The modern business environment has grown increasingly competitive and much hype has been placed on procurement management to achieve that competitive edge. So, it raises a fundamental question – Is all the hype given to procurement management worth it or are business executives overly emphasizing the business function? This, in turn, questions an organization’s strategic focus on procurement management. Apart from the preconceived notion that procurement management results in cost savings, it can also create a competitive advantage by improving customer satisfaction, time-to-market, and organizational efficiency.
It Ensures Compliance
Multiple rules and regulations govern the corporate sector. Organizations should strictly adhere to such rules or risk getting charged with hefty fines and damage their brand name. Even though procurement may seem concerned only with purchasing activities, it ensures that the organization complies with all regulations across the global locations.
It Supports Strategic Vision
Every organization is guided by its long-term strategic planning. Procurement management assists an organization in achieving its strategic goals. For instance, an organization might have a goal to create the best-in-class product. Procurement teams can develop ideal product and part specifications and help identify suppliers who can provide them with high-quality materials. Procurement management helps in understanding the tactical needs and requirements of an organization to maximize its ROI.
It Enhances Supplier Relationship Management
Procurement teams work hard to develop a long-term relationship with suppliers to get the best products at the best price. Procurement management goes one step further and helps integrate the suppliers as partners to assist in value creation process.
It Increases Organizational Efficiency
Procurement management ensures the best match to needs with desired goods or services. Also, it helps maintain the quality of goods and ensures timely delivery. A dynamic procurement practice will help an organization in adjusting to market volatility such as price changes, economic volatility, labor shortage, and financial problem. Optimal forecasting can help the organization better prepare for rough roads ahead.
It Improves Cost Savings
One of the most important function of procurement is to improve cost savings. Procurement teams analyze the product across multiple suppliers scattered across vast geographies and identify the best option to balance the cost and quality as required. Procurement management is one of the biggest reasons why retail firms like Walmart and TESCO can maintain highly competitive prices despite massive infrastructure and overhead costs.