14. Procurement Overview


[MUSIC] Welcome back to our lesson on procurement.
0:10
Upon completion of this lesson, learners should be able to, provide a definition of procurement, and list the three core components of the Procurement Function, and describe how they relate to each other. Procurement is the area of supply chain management that controls the buying of materials, equipment, and services. In many organizations, it is also called Supply Management.
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Some related terms that are used when discussing Procurement included purchasing, which I view as a subset of procurement generally referring to the transaction level execution of contracts for goods and services. Another term, sourcing, that relates to a subset of procurement actively, sorry, a subset or procurement activity generally referring to finding suppliers of goods and services.
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However, in the score model, the word source is used in a broader context to incorporate all of the elements of procurement.
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Let’s take a look at a graphical depiction of the procurement process, and use the components of the model to set the stage for further discussion. The key components of the procurement process include strategic sourcing, supplier management, and transaction execution.
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These three components or subprocesses have distinct roles, goals and objectives. The model also has important interactions with suppliers, supplier processes, and internal functions and processes. A short explanation of the three components of procurement can be viewed as strategic sourcing Identifies, and locks in suppliers, to meet a company’s material, and service names. Supplier management, is tasked with monitoring and managing the selected suppliers. Transaction execution focuses on the efficient execution of contracts between suppliers and a company.
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Given the distinct nature of the procurement components, it is understandable that a number of different personnel roles are engaged in conducting the activities, with the skills and responsibilities varying greatly. We will revisit the three core components of the procurement process model in the three lessons that follow.
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Procurement is not a function that is done in isolation. The procurement function must interact with a wide variety of internal functions, including production to understand the quantities, and timing of needed the materials. Engineering to understand detailed part and material requirements. Capital project teams to discuss specifications, sequencing and other issues associated with projects. Inventory management to discuss inventory management policies, etcetera. It’s important to note that procurement is engaged in more than the sourcing of direct materials for production. Procurement will engage in procuring a wide range of services, from lawn care to consulting and legal services. Procurement will also engage in procuring indirect materials, ranging from paper towels to office buildings. So it’s easy to see that the effectiveness of a procurement function can have a big impact on an overall organization.
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The procurement function also engages with external supplier processes in a number of ways, including communicating expected standards for orders to suppliers and requirements associated with receiving the orders. Maintaining up-to-date information and understanding of suppliers’ catalogues, containing product specifications and other important information. And synchronizing the flow of information and funds between suppliers and the organization. So the procurement function can be viewed as a sort of go-between between an organization and its suppliers. Seeking to provide needed materials and services in an efficient and legal manner, while obtaining required cost and quality attributes.
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Now, we have a question for your consideration,
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In this lesson, we have learned that procurement is the area of supply chain management that controls the buying of materials, equipment and services. And the core components of procurement are Strategic Sourcing, Supplier Management, and Transaction Execution. Thank you for watching, and we’ll see you in the next lesson. [MUSIC]

Jim Rohn Sứ mệnh khởi nghiệp