions , relationship in vendor management ,etc.
- Delivery model- The category managers involve themselves in major purchases while the remaining procurement will have to provide purchasing assistance to business. This new model will involve less transactional network and increased business network. This will imply greater focus on process excellence than limiting to just category knowledge.