Importance And Importance Of Procurement

Importance of procurement

Procurement is regarded as an essential part of an organization’s ability to function effectively and efficiently (Leonard, 2000) as cited in Faraji, (2007). An organization stands to benefit immensely if its procurement business function is managed well.

Weele (2005) provides the following procurement roles in an organization.

1. Procurement reduces cost: procurement can help reduce quality costs by making sure that selected suppliers deliver a product or service that does not need extensive quality control. It can also reduce quality costs by making sure that the components bought do

2. Procurement contributes to lower costs by striving for a reduction in product variety.

3. Procurement contributes to product design and innovations: Many a time, innovations in industry comes from suppliers or are results from intensive interactions between suppliers and buyers. By actively encouraging these interactions, procurement can contribute to the continuous innovation and improvement of products.

4. Stock reduction: Through imposing a solid discipline on suppliers and enforcing it, procurement can minimize the need for safety stocks of components. This might include such actions as demanding a consignment stock to be held at the facility of the supplier. These types of actions can significantly reduce the amount of stock needed and thereby the capital employed.

5. Increasing flexibility: If the company wishes to offer flexibility to its customers it