Author: Adjenim Boateng Adjei
School of Finance & Financial Management
Business University of Costa Rica
Not long ago, purchase function was seen to be a desk job, monotonous paper work, dull and passive and more of an administrative function. The purchase managements were the fall guys whose only aim was to keep feeding shop floor and avoiding stock out situation. Today the situation has changed totally. Procurement function is considered to be a strategic initiative and seen to be adding value to entire business process. Profile of the procurement managers has changed and expectations from these managers are different. Modern day procurement managers manage procurement and sourcing function both at strategic and operational levels. They are proactively engaged in building supplier networks, estimating, controlling and reducing costs besides performing other functions and ensuring service levels. Their job functions are increasing becoming cross functional together with supply chain and manufacturing functions. Procurement process and paper work is today managed by the ERP systems which drive the procurement business process. A sourcing or tender process is used to select the best product or service for a certain category of expenditure. Unfortunately, lots of these processes are not run well, resulting in loss of large saving opportunities, delivery of poor quality products, or less favorable terms. When selecting suppliers through a tender or sourcing process, the buyer works in collaboration with internal customers or budget holders. Internal customers are buyer’s colleagues working in other departments, such as finance or manufacturing. They are the ones who originally raised the need for the purchase and who will be actually transacting with the selected supplier. Internal customer involvement is usually highest (around 70%) at the specification stage and then drops to around 30% in subsequent stages.
Keywords: Sourcing Strategies, Procurement Processes