One of the crucial activities in an organization is the procurement function which must be conducted effectively and efficiently. Companies are beginning to understand the potential that their supply chains and procurement divisions contribute to their profitability. Effective procurement helps to streamline processes, reduce raw material prices and costs and identify better sources of supply, thus improving organizational efficiency.

Report from Florida-based Hackett Group says through the deployment of digital tools, procurement organizations can reduce operational costs by up to 45%, achieving efficiency levels while at the same time enabling them to improve effectiveness and customer experience.

Hence, procurement has become one of the most important functions of an enterprise. The following 5 important functions are mandated to be executed by the procurement department:

  1. Sourcing

    One of the most important functions of the procurement department is to purchase goods, services or works from external sources. It plays a vital part in the company’s overall business strategy as it requires strategic planning to acquire these things at the best possible cost. It should procure from the right source at the right time the right quality of materials in the right quantity.

    It starts by qualifying suppliers before initiating negotiations. The collection and monitoring of supplier data are streamlined to ensure that suppliers comply with corporate policies. Important supplier qualification information is collected and supplier proposals are compiled and compared. Best suppliers are selected by assessing supplier qualifications, risk factors, and policy compliance. One of the significant factors for controlling costs is finding the best and reliable vendor.

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  2. Negotiation

    Procurement professionals with their skills to negotiate should be able to negotiate the best deal for the company. They should procure the highest quality product from the suppliers at the best possible price. This function is very vital for the organization`s profitability because if purchasing costs are high, an organization can end up spending well over half of its revenue in this area thereby affecting its bottom line. Organizations have realized that if the purchasing decisions are effective then cost savings can be achieved. Even the slightest decrease in purchasing costs can make a significant impact.

  3. Contracting

    Procurement professionals after evaluating supplier bids based on price, quality and value, offer the contract award to the best supplier by taking into consideration the unique business requirements of the organization which is in accordance with company standards, industry regulations and client expectations.

    Click here to read 6 Tips to Streamline Redlining and Negotiating in Contracts

  4. Monitoring of suppliers’ performance

    Procurement professionals must monitor contracts to ensure suppliers perform well in terms of delivery of goods and pricing. It should generate and track purchase orders. It should see that there is timely delivery of materials from vendors and are of expected quality, otherwise, it would affect the complete production chain. The promised deliveries by the vendors should be tracked to see if the invoices are approved and paid in a timely manner. It must also keep track of all goods and services ordered and received and maintain inventory records accurately along with details on performance, delivery, and pricing. Thus, this function is of the utmost importance across all enterprises.

  5. Compliance with business protocols

    The procurement department must ensure that it is meeting with all company objectives and compliance requirements. For example, in an organization, if members or staff is requesting to purchase things like supplies, stationery or computers, then it has to look into the business protocols for purchase and budget approval and ensure whether the items purchased are in compliance with the organization’s purchasing policy.

  6. Leveraging technology to help in procurement functions

    A recent case study research concerning the challenges facing procurement function in an organization established, 48% cited on lack of professionally qualified and experienced employees and 28% cited on technology change. From the findings, it shows that an organization should learn to adapt to any technology change as technology improves the efficiency of the organization.

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  7. How DocuCollab can help

    With the help of DocuCollab`s cloud-based enterprise software, organizations can streamline their supplier selection, rate management, enforcing negotiated pricing and policy. It can create purchase orders from approved requisitions eliminating manual process. It can help manage supplier relationships, monitor performance, and process payments. By optimizing the procurement process with DocuCollab`s enterprise management solution, companies can significantly cut costs, protect their profit margins and improve efficiency in supply chain management.

Click here to discover how you can automate every step of your contract management lifecycle through DocuCollab’s seamless contract lifecycle management tools