A procurement department is responsible for managing the purchasing activity for the organization. There are two types of purchasing or procurement departments: centralized and decentralized. In a centralized model, all requests for materials or goods are center to this department. In a decentralized model, individual departments can process their own purchases.
Regardless of the organizational model used, procurement activity is subject to more scrutiny and review than any other process. The use of company resources to purchase goods and services must be based on adherence to specific policies and procedures to reduce the chance of fraud or theft. Typically, the type of activity is monitored by the accounting department and internal audit.
In a procurement department, the director is responsible for strategic planning, policy development, and providing procurement advice to senior management. Most organizations have procurement officers responsible for managing the request for proposal process, bid tendering, and other related processes. The most junior position in a procurement department is buyer. A buyer is typically responsible for a specific commodity or product type. He or she issues purchase requisitions and orders to approved suppliers, based on internal needs.
The main purpose of a procurement department is to manage the process used for the purchase of goods and services by the organization. Advanced planning, group buying, and negotiated pricing are all strategies used to reduce costs and increase profitability. In most organizations, the implementation of procurement strategies is used to reduce overhead and operational costs without compromising on service to customers.
In order to qualify for a position in a procurement department, most organizations require a minimum college diploma in business, procurement, business administration, or a related field. In order to become a purchasing officer, manager, or director, a university degree or professional certification is often necessary. These positions have a greater degree of responsibility, and so many firms require more education.
The increased used of technology in business has resulted in the development and adoption of electronic procurement, or eprocurement. Using the Internet, companies can purchase products from suppliers’ websites, submit the order electronically, and receive the invoices electronically. This process reduces inefficiencies, decreases costs for both the supplier and the customer, and is becoming increasingly popular. In many firms, the transition to electronic procurement is slow, due to the complexity of the technology and the complete change in business process required. However, this area of procurement is expected to grow, due to the potential cost savings and increased efficiency.