Businesses purchase, or procure, products and services from a variety of vendors. Each product or service purchased assists the company in meeting its goals of servicing the customer. Procurement departments negotiate with vendors and place orders. Procurement management includes the concept of organizing and directing a company’s procurement activities. Both pros and cons exist for businesses that incorporate procurement management.
Negotiate Best Prices
One pro of managing the procurement process involves developing skills of specific employees to negotiate with vendors for the best prices. Procurement management allows the department leader to identify those employees with the strongest abilities in negotiation, develop those skills further and assign this responsibility to those employees. These employees learn what each vendor looks for in the customer-supplier relationship and finds ways to provide these elements while getting the best deal for the company.
Another pro of procurement management considers the company’s ability to evaluate suppliers. The process involves evaluating each supplier before transacting business with it and re-evaluating the supplier regularly. The employees who evaluate suppliers consider the quality of the supplier’s products, its ability to meet the company’s needs, the credit terms offered and the supplier’s willingness to meet specific requirements imposed by the company. The company employees rank each supplier, allowing the company to identify preferred suppliers and to eliminate poor suppliers.
A con of using procurement management involves the expense of managing this process. In the procurement department, a specific manager needs to spend her workday overseeing the process. This involves evaluating employee performance to determine where each employees’ strengths and weaknesses lie, assigning responsibilities to those employees and identifying employees ready to learn more. The more time the manager spends overseeing this process, the less time she spends on other responsibilities.
Another con of managing the procurement process is the lack of flexibility enjoyed by the company and the employees. When new purchasing opportunities arise, the company needs to follow the processes in place, such as supplier evaluation, before pursuing that business relationship. For example, if a new supplier offers the company a great deal on supplies, the company needs to follow the established steps before it can take advantage of the deal.