Procurement and its importance

Procurement department of any organization has great deal of importance.

Procurement department of any organization is of high importance. 

To explain the importance of procurement we can example a family that is a small collection. In each successful family the purchase responsibility and services is assigned to the most arithmetic person, in order to evaluate the market, choose the best method and do a successful purchase and help the family for economic improvement. Procurement has more importance in production and commercial services and shall be done professionally in order to boost the organization.

In production organizations there is separate unit for procurement and industry’s successful managers mention the procurement as a useful medium to achieve their goals and always try to reinforce the procurement department of their organization.

The principles of a successful purchase:

The important factors in procurement are:

Competitive price, high quality and on-time delivery, and any successful purchase shall meet these factors.

As you know the goods & services market are in control by related organs and whatever these office to their duty, the procurement duties get facilitated and otherwise the pressure that emerged from slumber of these office will transfer to procurement unit so in present market conditions supplying the goods with appropriate price and good quality or indeed a purchase that we can defense is a difficult work that needs endeavor and enough experiment.

In the present market the most important factor for determining the goods price is two factors of supply and demand and each alteration in these two factors will have direct effect on prices. So the duty of procurement unit that arranged in demand step & specially in large production organization that have huge request volume is very important and for sending the request to the market, market conditions and should be considered.

The required quality means that the goods delivered with the quality that secured applicant comments and presently the products doesn't prepared with the best quality so procurement unit can place applicant with checking market and consulting technical unit , place the products with appropriate price and adequate quality in disposed of unit and be participate in decreasing expired price of organization production the product procurement with good quality and price should be accompanied with on-time delivery to the customer so to achieve this purpose it is necessary that in contract and agreement with sellers emphasis on the delivery time and with probable delay prediction , the disadvantages due to the failure of timing delivery should be on the responsible party .

The role of procurement unit in financial crisis:

One of the skilled procurement specification is the validity of this market and this validity obtained when procurement unit provides the goods from valid resources and acted timely to their obligation toward the sellers, and this validity is the most valuable fund for commercial and production business and financial crisis could be passed using credit purchasing .

The above subject is a review on the importance of procurement duty and the manners position and treatments in purchase specially articles that some of them mention as follows:

Evaluating regulation of transaction and its effect on purchase – control methods and purchase managements – the characters of a successful expert – the role of technical and legal information in whole sale / macro sale – the procedure of a successful purchase – the methods on inquiry and its main points.

Finally its remembrance usually sellers doesn't satisfy from sale experts but admire them, because they know that he/she is an empowered and persistent expert.

Evaluating deals regulations and its effect on purchase.

The transaction regulation contains a set of instruction and methods for controlling and optimized transactions of on organization that prepared and approved by management and its board of directors, and all the transaction s should accomplished with consideration of instruction.

A portion of this deal regulation is related to shipping purchase and service that culled purchase regulation and the main audience is the procurement unit.

The purchase regulation have an important role in the procurement function and each weakness or strength have direct effect on procurement performance.

The regulation of efficient purchase can practice as one of the affection tools of management toward organization improvement , and otherwise in the case of weakness in instruction , this regulation not only have positive effect on purchase optimized but also have an abstractive role on purchase process always some part of supplies potential spend for crossing from non-methodical obstacle .  

The purchase regulation

The purchase regulation should be prepared based on marketing conditions, production program, targets, capabilities of this organization, in this case its instruction is capable to have control and transactions benefit forwards, otherwise because of non-conformity between the regulation and present realities, it hasn’t favor application and is weak. Therefore regarding management method, target capabilities of each organization should prepare regulation content and using regulation got to challenge similar organization in its management.

The purchase regulation should be reformed and upgraded proportional with markets term changes to keep it quality favorable.

In same of observed cases the purchase regulation limited to number of formulaic instruction that mentioned to some of them: dividing purchases to major, directions toward its price, pre panning 3 inquiries by written for major purchase and advertising tender for macro purchases.

Unfortunately these instruction because of their stereotype structure has been known for many years, even in some cases these methods suggested by sellers to the purchasing officers such as preparing  3 inquiries by one seller or dividing major shopping by separation to multi factor in order to preventing from preparing inquiry of written prices.

Because of weakness in these regulations. The related company directors always one concern to failure to do deals correctly, and with creating administrative complex cycle try to control deals that deciding such methods censed to slowness in purchasing produce and cost making while ,if purchasing regulation prepared with considered stockiest ,proposing exchange product, and company capabilities, controls and deals forwarding assigned to regulation. The most part of director attention will spend for continues investigation of market conditions, its coordinating with organization purposes and updating purchase regulation.

For example, some instructions that can strengthen the regulation are mentioned as fallowed:

1) Separating purchase resources and emphasis a purchasing from valid resources:

As mentioned in former article one of the valuable assets in each economical is the reliability of that organization in all merlots and in financial crisis we can use the credit purchases to cross from these crisis's and this credit earn from purchasing valid resources and timely equalization with sellers, so we suggested purchase resources divided to 3 groups of valid, invalid and etc., and the list of each group prepared with full specification of seller and has been and settled in purchase instruction.

Valid resources include those sellers who provide proper goods services and enjoy financial power, and invalid resources are those seller who do not stick to their commitments.

In procurement it is desired to purchase from the valid resources that after assessing them, they can be categorized. It’s better that the price inquiry and macro purchases have been done as valid or invalid resources.

From valid resources group and use miscellanies resources for diminutive purchases that set after deals repetition, after evaluating new resources and getting validity of these seller in valid or invalid resources group.

Taking such an approach have direct effect on important process of deals and the seller’s treatment with organization.

2) According to classification of purchases base on numbers or quality of requested goods in a period usually divided into two group of micro and macro, and the criteria for determining each group’s purchases is based on the total amount requested price. For example, if requested 100 bolt for production unit and the total price is less than 2.000.000 Rials will stand in micro purchases group, and the approval of purchase officer is enough for this deal, while if the same bolt is requested for 6 month usage may be its total price would be categorized in major purchasing group.

The significance of this purchase because of its continuous usage is more than buying a lift truck that despite of expensive price its purchase will not repeat in incoming years.

So, regarding this instruction that repeated purchases for consumable goods in the production line (observing the expiration date) is forbidden for a 6 month period and cause coordination and optimal planning of product unit, stock, and supplies and procurement. In addition, to prevent the breakdown of major purchasing of the goods with high consumption, a better planning would be taken.

In this Article we mentioned the key points of purchase regulation in deals and the full explanation about how to set purchase regulation, needs more studying and identification of the purposes and the company capabilities.