Procurement function and organizational role

Procurement Function

One of the most important functions of business is procurement. Procurement refers to the acquisition of the goods and services a company needs to carry out its functions and to operate within its market. It is therefore vital that this process be implemented and streamlined in such a way to optimize not only the business process, but also to maximize economic activity. There are several levels of procurement, three of which include the project level, the business unit level, and the corporate level.

In a project-based organization with project-based procurement, procurement occurs, as the title suggests, on the basis of the necessities required for each individual project (Lynch, n.d.). Once project objectives are predetermined in the project proposal, procurement activities can also be undertaking to correspond to the project objectives. This kind of procurement is vital to the success of a project.

Hence, one of its disadvantages might be the fact that each project needs to be very closely scrutinized for its procurement needs. This requires a dependency upon the specific objectives and goals of each project, and can therefore require additional resources in terms of time and money. Another disadvantage could be that project procurement is not a uniform process, and can therefore not be implemented with equal speed or knowledge across all projects. On the other hand, an advantage is focus. Project procurement provides for a focused platform of specific requirements, which eliminates the acquisition of surplus or unnecessary bulk materials. This results in cost savings.

The project manager's function is to coordinate project procurement with the necessary functions of the process (Crawford, 2014). This function includes not only planning, but also the identification of outsourcing needs, market analysis and contract planning.

While many large companies opt for a centralized corporate procurement process, it is often the case the companies on their way to such a significant size begin by a segmented procurement approach. In such a case, procurement occurs in the form of business-unite procurements. According to McBeath (2010), such procurement occurs in a localized way, where each division of the company handles its own procurement processes.

The main disadvantage related to this is that the procurement process could become increasingly fragmented as the company grows. This could lead to a less than optimized focuse when procuring goods and services, with a company that grows so rapidly that little is left in terms of time and effort to ensure the growth of procurement along with the growth of the company.

Centralized corporate procurement, on the other hand, means that a global, integrated procurement process is followed. The main advantage of this is that there are significant cost savings to a centralized procurement process. The role of management here is to integrate the process in such a way that it is optimal not only in terms of costs, but also in terms of what the company needs.