PSM 406

strategic Procurement Management

Session 3: The Procurement Function’s Internal
Relationships

Jan 2014
In this session, we will be looking at

• Scope of Procurement Operations

• Key Departmental Roles
• Developing a good working relationship
Introduction
• Overall scope of procurement operations touches virtually
every function within the organization. Typically,
procurement activities usually relate to one another.
• The common roles and responsibilities carried out by
procurement department are grouped into three main
categories:
– Procurement role
– materials management role
– supporting role
Procurement Functional role

• The procurement function manages the acquisition of

goods and services, conducting a broad range of
functional services that are used by all departments in
the organization
Role Description
COMMODITY Industry analysis ,Market analysis, Commodity analysis,
EXPERTISE Benchmarking, Forecasting
SOURCING Locating potential suppliers, Supplier prequalification, RFx
preparation and response analysis, Evaluation of supplier
capabilities, Competitive bidding, Supplier selection leadership

CONTRACTING Contract formation, Negotiation of terms and conditions,

Management and administration of contract compliance,
Termination
RISK MANAGEMENT Risk assessment and evaluation, Risk mitigation Ensuring
supply, Supplier ratings and approved supplier list, Regulatory
compliance
QUALITY MANAGEMENT Supplier qualification, Quality assessments, Quality
improvement programs
TRANSACTIONAL Issuing purchase orders, Expediting supplier shipments,
PROCESSING Returned goods documentation, Procurement card
management, E-procurement solutions
Materials Management Role

• The materials management function is responsible for

the planning of supply requirements and the internal
handling of purchased materials
Role Description
LOGISTICS/SUPPLY CHAIN Transportation and customs management
MANAGEMENT Receiving
Packaging
Physical distribution of finished goods
Internal movement of materials
PLANNING Production planning and master scheduling
MRP management
Capacity planning
Forecasting
Just-in-time manufacturing
INVENTORY MANAGEMENT Warehousing and stores operations
Part master maintenance
ABC inventory control
Economic ordering quantity analysis
DISPOSAL Hazardous materials handling
Scrap sales
End-of-life product sales
Surplus equipment sales
 OTHER SUPPORTING ROLES
The Procurement Department indirectly supports a variety
of activities within the organization.
Role Description
PROJECT MANAGEMENT New product introduction projects
Information technology and systems projects
Manufacturing/services improvement programs
Plant engineering and relocation projects
Policy and procedure revisions
Audit preparation
Value analysis
FINANCE AND BUDGET Cost center maintenance
Pricing forecasts for budgets
Spending analysis
Cost analysis
Accounts payable support
Return on Investment analysis
Understanding Key Departmental Roles
Let us try to examine the roles of the major organizational
groups you are likely to encounter and how these roles
interface with those of your department.
For the purposes of examination, we group these roles into
1. Administrative and Support Functions
2. Production Functions
3. Sales and Marketing
4. Engineering and Design Functions
Administrative and Support Functions

Administrative and support departments generally include

those groups that provide the foundation for the smooth,
day-to-day tactical operation of the organization as well as
those that perform general management activities that
serve the entire organization.
• Senior management
• Accounts and finance
• Legal
• Facility
• Human resources
• Information technology
Production Functions

Production is a term widely used to refer to

manufacturing, mining, baking and brewing, etc.
Production operations generally include the functions of
– manufacturing operations planning
– quality assurance
– maintenance of related equipment.
Sales and Marketing
• Product/Business Development
• Public Relations
• Advertising/Sales Collateral
• Distribution
Engineering and Design Functions
• Research And Development (R&D)
• New Product/Service Design
Developing Good Working Relationships
Your effectiveness as a procurement officer
and the effectiveness of your department will
depend largely on the strength of your
relationships with your
– suppliers
– internal customers.
This can be done through

• Communicating within the Organization

– establishing credibility and trust
– Customer surveys
– One-on one meetings with stakeholders
– Team meetings
– Newsletters and Websites
• Gaining Early Involvement
• Formation of cross-functional teams
THANK YOU