Strategic Role of Procurement in High-Performance Organisation

Eleven letters word ‘Procurement’ can be broadly defined as an imperative business function in an organizational structure that guarantees supply from key suppliers and helping in continually eliminating unnecessary cost from the business. It bridges the ever-expanding demand-supply gap by making the resources available on time at the best prices possible.

Gone are those days when procurement was a part of an administrative-logistic process in a company linked with purchasing of goods and services from vendors. Its overall evolution as a valuable business strategy is very laid back because the Procurement function was perceived as a support function that only generates cash just to invest in R&D and marketing.

Also, many organizations were inept to measure the impact of procurement in terms of stock management, payment terms, supplier relationship management, business preparation, mitigation and action around supply chain risk.

In the late 70’s and 80’s procurement started gaining recognition as a noteworthy determinant and 1990’s the turning point when it received a wider recognition as the value-contributing integral process in an organizational structure. Now, it bridges the gap between internal company requirements and external markets to address the pressing grave problems governed by disruptive markets.

With the growing awareness of procurement function in the 21st century, the role of the procurement department is magnified and equated with the most valued extension of the business like the internal workforce in many organizations. It has come a long way to improve the company’s performance which is determined by major external forces like digitalization and globalization.

It is being involved as a principal business collaborator in strategic business decisions for optimizing the supply chain for higher returns leading to a “shared methodology” across the firm.

The right deployment of procurement strategy also helps in cost-benefit analysis by concentrating significantly on key company areas such as sales, innovation, investments, mergers, currency hedging, etc. and especially in scenarios of an absence of supply to the company.

On the C-suite’s radar in a manner proportionate to its growing importance within the organization, it contributes to corporate profitability at both strategic and operational levels. The Procurement team perfectly automates the sourcing and purchasing processes by leveraging appropriate technology. Also, it works at ground level to identify the key growth opportunities and manage internal operations that collectively result in a greater degree of transparency and substantial cost savings.

Today, the procurement function demonstrates the streamlined business processes associated with implementing the right key strategies to manage the company’s investment portfolio and minimize the total cost of ownership effectively. Its role has been transformed from a transactional function to a major business strategy that accesses reliable sources of supply.

Also, it aligned the complex network of suppliers and impacted stakeholder groups (both internal and external) effectively to improvise the business performance in terms of company’s profitability, team productivity, risk management, and intellectual property.

In essence, we should not underestimate the significance of Procurement within an organisational structure and treat this business function as an important part of company’s corporate strategy by positioning the procurement team at an Executive Board level.

Don’t consider procurement just an administrative function because it controls a high degree of supply chain wastage through a meticulous action planning and adds a dramatic enterprise value that builds a healthy profitable corporation.

Tags: supply chain management, demand supply gap, growth, execution, business strategies, procurement

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