10 1.1 Introduction to Procurement Management

1.1 Introduction to Procurement Management

Objectives

By the end of this section, you should be able to:

1.  Define the terms purchasing and procurement management.

2.  Explain the perspectives on procurement in business management.

3.  Describe the interdependencies of procurement with other functions in the organisation.

4.  Describe the drivers of change and future trends of procurement management.

Introduction

The new millennium began with the global marketplace in an economic and political quandary. The business world today is considerably different and more complex than it was before the turn of the century. In addition to the significant events that have impacted the world’s business environment, organisations have had to transform radically in response to burgeoning technologies and the changes in social, cultural, demographic and environmental variables.

Let us consider a scenario. Your organisation wants an across-the-board 12% reduction in spending. As the procurement manager, you have to make some tough decisions. Do you negotiate lower prices with your current Malaysian suppliers? Do you take the advantage of global sourcing and buy from any country with the lowest price? Do you fulfil your corporate social responsibility of developing other Malaysian small and medium enterprise (SMEs) suppliers, which offer you a lower price?

In today’s fast-paced global marketplace, procurement professionals do much more than order supplies and maintain inventory. Procurement has made many strides towards shedding the stigma of being labelled just as a clerical functional area in an organisation. Procurement has emerged as a viable professional career path and is likely to contribute to profits more than any other function in the organisation.

In this section, the term procurement and other related terminologies are first defined in the context of the unlimited potential of the evolving profession. This section also discusses the perspectives on procurement, the functional interdependencies and the developments to date. This section ends with a look at the future trends of procurement management.

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