Question

Over the past 25 years, the role of procurement within companies has changed dramatically from that of simply buying goods and services to overseeing an integrated set of management functions. Procurement has crept into every aspect of management, from category management to managing supplier relationships, contracts and payments, and strategy. As companies look beyond short-term costs and the scope of procurement-related issues has grown, procurement professionals are paying more attention not just to what they spend on goods and services but to the broader costs of operating, maintaining and replacing the items and resources they purchase over time. What in your opinion are the reasons why despite procurement’s increased level of importance, it has yet to achieve the high-level recognition it deserves? Please explain.

Answer 1

Earlier Procurement in business means sourcing and purchasing of goods and services for business use from an external source. as the time passed the role of procurement within companies has changed dramatically from that of simply buying goods and services to overseeing an integrated set of management functions. Procurement has crept into every aspect of management, from category management to managing supplier relationships, contracts and payments, and strategy. they are not limited to just monitoring and interpreting the supply market trends. procurement is seen as a strategic function working to improve the organisations profitability.It helps to reduce the processes time, raw material prices and cost and identifying better sources of supply. it also protect the organization from risk by deploying failure mode and effects analysis. contract management and price shock mitigation, these provide huge benefits to the organisation, stakeholders and customers.

Despite procurement’s increased level of importance, it has yet to achieve the high-level recognition it deserves. over the years procurement management has grown into its full dynamics even then Its often not considered as a strategically important. there is a lack of initiative in procurement to influence top management.

Management often dont give focus on supplier cost. a good supplier helps to reduce cost or increase value creation. from a pure cost consideration, management should spend more time and focus on managing suppliers and related cost rather than focussing on internal cost.

Procurement function is measured and assessed on price reduction and cost savings. there are evaluated on the price criteria . The lack of other evaluation criteria other than price make procurement function a step down to other managerial functions.

Often management forgets the high advantages it could gain by understanding the R&D potential in the supply chain investing in it. If you do not have a good relationship and transparent cooperation with the suppliers to influence them to innovate or develop then we are missing out on future opportunities.