Wikipedia -- the popular Internet encyclopedia -- defines procurement as
"the acquisition of goods and/or services at the most effective total
price of possession, in the right quality and quantity, at the proper
time, in the right place and from the right source for the direct
benefit or use of corporations, individuals, or perhaps governments,
generally using a contract, or it may be the same manner choice for hr.
Simple procurement may involve simply repeat purchasing. Complex
procurement could involve finding lengthy term partners - or perhaps
'co-destiny' companies that might essentially commit one organization to
a different. Procurement can make reference to buying, outsourcing, etc
of any sources."
What this definition doesn't address is the importance of procurement
for an organization's main point here. Very frequently, procurement is
relegated to numerous departments throughout a company. Each individual
with buying authority inside a department is approved to invest up to
and including given amount. While major projects usually require
separate line-item approvals through various channels, on-going
purchases for example printing are approved at the departmental level.
For any large organization, that may be dozens of departments. For more
information on indirects procurement, visit our website.
Printing and other outlays accumulate, but they don't appear as itemized
expenses in the annual report at the finish of the year. Consequently,
most organizations don't have an idea regarding just how much they may
be conserving print and similar specs-defined goods and services since
it is not reported except through lump-sum figures or as "additional
fees."
To change procurement right into a effective financial management
function, there has to be a paradigm shift -Body that demands
accountability through centralization and detailed reporting. Gone are
the days when departments are permitted to invest freely inside a given
budget amount, just as long as that quantity isn't exceeded. Like a
matter of fact, in some organizations, common practice is to spend the
allotted amount whether it's been needed or otherwise so that quantity
or even more could be allotted the following fiscal year.
Tools exist today which make that method of procurement archaic. New
methods to procurement have the ability to possess everything of every
purchase logged right into a computer so from the main issue perspective
management can easily see what's being spent, by whom, why and when.
If, for example, twelve departments order printing from the dozen
different printers and the amounts compensated for similar work vary
broadly, that's a warning sign for management.
Besides this signal that there's no coordinated print buying program
within the organization, it illustrates how what may appear to become
incidental purchases can equal to significant dollars -- dollars that
may be saved for other purposes if spent more wisely and efficiently.
New methods and technology can be found today that make it easy for the
buyer to manage costs instead of acquiescing to companies that will
always be likely to charge greater charges when requested to create
their finest offer to make a job. Despite negotiations and rate card
rates, charges derived by traditional procurement methods are
unnecessarily high.
The better strategy is to embrace a strategy whereby the buyer sets
rules for suppliers. Hence, the supplier isn't dictating cost. This is
achieved by creating an aggressive procurement atmosphere. The initial
step would be to develop a database of reliable suppliers -- all
handpicked and vetted by the buyer to make sure that any supplier in the
pool will provide quality focus on time regardless of the cost. The
next thing would be to enter job specifications into the same computer
communications and workflow system that stores the buyer's supplier
database. The computer gets control came from here. When requested, it
matches the specifications for the job with suppliers capable of doing
the work. Only individuals suppliers selected will be requested to
invest in the job. This is when the rules for competitive putting in a
bid try to the buyer's advantage.
All suppliers realize that the buyer is searching for the cheapest bid,
and the the easy way provide deep discount prices of 25% to 50% would be
to run the job when equipment would certainly be idle. This really is
known as filling downtime, and it's standard practice in the printing
industry since most printers reserve about 30% of their production
schedules for key client work. When that actually work doesn't
materialize, downtime needs to be filled or there won't be any revenue.
This competitive procurement method also activly works to the advantage
of the supplier. Instead of being tied to no work, idle equipment and
employees and no revenue, the supplier gains work and earnings.
Companies that apply this tactic consistently improve their main point
here annual profitability from the national average of under 3% to
greater than 14%.
However, this latest process for procuring print and other specs-defined
goods and services isn't about prices. That's a very attractive
benefit, but so might be the efficiencies acquired and the establishment
of strong standardized controls. All facets of employment, from
conception through changes and production to delivery and invoicing, are
recorded and archived by the communications and workflow system. The
buyer and the supplier determine who can access the system and when to
ensure that each time a decision is created the individual who makes the
decision is noted and the what, when and why documented. Total
transparency is supplied. Full accountability is assigned. Qc is
strengthened. Want to know more about sap procurement? Visit our website today for more information.
Because this sequence of occasions occurs job after job, the buyer and
the suppliers know what to anticipate. It eliminates looking for
suppliers whenever a job is required. They all are in the buyer's
database just awaiting possibilities. It eliminates getting to barter
prices. It time saving and sources. The competitive procurement method
takes care of that and delivers foreseeable results -- results that
needs to be reported like a line item to shareholders to show how the
organization is applying a brand new procurement process to save cash.