Procurement Department – 8 Key Roles & Strategies
The procurement department is where it all happens. Every important procurement process starts in this very area where the procurement manager and his/her team discuss their strategies and options. As an upcoming or experienced procurement manager, your role is very important, that is why for today, we are going to discuss what the procurement department is all about.
We’ll cover the roles and the strategies that can be used. There are about 7 key roles that are very important in the procurement department, so we’ll cover those as well. After you are done reading this article, you should know those roles and possibly already have the right person in mind for these procurement roles.
- The procurement is headed by the director of procurement and where the procurement process starts and finishes.
- The three components of procurement are the people, process, and paperwork.
- The procurement department’s important functions are sourcing, complying with policies, negotiation, contracting, and monitoring suppliers’ performance.
What is procurement?
For professionals, procurement means the process of identifying, shortlisting, selecting, and acquiring needed goods or services from a third-party vendor.
It can be done through direct purchase, competitive bidding, or tendering process while making sure that the delivery of the supplies is done in a timely manner.
Components of Procurement
This is the heart of procurement. They are the ones who are responsible for initiating and authorizing each step of the procurement process.
Without the people, nothing can be done in the procurement. There may be automation but there will be no one to maintain it without people in the procurement.
The process is the key to keeping the costs down and ensuring that the supplies are available when needed. It helps improve and promote accuracy and timeliness in the procurement process.
Keeping records is important to make sure that every document is accessible when needed. Records act as a database of knowledge concerning payment terms and the supplier’s performance.
The Procurement Department Defined
Also called the purchasing or sourcing department, the procurement department is where the procurement process starts and finishes. This is the place where the procurement manager discusses how the procurement process should go with the other team members. This is also where each member of the procurement team does their respective assignments, which is why it is very important for the company or organization that the procurement department must function well, with each member of the team coordinating without problems.
The procurement department is often headed by the director of procurement. He/She’s the one who gathers the members of the procurement department. The procurement director is also the one who assigns the tasks needed during the procurement process while checking to see if each process involved aligns with the strategies that the company wants for the procurement.
Finally, it is also in the procurement department where the final stages of the process are done. When the supplies are received in good condition, the suppliers paid, and contracts are negotiated, the procurement department takes care of all the necessary work to finalize the procurement process.
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The 8 Key Procurement Department Roles
Since we’ve nailed down what the procurement department does and what it is made of, it’s time to check what its 8 key roles are.
Understand that each procurement role is dependent on one another. If the procurement department misses one, then it may present problems for the procurement process itself.
To make things simpler, we at Procurement Tactics created this very simple table so you can recognize each role and its core definition. This table is also present in our Negotiation Gamechanger, so you should check it out today.
So without further ado, here are the 8 key procurement department roles:
1. Chief of Procurement
- Leading a strong procurement team
- Manage Annual Organizational Budgets
- Manage Supplier Relationships
- Develop an Organization’s purchasing policies
- Source, Negotiate, and Review Supplier Contracts
- Manage Supplier Relationships
2. Director of Procurement
- Maintaining Knowledge of the market, citing current prices and fair rates for supplies.
- Monitoring, reviewing, and analyzing bids and quotes with potential suppliers.
- Monitoring, reviewing, and analyzing service agreements and contracts
- Overseeing sources for purchasing supplies
- Maintaining company budget and streamlining costs
3. Procurement manager
- Identifying potential supplier sources
- Conducting interviews with potential vendors
- Negotiating good supplier agreements
- Managing supplier and vendor contracts
4. Procurement analyst
- Meeting with vendors
- Testing products
- Negotiating supply contracts
- Creating cost reports
5. Procurement specialist
- Supervise budget estimation and sourcing operations
- Maintain excellent communication with all business stakeholders
- Analyze offer and purchase bids and negotiate accordingly
- Assist in asset management procedures when required
6. Contract specialist
- Manage contract development through all lifecycle stages
- Provide ongoing assistance to staff on contract development and compliance issues.
- Evaluate records for retention in compliance with Board-approved policies
7. Legal counselor
- Provide Legal Guidance
- Conduct Legal Research
- Draft Legal Correspondence
- Ensure compliance with the law
8. Business controller
- Analyzing and controlling the development of purchase prices
- Analyzing and controlling the impact from cost down projects and R&D projects
- Monthly reports and KPIs regarding procurement
- Forecasting the impact with procurement activities and development in purchase prices
- Prepare presentations for meetings
Important Functions of the Procurement Department
Sourcing is the number one most important function of a procurement department. Why? Because the procurement department is responsible for purchasing goods or services that the company needs to operate.
It requires the procurement department to create a strategic plan to acquire the goods or services at the best possible price. Thus, it plays a huge part in the growth of the organization.
Of course, this starts by looking for potential suppliers. Selecting the best and most reliable supplier can have a huge impact on controlling costs.
2. Compliance with business policies
The procurement department must ensure that all its purchases are in compliance with the organization’s policies. Before purchasing,
It needs to look into the organization’s protocol to ensure that it complies with the budget approval. This will effectively help the organization to stay efficient with its costs.
The procurement department must have great negotiation skills to acquire the best materials at the lowest price.
This is vital to the profitability of the organization as high costs of materials can impact their revenue. If this happens, the growth of the organization will be slowed and will greatly affect its bottom line.
The procurement department offers the contract award to the best supplier. That is why the procurement department needs to scrutinize the supplier.
Furthermore, the procurement department must know and abide by all the agreements as it is vital to the success of the relationship between the organization and the supplier.
5. Monitors supplier’s performance
The procurement department must monitor and know all the stipulations in the contract to properly evaluate the supplier’s performance.
If it fails to monitor the supplier, it can be detrimental to the complete product and supply chain.
What is a procurement department?
A procurement department is a branch in any company that takes care of procurements
How to construct a procurement department?
To construct a procurement department, you need a Director of Procurement, some procurement managers or directors, and procurement specialists.
What are key roles in a procurement department?
The key roles in a procurement department are sourcing, negotiations, competitor analysis, and supplier performance monitoring.
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