What Are the Critical Elements of Procurement Management?

by Tara Duggan; Updated September 26, 2017

Using procurement management processes, business professionals purchase the resources they need from suppliers or vendors to conduct business. Effective procurement management policies and procedures enable purchasing professionals to negotiate prices from supplies and vendors to get the best quality materials and services for business operations. Because large companies purchase resources in large volumes, they typically utilize formal procurement management processes. Smaller enterprises use more informal techniques to get the goods necessary for their businesses.

Benefits

Transforming the contract management role from an administrative function to a strategic process involves proving that a business depends on effective procurement process management. Developing critical procurement management expertise allows business professionals to increase their knowledge of production and inventory management, improve efficiency by streamlining processes across the supply chain using accurate forecasting techniques, maximize customer satisfaction by delivering products and services in a timely manner and enhancing credibility among peers, employers and suppliers.

Developing Contract Management Processes

Effective procurement management starts with acknowledging that managing the processes used to sign contracts benefits the company. Once an organization establishes standard documentation of policies and procedures associated with contract management, personnel can be held accountable for adhering and complying with these standards. At the beginning, only high-visibility contracts meeting budget thresholds fall under these guidelines, but as the organization’s procurement function matures, procurement professionals apply these standards to other deals.

Automating Contract Management Processes

As procurement management professionals institutionalize standard policies throughout their company, they establish documentation and procedures that must be completed to complete a transaction. Using software tools, automating these functions depending on contracting type, terms and conditions, dollar amount or other requirements streamlines the process.

Integrating Procurement Processes

As contract management processes mature, organizations integrate critical procurement functions with other core operational processes, such as financial management, performance management and engineering design. Providing training to all employees ensures that each department follows established best practices. Since 1973, the Association for Operations Management has provided critical education to more than 90,000 manufacturing professionals on topics including procurement management. Additionally, by using production metrics from each department, procurement professionals can analyze data to negotiate more effectively with suppliers and make decisions about quality and service that impact the entire company’s long-term profitability.

Evaluating Efficiency

Evaluating efficiency includes continuous process improvement efforts made by procurement professionals. These projects, designed to improve the contract management process, reflects the experiences and lessons learned by previous projects. By ensuring that the organization follows the most efficient work flow with the fewest approval signatures needed, a company achieves the highest level of procurement capability.

References

About the Author

Tara Duggan is a Project Management Professional (PMP) specializing in knowledge management and instructional design. For over 25 years she has developed quality training materials for a variety of products and services supporting such companies as Digital Equipment Corporation, Compaq and HP. Her freelance work is published on various websites.