Does Procurement Fall Under Supply Chain?

Introduction

Procurement and supply chain management are two fundamental functions that play a crucial role in ensuring the smooth functioning of any organization. Procurement is responsible for sourcing goods and services, negotiating contracts, and managing supplier relationships, while supply chain management encompasses logistics, inventory management, transportation planning, and more. But do these two fields overlap? Does procurement fall under supply chain? In this blog post, we’ll explore this question to clear up any confusion around the relationship between procurement and supply chain management. So let’s get started!

Procurement Defined

Procurement is the buying of goods and services for an organization. In a supply chain, procurement is one component of the process of bringing components and products from suppliers to consumers. The goal of procurement is to get the best possible price and quality for the goods or services being purchased.

A key part of procurement is identifying potential suppliers. This can be done through market research, meeting with potential suppliers, or using a supplier selection tool. Once a supplier is chosen, it’s important to ensure that the contract meets the needs of both parties. It’s also important to monitor contracts and make sure that deadlines are met. If there are problems with a contract, it’s important to resolve them as quickly as possible so that both parties can move on to other projects.

The goal of procurement is always to get the best possible price and quality for the goods or services being purchased.

Types of Procurement

Procurement falls into a few different categories: buying goods and services from suppliers, awarding contracts to suppliers, and purchasing goods and services on behalf of another organization. Each of these procurement methods has its own set of challenges and advantages.

Buying Goods and Services from Suppliers

The most common type of procurement is buying goods and services from suppliers. This involves negotiating prices with suppliers and making sure that the products or services meet the customer’s needs. Suppliers may be small businesses or large companies, but all have their own unique strengths and weaknesses. Large companies often have more resources available to them, so they can offer lower prices than smaller suppliers. However, they may also be less able to meet the customer’s specific needs. Smaller suppliers are often able to offer more personalized service, but they may struggle to meet high demand requirements.

Awarding Contracts to Suppliers

Another common type of procurement is awarding contracts to suppliers. Contracts usually contain specific requirements for the supplier’s products or services, so it’s important that the supplier meets those requirements. Contracts can also specify how long the supplier must deliver the product or service, which can help avoid delays in project completion. Awarding contracts can be a difficult task because there are many variables involved in deciding who should receive a contract award. Factors such as price, quality, service level agreement (SLA), delivery schedule, etc., all need to be considered.

Purchase Goods and Services

The Supply Chain Process

The procurement process is the first step in forming a supply chain. Procurement establishes a relationship between buyers and suppliers, helps to identify and prioritize needs, and allocates resources accordingly. The procurement process can be divided into five stages: market analysis, research, selection, negotiation, and contract signing.

Market analysis involves identifying the buyer’s needs and analyzing potential suppliers. This stage may include surveying industry data, conducting market research studies, or visiting suppliers’ facilities.

Research indicates whether a supplier meets the buyer’s specifications and whether the supplier will be able to meet future needs. This stage may involve conducting company surveys, interviewing key personnel, or reviewing competitor products.

Selecting a supplier involves assessing several factors such as price, quality of product/service, delivery timeframes, and compliance with regulations. This stage may also involve interviews with key personnel or performance reviews of competing suppliers.

Negotiation focuses on resolving any differences between the buyer and supplier. This stage may involve meetings to discuss terms of agreement (such as price), negotiating contracts, or agreeing to modified terms of service.

Contract signing represents the end of the procurement process and confirms that a supplier will provide products/services Meeting customer’s requirements is one important element of successful supply chains

Factors That Impact Supply Chain Performance

In order to successfully execute a procurement process, there are a number of factors that must be considered. These factors can impact the overall supply chain performance.

One key factor is the procurement target. If the procurement target is too high or too low, it can have a negative impact on the entire supply chain. Additionally, the quality of the procurement data can also have a big impact on how smoothly the process goes. If information is inaccurate or not available at all, it can make it difficult for suppliers to respond to requests and could lead to delays in shipments.

Another important factor is communication between buyers and suppliers. This should involve regular updates so that everyone involved knows what is expected and avoids any potential misunderstandings or delays. It is also important to have open lines of communication so that problems can be quickly resolved. Finally, effective tracking and metrics help managers understand where changes need to be made in order to improve performance.

Conclusion

Procurement falls squarely under the supply chain umbrella and plays a role in every stage of the product life cycle. This is why procurement managers must be knowledgeable about all facets of supply chains, including planning, production, delivery, inventory management, and customer service. In order to improve your company’s overall performance and competitive edge, it is important that you have an effective procurement process in place. Contact us today to learn more about our comprehensive procurement services.