What is Procurement?
Procurement is the action of obtaining or procuring something.
When the Purchasing Department is efficient, it generates important savings for the company. However, for the saving to be optimum, the Purchasing Department must be working in conjunction with a Procurement Department.
The Procurement Department is responsible for making sure that all the goods and services needed for the company to operate and to manufacture goods arrive on time, according to specifications.
Several key operations are managed by the Procurement Department:
1- Calculate the quantities needed for what date
2- Place recurring orders
3- Track deliveries
4- Manage stocks
This department is at the core of operations, managing incoming and outcoming goods. A good procurement organization aims at acquiring and possessing sufficient safety stocks to avoid any disruption that will disrupt the supply chain, but also the minimization of costs (storage costs, transport costs, costs of purchases, cost of ordering).
In general, the larger the quantities you procure, the lower the cost, the downside is that the more you procure, the higher the cost of stocks. It is generally assumed that the cost of stocks represents annually the equivalent of 20% of the company's value. It is, therefore, necessary to create a procurement and supply strategy that will optimize cashflow while ensuring goods availability.