PROCUREMENT IN ACTION

1. PROCUREMENT IN ACTION
Procurement is the process of obtaining
goods, services, or works from an external
source, often through purchasing or
acquisition.

2. It encompasses a series of activities
that involve planning, sourcing,
negotiation, purchasing, and contract
management.

3. The goal of procurement is to acquire the
necessary resources efficiently and cost-
effectively, ensuring that organizations can meet
their objectives and deliver value to
stakeholders.

4. DIFFERENCES BETWEEN PURCHASING AND PROCUREMENT
“Purchasing" and "procurement" are related terms often
used interchangeably, but they refer to distinct aspects of
the overall process of acquiring goods and services
within an organization.
Here are the key differences between purchasing and
procurement:

5. 1. Scope:
o Purchasing: This is a subset of procurement and focuses
specifically on the transactional aspects of buying goods or
services. It involves activities such as placing orders, negotiating
contracts, and managing supplier relationships.
o Procurement: This is a broader term that encompasses the entire
process of acquiring goods and services, from identifying needs
and selecting suppliers to negotiation, purchase, and ongoing
supplier management.

6. 2. Process:
o Purchasing: It involves the actual buying of goods or
services. This includes activities like order placement,
supplier negotiation, and payment processing.
o Procurement: It involves the entire process, starting with
the identification of a need within the organization, market
analysis, supplier evaluation, negotiation, contracting, and
finally, the actual purchase.

7. 3. Strategic vs. Tactical:
o Purchasing: Often considered a tactical function, focusing on
day-to-day transactions and operational efficiency.
o Procurement: It is more strategic in nature, involving long-term
planning, supplier relationship management, and aligning
procurement activities with organizational goals.

8. 4. Involvement:
o Purchasing: Typically, purchasing is a function within the
broader procurement process. It is concerned with executing the
plans and strategies developed during the procurement process.
o Procurement: Encompasses a wider range of activities,
including strategic planning, market analysis, and supplier
relationship management.

9. 5. Relationships:
o Purchasing: Primarily involves interactions with suppliers to
secure goods and services at the best possible terms, such as price
and delivery.
o Procurement: Involves relationships with various stakeholders
within and outside the organization, including departments that
have specific needs, legal teams for contracts, and finance for
budget considerations.

10. 6. Timeframe:
o Purchasing: Often a shorter-term focus on immediate needs
and transactions.
o Procurement: Involves a more extended timeframe,
covering strategic planning, supplier selection, and ongoing
relationship management

11. OBJECTIVES OF PROCUREMENT
1. Cost Efficiency:
Achieving cost savings and optimal value for money in the
acquisition of goods, services, or works.
Efficient procurement practices help minimize expenses,
negotiate favorable terms, and maximize the organization's
financial resources.

12. 2.Quality Assurance:
Ensuring that the acquired goods, services, or works
meet or exceed specified quality standards.
Quality assurance in procurement is vital to prevent
defects, enhance operational efficiency, and maintain
customer satisfaction.

13. 3.Timely Delivery:
Securing timely and reliable delivery of goods, services,
or works to meet operational requirements.
Timely procurement is crucial to avoid disruptions in
operations, project delays, and potential financial losses.

14. 4. Risk Management:
Identifying, assessing, and mitigating risks associated with the
procurement process.
Effective risk management helps organizations anticipate and
address potential issues, such as supply chain disruptions, legal
challenges, or quality concerns.

15. 5. Supplier Relationship Management (SRM):
Building and maintaining positive, collaborative relationships
with suppliers.
Strong supplier relationships contribute to innovation,
reliability, and the ability to respond to changing market
conditions.

16. 6.Strategic Alignment:
Aligning procurement strategies with the overall
organizational goals and objectives.
Strategic alignment ensures that procurement decisions
support the broader mission and contribute to the success
of the organization.

17. 7.Compliance with Regulations and Ethics:
Adhering to legal and ethical standards in the
procurement process.
Compliance safeguards the organization from legal
liabilities, reputational damage, and ensures fair and
ethical business practices.

18. 8. Innovation and Continuous Improvement:
Fostering innovation and encouraging continuous improvement
in products, services, and processes through collaboration with
suppliers.
Engaging with suppliers as strategic partners can lead to the
introduction of new technologies, processes, and ideas that
enhance organizational capabilities.

19. 9. Social Responsibility:
Incorporating sustainable and socially responsible practices into
procurement processes.
Socially responsible procurement contributes to corporate social
responsibility (CSR) goals, enhances reputation, and aligns with
stakeholder expectations.

20. 10.Flexibility and Adaptability:
Building a procurement framework that is flexible and
adaptable to changing market conditions and organizational
needs.
A flexible procurement approach allows organizations to
respond promptly to market trends, emerging risks, and
evolving business requirements.

21. 11.Technology Integration:
Leveraging technology to streamline procurement
processes, enhance efficiency, and facilitate data-driven
decision-making.
Technology integration improves accuracy, reduces
manual errors, and provides real-time insights into
procurement activities.

22. 12.Optimal Use of Resources:
Ensuring efficient and effective use of resources,
including time, personnel, and budget, in the procurement
process.
Resource optimization contributes to overall
organizational efficiency and financial sustainability.

23. Historical perspective of procurement
The historical perspective of procurement spans centuries and has
evolved in response to changing economic, social, and technological
landscapes.
Understanding the historical context provides insights into the
development of procurement practices and its significance in various
historical periods.
Here's a brief overview:

24. 1. Ancient Civilizations:
Mesopotamia and Egypt (3000 BCE): Procurement practices
can be traced back to ancient civilizations where centralized
authorities managed the acquisition of resources for
construction projects and military campaigns.
Scribes were responsible for recording transactions and
managing inventories.

25. 2. Middle Ages:
Feudal System (9th to 15th centuries):
During the feudal era, procurement was often
decentralized, with individual manors or estates
responsible for their own sourcing and supply chain.
Localized economies focused on self-sufficiency.

26. 3. Renaissance and Mercantilism (14th to 18th
centuries):European Renaissance:
As trade expanded, procurement became more organized.
Governments, merchants, and explorers engaged in
procurement activities for goods such as spices, silk, and
precious metals from other continents.

27. 4. Industrial Revolution (18th to 19th centuries):
Mass Production Era: The Industrial Revolution
brought about significant changes in procurement with
the rise of mass production. Organizations needed to
procure raw materials on a larger scale to meet increased
demand. Procurement became more centralized, and the
role of purchasing agents emerged.

28. 4. World Wars (20th century):
Military Procurement: The World Wars marked a major
shift in procurement, especially in military contexts.
Governments had to efficiently procure massive amounts
of resources for war efforts, leading to the development
of more sophisticated procurement processes.

29. 5. Post-World War II (Mid-20th century):
Corporate Procurement: The mid-20th century saw the
formalization of corporate procurement functions within
organizations.
The focus shifted from mere purchasing to strategic
procurement, considering factors such as supplier relationships,
quality, and cost-effectiveness.

30. 6. Late 20th Century:
Globalization: With the advent of globalization,
procurement became more complex.
Organizations started to source materials and
components from different parts of the world, leading to
the need for global supply chain management.

31. 7. 21st Century:
Technology Integration: The 21st century witnessed
the integration of technology in procurement processes.
E-procurement systems, automation, and data analytics
became crucial for efficiency, transparency, and strategic
decision-making.

32. 8. Green Procurement and Sustainability (21st century):
Environmental and Social Responsibility: In recent years,
there has been a growing emphasis on green procurement and
sustainability.
Organizations are integrating environmentally friendly
practices into their procurement processes, considering the
ecological and social impact of their supply chains.

33. 9. Current Trends:
Digital Transformation: The procurement
landscape is undergoing a digital transformation,
with the use of AI, blockchain, and advanced
analytics for smarter decision-making and enhanced
efficiency.

34. Key stakeholders in the procurement
process
Stakeholders in the procurement process are individuals, groups, or
organizations that have an interest or are directly involved in the
procurement activities of an organization.
The collaboration and effective management of these stakeholders are
essential for the success of the procurement function. Here are key
stakeholders in the procurement process:

35. 1.Procurement Professionals:
Roles: Procurement officers, managers, and specialists
are directly responsible for planning, executing, and
managing the procurement process. They ensure
compliance with policies, negotiate contracts, and
evaluate suppliers.

36. 2. End Users:
Roles: Individuals or departments that require goods or
services. Their input is crucial in identifying needs,
specifications, and quality requirements. Their
satisfaction is a key measure of procurement success.

37. 3. Finance Department:
Roles: Responsible for budgeting, financial
planning, and ensuring funds are available for
procurement activities. Collaboration between
procurement and finance is crucial for financial
stability and compliance.

38. 4. Executive Leadership:
Roles: C-level executives and senior management
provide strategic direction. Their support and
alignment with procurement goals are essential for
effective decision-making and resource allocation.

39. 5. Legal Department:
Roles: Ensures compliance with laws and
regulations. Legal professionals review contracts,
assess legal risks, and ensure that procurement
activities adhere to legal requirements.

40. 6. Suppliers and Vendors:
Roles: External entities providing goods or services.
Building strong relationships with suppliers is crucial for
reliable, cost-effective, and sustainable supply chains.
Suppliers impact product/service quality and overall
competitiveness.

41. 7. Customers/Clients:
Roles: In some cases, the end-users of the organization's
products or services are considered stakeholders.
Their needs and expectations can influence the
procurement strategy and the quality of products or
services acquired.

42. 8. Internal Audit:
Roles: Conducts internal reviews to ensure compliance,
identify potential risks, and assess the effectiveness of
procurement processes.
Internal audit contributes to transparency and
accountability.

43. 9. Regulatory Bodies:
Roles: Government agencies or industry regulators that
set rules and standards.
Compliance with regulatory requirements is crucial to
avoid legal issues and maintain the organization's
reputation.

44. 10. IT Department:
Roles: Manages procurement-related technologies,
such as e-procurement systems and data analytics
tools. Collaboration with the IT department ensures
the smooth functioning of procurement
technologies.

45. 11. Quality Assurance/Control:
Roles: Ensures that procured goods or services meet
specified quality standards.
Collaboration with quality control is vital to prevent
defects, enhance reliability, and maintain brand
reputation.

46. 12. Human Resources:
Roles: Involved in workforce planning
and management. Collaboration with HR
ensures that the organization has the
necessary talent and skills for effective

47. 13. Environmental, Health, and Safety (EHS)
Department:
Roles: Monitors and ensures compliance with
environmental and safety standards. Collaboration
with EHS is critical, especially in industries with a
focus on sustainability and responsible sourcing.