What is Procurement Management?

In any type of business, a source of raw materials is needed to start production. Without these investments, there would be no product. And if there is no product, there can never be any profit. This is the very reason why the concept of procurement is very crucial for all businesses, no matter how big or small. For small companies, it is the owner or proprietor that does almost all the work in procuring. But for the big companies, it’s necessary for them to have their own procurement department. Given its importance, it is a must that you should know about procurement management.

In a nutshell, the meaning of this word can be described as the management of procurement. We all know how managing works already, but how about procurement? For non-business people this may seem like a complicated thing. But the truth is it’s actually relatively simple. Procurement is the ability to get all the resources, material or otherwise, needed to keep operations running. So why does it have to be managed? If procurement gets shut down for some reason, that would mean the halting of operations, with pretty steep consequences. However, if too much procurement happens, costs will go out of control and eventually your business is going to suffer due to it. So what are the tools that must be procured?

There are 3 basic segments of resources needed to keep a business running. The first, of course, is the physical or raw materials. Physical materials include the materials needed to create the product or complete the service, as well as the physical space necessary (such as a lot/building) to perform the job. The second segment is labor or manpower. Of course, no job can be done, even if the process is machine-centered, without the input of people. People can never be taken out of the equation when considering procurement. And lastly, there is capital. Without the finances, both materials and labor cannot be acquired. Making sure that all 3 types of resources are to be acquired is the job people involved in procurement management is concerned about.

Take for example those that are involved with the acquisition of physical materials. To gather raw materials, one must negotiate people with possession of those materials. As for labor, there must be people responsible for both recruiting and screening people for specific roles inside the business. And for capital, there must be people responsible that cash is flowing appropriately. Especially for large companies, procurement should be managed properly at all times. There should be a perfect balance of procurement. Too little procurement results in the delay or even stoppage of production. Too much procurement would be too costly especially in the financial aspect. Those managing procurement should work in coordination with other departments so all needs are going to be addressed when necessary.

Procuring all the needs of a business in a day-to-day basis can be a tricky thing, especially for big companies. Finding that balance is the role played by people who are into procurement management.