Generally, procurement pertains to every action encompassed in obtaining the services a firm requires to support its day-to-day operations. The daily business operations include inspection, sourcing, receiving goods, negotiating terms, and purchasing items. The core procurement roles include supplier performance monitoring, sourcing, competitor analysis, and contract negotiations. This study aims to assist the procurement team in reaching ultimate work efficiency while working between suppliers and proponents.
Definitions and Acronyms
Procurement – is the act of obtaining or purchasing goods or services, typically for business purposes. Proponent (Young, 2022).
- Buyer- Buyers are responsible for purchasing goods for a company to use or sell in their business. This position requires extensive research and the ability to negotiate contracts with suppliers, manage an inventory, evaluate quality goods, and stick within a budget.
- Vendor – refers to an individual or entity purchasing products from manufacturers and then selling them directly to customers.
- Supplier – is a person or business that provides raw materials, parts, and machines to manufacturing units.
- SCM – Supply chain management.
- B2B – Business to business.
- B2C – Business to customer.
- Org – Organizations.
Significance of the Procurement Department
The procurement department should serve its internal consumers by purchasing services and goods required on time. In doing so, it should also maintain organizational financial health. It seeks and purchases services and products at the best possible value and price (Aulia and Isvara, 2022). Therefore, it must comprehend the complexities of this function and the markets providing the services or goods required to attain its goals. Moreover, modern procurement personnel must also decipher workspace acquisition, network technology equipment, and international travel needs. The roles of the procurement department are either competitive or non-competitive.
The competitive procurement function involves federal, local, or state laws requiring government agencies to procure goods or services using competitive bidding. For this process, information is collected from organizational stakeholders about the types of services and goods needed, contact interested vendors, and then procure advertisements to announce the bidding procedure (Aulia and Isvara, 2022). Conversely, non-competitive procurement entails directly purchasing certain services and goods from the vendor. The buyer evaluates the capacity of the supplier to make timely and quality deliveries. Thus, procurement adds value to the organization through cost reduction without compromising product features or quality.
Challenges of Working with Suppliers Locally and Internationally
The main challenges faced by the procurement department while working with local suppliers include communication gaps, failure to investigate the track record of the supplier, and lack of transparency in the procurement procedure. On the one hand, communication is the backbone of successful procurement activities. However, most times, suppliers do not understand the strategic goals of the organization. Hence, the supplier fails to fulfill the requirements and needs of the firm, thereby providing low-quality services and goods. It is paramount for the procurement department and supplier to maintain contact by choosing the best medium for them, for instance, telephone calls or memos.
Failure to investigate the track record of the supplier is detrimental to the supplier-buyer relationship. Earlier, it was mentioned that the procurement department conducts research before procuring services or goods. However, this step is foregone at times, costing the organization heavily in terms of penalties and a negative reputation. It happens because many businesses lack the human resources and the financial resources to carry out this activity. Even so, it is imperative for the procurement function to investigate the knowledge of the supplier about the legal and tax implications of importing and exporting. Knowledge of the supplier beforehand aids in developing and building robust relations.
Locally, the procurement process lack transparency between the procuring department and the suppliers involved. The procurement function follows a systematic process; need recognition, purchase requisition, requisition review, solicitation process, evaluation and contract, order management, invoice approvals and disputes, and record keeping. The procurement department and the supplier should go through this process hand in hand (Ho, Ghauri, and Larimo, 2018). In the case that transparency is lacking along this process, then gaps are created in their relationship, which might cause the termination of the contract. However, the latter can be avoided through the adoption of technology. For instance, Invoicera, online invoice management and purchase order tool, can be used to analyze the entire process more efficiently.
At the international level, suppliers and the procurement department face diverse challenges, such as communication gaps, language barriers, and legislative issues. As stated before, communication is vital for effective procurement functions. When it comes to the international arena, it becomes more complicated and complex. For instance, other factors such as differences in time zones, availability of networks, and the level of technology come into play. Thus, it requires absolute cooperation between both parties. For instance, both parties have to agree on the perfect time, technology to be adopted, and method of communication and ensure the availability of an internet connection. This way, the strategic objectives will be communicated, ensuring the provision of quality services and goods.
The language barrier behaves like a wall impending mutual understanding and integration of ideas during the procurement process in the international context. For instance, a Kenyan procurement department might be willing to purchase from a French supplier but might be discouraged. However, technology provides translation tools such as Google translator, which can be handy. Moreover, urbanization has increased the demand for professional translators, which can be utilized. To overcome this challenge, procurement department staff are encouraged to familiarize themselves with specific general terms like greetings to reduce tension during business meetings. To facilitate this, thorough research should be undertaken, and time and resources allocated for language training.
The International market is subject to different legislations from those instituted in the local market. Primarily, governments use various barriers and tariffs like local content requirements, specific tariffs, voluntary export restraints, Ad valorem tariffs, licenses, and import quotas to regulate trade locally. Similarly, the international trade authorities have harmonized the latter into a standard law, GATT (the General Agreement on Tariffs and Trade), to govern international trade (Balistreri, Kaffine, and Yonezawa, 2019). The GATT contains regulations that address unfair commercial practices, for instance, subsidies and dumping. Therefore, both the supplier and the procurement department Stam should have adequate knowledge of the GATT as well as the trade regulations in that specific country. Doing so will avoid unnecessary penalties and fines.
The Challenges of Working with Proponents
A proponent is a vendor who responds to an SRFP (Short-form Request for Proposals). It can be an organization or individual that, according to the assessment of their commercial, financial, and technical capacity, can fulfill procurement requirements (Law Insider, 2022). The challenges that might be encountered when working with proponents include a lack of accuracy in analyses and reports, risk management, and complexities around the supply chain procedure (Balakrishnan and Lazar, 2022). Short-term procurement activities deal with managing big data that is prone to errors. The appropriate business intelligence tools are imperative to overcoming this challenge. Procurement is a complex supply chain activity, especially during direct procurement (Balakrishnan and Lazar, 2022). Asking proponents to conduct surveys to provide the best input requires high resource input (Balakrishnan and Lazar, 2022). Formulating standardized written codes of conduct can aid in reducing the latter. Risk management is a rising concern for procurement activities due to the increased need for cost reduction and quality improvement (De Ruyter, Keeling, and Cox, 2019). It is essential for putting backup plans in place, conducting risk analysis for every proponent, and acquiring their competition information to manage risks.
Close working relationships with proponents can be attained through effective communication, frequent meetings, and early detection and resolution of conflicts. Effective communication entails the dissemination of information, elaborating organizational goals, objectives, culture, and standards, and feedback mechanisms (Hoque and Rana, 2020). Having the latter in place ensures the proponents and the procurement department staff understand each other. Having appropriate feedback mechanisms, such as memos, aid in assessing the attitude of either party toward a particular matter under discussion. Most proponent contracts are short-lived due to unmanaged conflicts during negotiations (Balakrishnan and Lazar, 2022). However, when identified early and addressed accordingly, a better working relationship will be enhanced.
Ways to Convince the Proponent of the Value of Suppliers
A proponent can barter any service or product consumed or produced by them to eliminate marketing, sales, or distribution overheads and save cash. Most importantly, having suppliers will help the proponent to reduce bad debts, sell dead stock, and build their clientele base. During bartering, suppliers play a crucial role in offloading the balance sheet and captivating new sources of revenue (Chae, Yan, and Yang, 2020). Secondly, a supplier can aid in having various services and products to choose from through supplier innovation. Supplier ties provide unique resources such as creativity, experience, and knowledge that can benefit a proponent. For instance, suppliers give recommendations on cost reduction and quality improvement in the product life cycle and supply chain and business consultation about marketing strategies, production processes, and optimization of business models (Chae, Yan, and Yang, 2020). A proponent should always know that a supplier is interested in their success and will do anything to make it happen.
A supplier can aid a proponent in preferential buying through programs that support war veterans, local crafts, and small private entrepreneurs. A supplier will advise a proponent to allocate a certain percentage in the tender evaluation for preferences. As a result, the proponent will improve their public image and social responsibility (Chae, Yan, and Yang, 2020). Lastly, suppliers provide proponents with new sources of revenue through outsourcing. Other techniques adopted by suppliers for accumulating new revenue are agreement renegotiation, return of specific consumables and accessories for credit notes, sale of recyclable and reusable packaging, and selling onboard products such as blankets, linens, and cutlery (Chae, Yan, and Yang, 2020). Ultimately, revenue accumulation will not be limited to cost reduction but will be increased through the aforementioned ways.
The aim of this study was to aid the procurement staff in attaining ultimate work efficiency in the working relationship between suppliers and proponents. To achieve this, sub-topics such as the definition of procurement, proponents, suppliers, their responsibilities or significance are highlighted, as well as the importance of the procurement department and difficulties of working with vendors internationally and locally. The methods to overcome problems faced while working with vendors, challenges faced when working with proponents and how to overcome them, and techniques for convincing proponents about the value of vendors were discussed. Various challenges faced while working with proponents, such as risk management, complexities around the supply chain procedure, and a lack of accuracy in analyses and reports, can be managed by evaluating the suppliers. If the proponents understand supplier value through preferential buying, supplier innovation, and revenue generation, they will appreciate the significant role played by suppliers and attain ultimate operational efficiency in organizational procurement activities.
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