Set The Terms
Procurement is the process of obtaining goods or services usually on a relatively large scale. Often confused with purchasing – or even buying – procurement represents a more strategic, sustainable and less purely transactional process.
There is a lot of literature and out-of-experience knowledge out there but yet, in daily business life, one encounters a very common misunderstanding of the terms Procurement, Purchasing and Buying. Whilst the first two are mostly B2B undertakings, the latter may be a B2C process as well.
- Procurement must include the importance of strategy preferably at corporate management level. Because procurement is an umbrella term that includes several core business functions it should be considered a core part of any organization’s corporate strategy.
- Purchasing is a subset of procurement. Purchasing generally and simply refers to purchasing goods or services. It may include receiving and payment as well.
- Buying may be considered as a further subset of purchasing, widely recognized as the immediate act of actually acquiring something for the value of money be it in cash, wire transfer or against credit.
“Revenue is generated by sales but profit is made in procurement.”
– Eric Roth
Procurement Strategy
Every company has its own business strategy from which a procurement strategy with its strategic sourcing must be drawn and executed, ensuring alignment with overall organizational goals and market dynamics.
Here are Major Points to consider when formulating a solid Procurement Strategy
- Supplier Optimization: The company chooses an optimum mix of vendors who can provide the best prices and terms. This process usually means that the less able suppliers who cannot provide a quality service at the terms and prices required are discarded.
- Global Sourcing: Multinational companies view the world as one market, sourcing from vendors globally. Supply and demand can shift, turning supplier markets into consumer markets with rising prices. To mitigate this, monitor emerging markets and source as close to raw materials or manufacturers as possible.
- TQM: Total Quality Methods, requires vendors to provide an ever-increasing quality of service with zero errors. Suppliers ensure best practices using tools like KAIZEN or Six Sigma, emphasizing continuous improvement and efficiency.
- Risk Management: As more companies obtain their supplies from so-called LCCs (Low-Cost Countries), they are more concerned with the risk management of this supply chain. Whilst these countries can supply products at very advantageous prices, these advantages can be soon negated by a natural or human disaster.
- Vendor Development involves collaborating with vendors to improve their processes and performance. Companies may assist vendors, especially when dependent on a single supplier, by helping them meet required standards or enhancing their procurement cycles.
- Green Purchasing: A common strategy among larger corporations and governments, it promotes Sustainability by prioritizing recycling and the procurement of products that minimize environmental harm.
Effective procurement drives cost savings, enhances quality, and strengthens supplier relationships. A solid strategy improves vendor collaboration and supports sustainability through eco-friendly choices, helping organizations thrive competitively.
“Do procure at favourable price but do not procure at cheap, low price.”
– Eric Roth
“Procurement is about creating value, not just cutting costs.”
– Peter Smith
Speaking Of Strategy
Facing uncooperative vendors? My Publications offer a 5-Point Strategy to enhance supplier cooperation, benefiting global corporations. These strategies can transform vendor relationships and drive business success.
Procurement Guidelines
Once a procurement strategy is concluded and set in place, there is need to come up with some procurement guidelines mostly but not necessarily only for internal use. Procurement guidelines contain policy, process and measures as major points.
Procurement Policy, Process, Measures
Procurement Policy
In My Publications, you will find a sample of a procurement policy.
Payment- & Delivery Terms
Within delivery terms, the delivery time might be an issue. As lead time and delivery time get confused as often as procurement and purchasing (see above), let me emphasize here that there is a big difference between those two. At the bottom of this page, you will find a graphic showing this difference. In addition, you will the most common payment- and delivery terms too. Highly advised: Stick to one of the Incoterms (current issue) and think outside the box: There is more and more intercontinental dispatch by train (as opposed to sea shipments) available.
Certifications / Quality
When procuring, ensure the certifying body is also certified, obtain and verify the original certificate, and recognize that vendors and products might carry separate certifications. Quality is as crucial as price and availability, so conduct both announced and random inspections at vendor facilities and of goods, packaging, and loading. Consider AQL quality checks, reporting both internally and to suppliers. You can find links to widely demanded certifications at the bottom of this page for further details.
Procurement Process
The procurement process involves key steps such as identifying requirements, conducting market research, issuing RFPs, evaluating bids, and finalizing contracts. Each stage ensures the organization secures the best value, minimizes risks, and complies with regulations, enabling strategic and efficient operations.
In My Publications, you will find a sample of a procurement process.
Procurement Measures
In My Publications, you will find a description of two major procurement measures. Naturally, there are more to consider but included is a workable (*.xlsx format) sample of vendor KPI scorecard with a traffic light rating system. Additionally, each measure is complemented by detailed methodologies to ensure effective implementation.
These guidelines help ensure consistency, compliance, and efficiency in procurement operations, supporting the organization’s overall strategic objectives.
Procurement Outsourced
Interim Management
Instant expertise: Inject highly-skilled procurement expertise into your team | Best-practice approach: A procurement expert, you can trust fitting seamlessly into your team – working remotely or on-site to look after your procurement | A range of experience: Inter-continental, multi-category expertise and an excellent track record | Increase flexibility: Upscale and downscale in line with your demands | Reduce cost: Avoid expensive recruitment fees | Upskilling: Get your internal personnel developed on your behalf.
Whether you are struggling to hire the right procurement talent, have a critical knowledge gap in your team or face a project with an aggressive deadline – the instant capacity and dependable procurement expertise you need is provided.
Remote Services
Sourcing and vendor management as well as quality inspections and loading supervision at the other end of the world based from your site might be challenging due to distance, culture, mentality and time difference – or just your very own internal time / source contstraints. Outsource such activities and let it be dealt with on your behalf: Travel to appropriate procurement markets | Perform scheduled and surprise supplier audits | Personal meetings with current or alternative & prospective vendors | Approach relevant chambers of commerce and suitable associations locally in the supplying countries.
Be represented overseas as a buyer at for your line of business important trade fairs & exhibitions and on site at vendor’s manufacturing facilities as well as other partners’ offices.
Procurement Consulting
Mentoring & Coaching
Why External Mentoring? Internal time constraints | Independent perspective | Lack of existing knowledge / experience | Develop in-house skills / fill skill gaps. Provide key procurement individuals with the expert mentoring support they need to achieve their full potential. Delivering one to one support, the process is designed to help people quickly gain the capability, understanding, skills and confidence required to develop as a procurement professional and perform in your business.
Whether you’re looking to on-board new starters or enhance the capability of your team, procurement mentoring & coaching provides the support your team members need to be effective.
“Transform your procurement staff in your enterprise into entrepreneurs in your procurement team.”
– Eric Roth
My Services
My Services include tailored solutions for short-term assignments or long-term roles, with flexibility for global travel. Each engagement is customized to align with strategic goals, ensuring a lasting impact on performance.
My Background, extensive globally gathered experience and well-developed solid core competencies are available to address diverse business needs, ensuring exceptional outcomes.
Contact me today for effective support in navigating challenges and driving success.
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