The Importance of having a 360° Procurement Function – Considering the impact of Procurement on other areas within the organisation

Each of the areas within an organisation have their own set of goals and objectives. In best practice, these align with the wider goals and objectives of the whole organisation. Sometimes, when these areas strive to achieve their goals, they can lose sight of the impact that they will be creating on other parts of the organisation. Procurement is not an exemption.

The Procurement Function looks after obtaining the right goods or services at the right price. These goods and services will be beneficial for the operations of the organisation. But while Procurement is busy sourcing what other areas need, a ripple effect is created and impact can strike other areas. Commonly, these areas are:

Finance (Accounts Payable): Finance will be in charge of processing the invoices received from the supplier for the goods or services requested by Procurement. When goods are procured, the warehouse receives and checks them ensuring that the quantity delivered on paper matches the quantity ordered. These goods will normally go through quality control to make sure that they are up to the standards requested by the organisation. Normally, once in stock, Finance can process the invoice for payment.

When services are ordered, it is a bit more complex as payment normally would happen by achieved milestone, or through the confirmation of a stakeholder (i.e. a project manager). It is important for procurement professionals (specifically buyers) to ensure that payment conditions, price, quantity stated in the contract, or purchase orders match the vendor’s quote. This will assist Finance with the processing of invoices.

Warehouse: Depending on the company’s policies, most warehouses will tend to reject the reception of goods when there is a discrepancy between in the amount ordered and the amount dispatched. It is important for Procurement that, when dealing with vendors, the minimum order quantity is discussed and the items are ordered in the multiples stated by the vendor (i.e. sometimes items can only be dispatched in packs of 12 even if sold per unit). By discussing these details during the quoting stage, it will make the reception process smoother. 

Logistics: When the goods are collected by the buyer, Logistics will need to know the weight and quantity of cartons or pallets to be collected. It is important that Procurement ensures that the supplier sends this information timely when goods are ready for collection.

Suppliers: Another key player for the operations. Without suppliers, the end-users’ needs could not be satisfied. It is important for Procurement to see suppliers as long-term partners and keep a strategic mindset. The growth of the suppliers will depend on the growth of the organisation and vice-versa. A good ally for Procurement is a strong Supplier Relationship Management unit.

End-users: Procurement should collaborate with end-users to ensure their needs are understood and communicated to the market. Procurement has the knowledge to let end-users know what the market can offer, what would be the target price, and how realistic their needs are compared to what the market can offer.

The importance of a 360° Procurement Function can alleviate the ripple effect Procurement can create when in operation. It is important for procurement professionals to always try to consider all stakeholders that can be affected throughout the procurement process.  This will make a major difference compared to Procurement Functions that operate with minimum touch-points with stakeholders during their process.