By James Manktelow and the Mind Tools Team
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Procurement Management

Increasing the Strategic Value of Purchasing

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When you're spending someone else's money, you need to be rigorous.

Everyone buys things – groceries, clothes, transport services, housing.

When you're buying vegetables, you probably only spend a few seconds deciding what and where to buy. After all, if you make a mistake and finish up with apples that rot in your fruit bowl after a few days, the money you've wasted is insignificant.

When you choose a new car, though, you'll spend longer evaluating what you want, and you'll consider things like prices, and the levels of after-sales service that different dealerships offer.

Procurement – buying goods and services at work – also demands a range of approaches depending on the situation, although the decisions are usually bigger ones. What's more, since it's someone else's money you're spending at work, you need to be more rigorous about ensuring you've considered all the factors required to make a good purchasing decision. Who do you use as a supplier? What kind of contract terms do you need? What constraints and restrictions do you have on your purchasing power? And should you make something, or buy it in?

Procuring – or purchasing – goods and services from external suppliers is a critical part of most organizations. The materials and support provided by your suppliers are often key to their organization's overall success. Therefore, it's good practice to manage the entire supply acquisition process carefully to make sure you get what you want – and what you pay for.

Having a process in place allows you to manage the ordering, receipt, review, and approval of items – and it sets up procedures for managing the supplier relationship. Doing this properly helps you ensure that everything you buy is fit for purpose, and it helps you identify and resolve issues quickly. Developing an effective procurement management process will help you maximize the value of your supplier relationships – and safeguard and maximize the results of your project.

Sure, this takes a lot of work. However, if you get procurement right you can drive down the prices you pay for resources, at the same time that you protect yourself from all of the stress, disruption, delay and cost that comes with unreliable suppliers or defective inputs.

Strategic Procurement

Here are some ways to increase the contribution that your procurement practices deliver to your organization....

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