Why we need Procurement in Business?

All businesses are set up for one single purpose, i.e to make plenty of money for the shareholders. In order to do so, two thing need to happen quickly;

a) Increase the sales order by capturing more market share
b) Reduce the overall cost of operation to stay efficient

To increase the sales and capture more shares in the market place, the company need to have a quality product which is also competitive. Without these two value, it will be extremely difficult to generate more income for the company business.

In order to generate more sales, the company will need efficient output. To achieve this, the production department need to increase productivity either through efficient labor workforce or through investment of new technology. Beside this, the quality department has to play it part to ensure all operation under control to achieve the specification.

Having done that, efficient costing will not be achieve without having a quality supply with good pricing from suppliers,

Cost of material in certain industry can be from 45% to almost 60% of total product cost, which meant, material cost percentage in the total product cost is very high. And the greatest saving of cost to ensure company stay competitive is from the procurement function.

Beside lowering down of cost to ensure business stay competitive, is the fact that, managing disruption is also part of the objective of procurement.

There are few type of disruption in business operation which need to be managed from procurement perspective.

a) Quality issue from raw material supply by supplier
b) Disruption to supply due to delivery issue or event which need to be overcome through risk profiling
c) Poor performance by business partner which supply raw material and accessories to the company.

In the end, the real need of Procurement in business is very important and the role is extremely critical and strategically, the strength of the company rely on few area of operation and one of the most major area is procurement.