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Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Procurement Function — Everything A Procurement Professional Should Know

Key takeaways
  • The procurement function evolves with the business environment, adapting modern strategies and technologies. 
  • Understanding these functions helps companies develop their operation to remain competitive and operational.
  • Consequently, developing the functions helps companies tackle their operations more efficiently.

The procurement function is one of the keys for a business to succeed. The global pandemic and the ongoing war between Russia and Ukraine have disrupted the supply chain which shed light on the importance of procurement functions. 

This article will highlight the different job functions and components in procurement. We will discuss how critical it is for the company to execute these functions.

After reading this article, you will have a deeper understanding of procurement functions. This will allow you to give importance to these functions that will keep your supply chain sustainable.

    Procurement Today

    Procurement today has become more advanced than what we had a few years ago. Many processes in procurement are done using procurement software. E-sourcing has also become a thing to make transactions faster and easier. 

    The integration of technology with procurement has helped many companies to develop. According to CIPS, procurement is usually responsible for 70% of the companies’ revenue. This is due to the reductions in costs that have greatly impacted its profits. 

    Although it has made the procurement process faster and easier, many things have changed the ways of procurement. Through the use of social media, people have become more concerned with ethical standards when it comes to procurement.

    Mediums like TikTok, Facebook, Twitter, and Instagram are being used to point out the wrong treatment of employers to their employees. Through these apps, many businesses now take more care about their reputation because of the cancel culture that is popular today.

      Procurement Function

      We all know that the indirect procurement function is concerned with the acquisition of the required materials or services from potential suppliers. One of its functions is to enable the company to meet its objectives by ensuring that the materials or services are sufficient for its daily operations. 

      Procurement functions to improve the profitability of businesses. In the private sector, it is seen as helping to streamline processes, reduce the costs of raw materials, and identify better sources of supplies. 

      In the public sector, procurement helps by maximizing the available funds. It helps by finding suppliers that will give the best possible materials for its project.

        Procurement Most Important Job Functions

        Here are some of the most important job functions of procurement:

        1. Sourcing

        Sourcing is the start of every procurement process. You can never negotiate with a supplier without even finding one in the first place. Sourcing starts by checking potential suppliers in the market.

        The collection of the supplier’s information is carefully gathered and monitored to ensure that they comply with corporate policies. 

        The suppliers are selected based on their qualifications, risk factors, price and quality of products, and policy compliance. One of the factors to control costs is to find the best and most reliable supplier in the market. 

        2. Negotiating

        Negotiation is one of the skills that a procurement professional must possess. Having great negotiation skills will allow you to get the best deals for the company. 

        Procurement professionals will discuss all the stipulations on the proposals to come to an agreement. Professionals should acquire the highest quality products from their potential suppliers that will suit their budget. 

        Negotiation is a vital part of the procurement’s function. It affects the profitability of a business if they buy materials that are high in price. Organizations may overspend which will truly affect their revenue. 

        Negotiating is a critical step before they purchase the needed materials, as even the slightest decrease in the cost of materials will create an impact on its profitability. 

        3. Contracting

        The contracting phase happens when the procurement department is done evaluating supplier bids based on price, quality, and value. 

        The contract will be awarded to the best suppliers in accordance with the requirements set by the organization. 

        The company and the supplier both sign the contract as proof that they will do their obligations accordingly.

        4. Monitoring the supplier

        The contracting phase happens when the procurement department is done evaluating supplier bids based on price, quality, and value. 

        If the procurement department or manager fails to monitor the supplier’s performance, it will greatly affect your supply chain. 

        Their agreed time of date must be tracked to see if the invoices are paid promptly. Additionally, this function must keep track of all the records of transactions and the inventory to ensure a smooth flow of the process. 

        5. Complying with protocols

        The procurement department must consider that before they purchase the needed materials, it must first align with the organization’s objective. It must also align its purchases with the compliance requirements.

        The procurement department must look into protocols and budget approvals to ensure that purchases are aligned with the organization’s policy. 

        6. Utilizing technology

        Organizations should learn to adapt to any technological change that will be integrated into the procurement process. This is to streamline and improve the efficiency of the organization. 

        Using procurement and sourcing tools will greatly eliminate tasks that take too much time. 

        Procurement Salary

        The salary in the procurement industry depends on the competency level you are in. Additionally, salary is affected by factors such as education, skills, experience, and the country you live in.

        According to Glassdoor, the total salary of a procurement officer is $87,501 in the United States. Of course, it will be different from other countries due to various factors such as living expenses. 

        Procurement Interview Questions

        Of course, when you want to enter the field of procurement, you will need to apply to the industry it belongs to. 

        When you are prepared for the interview, there is a good chance that you will be accepted into an organization.

        Most companies in the procurement industry do not use the same questions twice or thrice. The hiring manager will always try to cycle the questions depending on the level of experience of the applicant. 

        The STAR method is a popular method employed by hiring managers and interviewers. This is to gauge how the applicant can answer critical situations to the best of their abilities. 

        The trick to answering these questions is to know the scope of the position that you are applying for. In addition, you must take note to answer each question simply and concisely.

        Conclusion

        To sum up everything, the procurement function is one of the many keys to running a business smoothly and successfully. However, one must understand the various functions the procurement department is responsible for.

        Furthermore, procurement responsibilities do not only stop at acquiring or sourcing goods. They go beyond and even more than you can imagine.

        Moreover, procurement professionals have also different job descriptions and titles that vary from their education, skills, experience, and the country they reside. For their average salary, according to Glassdoor, most American procurement professionals receive around $87, 501.

        On that note, when you want to enter the field of procurement, it is ideal to apply for an industry it belongs to and the position your education, skills, and experience best fit.

        Frequentlyasked questions

        What is the procurement function?

        The procurement function deals with the acquisition of needed goods and services from potential suppliers for its daily operations.

        Did procurement change?

        The procurement process varies for each business but some elements stay the same. The thing that most changed with procurement is the integration of technology.

        Why is it important for procurement to execute its functions?

        It is important to streamline, boost productivity, and improve efficiency in the organization.

        About the author

        My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.

        Marijn Overvest Procurement Tactics