Procurement Basics PDF

CHAPTER 3: PROCUREMENT BASICS ============================= Healthcare and political disasters, problems with the supply chain, unstable prices, unsure demand, and quickly changing customer tastes have all made the global market and procurement sector. Procurement departments assume a special role...

CHAPTER 3: PROCUREMENT BASICS ============================= Healthcare and political disasters, problems with the supply chain, unstable prices, unsure demand, and quickly changing customer tastes have all made the global market and procurement sector. Procurement departments assume a special role in managing these difficulties and achieving cost saves, supply chain stability, and long-term relationships with suppliers. Taking into the account the urgent needs of our planet and society, sustainable procurement integrates purchasing decisions that meet organizational needs while benefiting society and minimizing environmental impact (ISO, 2017). **PILLARS OF SUSTAINABLE PROCUREMENT** Ein Bild, das Diagramm, Text enthält. Automatisch generierte Beschreibung 1. **Standard Procurement Triangle** 2. **Brundtland Sustainability** 3. **Sustainable Procurement** **INFUSING SUSTAINABILITY IN PROCUREMENT** **Step No.** **Step Description** -------------- --------------------------------------------------------- 1 Formulate concrete sustainability objectives 2 Integrate sustainability into procurement processes 3 Monitor using Key Performance Indicators (KPIs) 4 Share knowledge internally and externally 5 Delegate responsibilities across functional levels 6 Allocate additional budget for sustainable options 7 Foster innovation and collaboration in the supply chain **\ ** **STEP 1 - Formulate Concrete Objectives** - - - **STEP 2 - Implement Sustainable Procurement Processes** - - - **STEP 3 -- MONITOR WITH KPIs** - - - **STEP 4 -- SHARE KNOWLEDGE INTERNALLY AND EXTERNALLY** - - - **STEP 5 -- DELEGATE RESPONSIBILITIES ACROSS FUNCTIONS** - - - **STEP 6 -- ALLOCATE ADDITIONAL BUDGET FOR SUSTAINABILITY** - - - **STEP 7 -- ENCOURAGE INNOVATION AND COLLABORATION IN THE SUPPLY CHAIN** - - - **ADOPT AN ENTREPRENEURIAL MINDSET** Procurement should be approached from the same perspective as entrepreneurship: looking for new opportunities, making partnerships outside of the usual supply base Each facet of an entrepreneurial procurement strategy contributes to organizational resilience and competitive advantage, positioning procurement as a proactive force driving strategic growth and sustainability initiatives. Aspect Description ------------------------- -------------------------------------------------------------------------------------------------------- Market Sensitivity Identifies market shifts and integrates sustainable practices to meet consumer demands. Innovation Sourcing Sources suppliers for cutting-edge solutions and fosters innovation through startup collaboration. Strategic Relationships Develops partnerships for joint projects and technology investments, enhancing operational excellence. Risk Management Embraces calculated risk-taking by diversifying suppliers and exploring alternative materials. Technology Leverage Uses AI and blockchain for efficient decision-making, improving innovation in supply chain operations. 1. **ASSESSING MARKET SENSITIVITY** - **Stay Informed and Conduct Market Research** - **Identify Emerging Markets** - **Integrate Sustainable Practices** 2. **ENCOURAGE INNOVATION SOURCING** - **Develop Flexible Sourcing Strategies** - **Align with Consumer Expectations** - **Continuous Improvement and Training** INNOVATION SOURCING BENEFITS  Source: [McKinsey, 2017](https://www.mckinsey.com/capabilities/operations/our-insights/procuring-innovation-wherever-it-may-be) 3. **BUILD STRATEGIC RELATIONSHIPS** - **Establish Clear Objectives and Mutual Goals** - **Foster Open Communication** - **Engage in Joint Development Projects** **THE RESULT?** In globalized, competitive markets, the ability to deliver shareholder value and attract discerning customers relies on productive collaboration, characterized by: - Joint innovation - Customer focus - High-quality outputs - World-class practices - Continuous improvement - Flexible commercial frameworks - Objective performance measurement - Improved business forecasting - Coordinated processes - Honest and open communication - Two-way information flows Investments in people, infrastructure, and systems foster innovation and the free flow of ideas. Eventually, this leads to reliable business systems capable of delivering high-quality goods and services that delight customers, creating a \'win-win\' relationship. As a domino effect, this virtuous cycle secures long-term profitability and market share, making these collaborative relationships valuable core assets that must be managed effectively. **KEY TAKEAWAYS** - **Supply Chain Risks: Unexpected events like health crises and political turmoil can disrupt** the supply chain, making it tough to predict and manage. - **Role of Procurement**: Procurement departments are key players in managing these challenges, focusing on cost savings, supply chain stability, and building long-term supplier relationships. - **What is Procurement?**: Simply put, procurement is the process of acquiring goods and services, covering everything from identifying needs to contract completion. - **Sustainable Procurement**: This approach integrates eco-friendly and socially responsible decisions into purchasing, aiming to meet organizational needs while benefiting society and the environment (ISO, 2017). - **Standard Procurement Triangle**: Balancing scope (product features and quality), time (schedule and production rate), and cost (resources and budget) is crucial for successful project management. - **Sustainable Procurement Model**: A hybrid approach that adds lifecycle management, investment in technology, and continuous improvement to the standard procurement triangle for a more sustainable and efficient process. - **Proactive Procurement**: Just like entrepreneurs, procurement professionals should seek new opportunities, form partnerships, and stay ahead of market trends to drive strategic growth.