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Procurement - Keeping The Arteries of Business Healthy 23 September 2016

Procurement affects every department within an organisation, be it directly or indirectly. As such, responsibility in purchasing becomes the remit of each employee, and it’s the role of Procurement to facilitate that. Only with everyone on board can the procurement process ever be as efficient or as lean as its full potential.

Accounting & Finance – from a company’s ability to manage cash flow to achieving the best possible price, the procurement process affects the Accounts & Finance Department. Ensuring the optimum flow of the required elements to facilitate the basic business function is integral to the business’s profitability. On an individual level, if each employee understands the reasoning behind the procurement processes in place and has a target to stay within spend, each will be invested in upholding lean practices, keeping spend efficient by using a bottom-up approach.

Human Resources – every business wants to attract top talent. In order to do this, it must be correctly positioned in the marketplace and have a competitive edge. To offer competitive salary packages, a business must be profitable. If cash flow is interrupted or if the business is known for interruptions in their product supply, talent acquisition becomes more challenging.

Research & Development / Production – in order to stay on the cutting edge, products need to be continuously improved and new ones developed to meet changing consumer demand. Procuring these components isn’t only about price; it’s also about supply. It’s also about ensuring the right elements of the business are in place, consistently, to keep production flowing. Many contracts will have financial penalty clauses built in, activated when supply is interrupted such that a project is delayed.

Sales & Marketing – most brands understand the requirement for a Corporate Social Responsibility statement. There have been numerous publicised cases recently where blue chip companies have failed to uphold their statements: Apple, Samsung and Sony, and the use of child labour in their supply chains, Primark, GAP and Matalan, all of which used the garment factory at Rana Plaza, Nestlé’s use of non-sustainably sourced Indonesian palm oil. Procurement can be a major winner in this area too, as demonstrated by Unilever who came out on top over Nestlé following the palm oil scandal by going beyond its commitments in this area. Ultimately, Procurement needs to be able to guarantee a high level of transparency throughout the supply chain in order to protect the brand, as well as upholding the ethics most consumers now demand from their favourite brands.

Taking the holistic view, it should be immediately obvious the procurement function has the ability to significantly impact the overall productivity and profitability of the business. Procurement is an essential and integral part of a company’s ability to succeed and Procurement professionals should market themselves accordingly.