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Value addition in a Procurment Department of a company

• A procurment department is responsible for purchasing direct and indirect materials, goods and services in a company. They are responsible to ensure that the procurements meet the required quality standards, supply is done on time along with cost optimization
• Signifcant improvement in the processes of this department can be done through implementing automation practices to excecute transactions.
• For instance, a bidding process can be introduced wherein different vendors can quote prices (as long as their quality standards are met) so that the deal is given to the lowest bidder
• This will not only ensure reduction in costs but also promote transparency in the organization and encourage ethical practices in the procurement department
• In continuation to the above point, audit of the entrire procurement process and life-cycle can be done more efficiently and effectively. This is because the entire process would be captured through the system along with the requisite paper trail (for instance, each step of the transaction could be mapped to the accountable individual)

• Furthermore, in order to ensure that supply of key materials or inputs is not disrupted, a process can be implemented wherein sourcing is done through diversified vendors (preferrably, from different geographies)
• Recent events such as the Covid-19 pandemic has demonstrated how supply can be disrupted because of force-majeure or socio-political events. Thus, bottlenecking crucial business processes
• For instance, an apparel manufacturer can set up supply of fabrics from vendors spread across different geogrpahies and regions - such as India, Bangladesh, Vietnam, Mexico etc. rather than solely relying on Chinese suppliers
• Moreover, this would also help the company to negotiate more favorable terms with the vendors, since reliance on a limited number of suppliers is avoide which promotes competition amongst them.

The first initiative (automation) would ensure cost optimization as well as more transparency in the procurement practices

Whereas, the second initiative (diversification of vendors) would minimize risk of business disruption