How can procurement leaders ensure that their procurement policies and procedures are not just adequate but optimized for operational efficiency, risk management, and sustainability?
Procurement is becoming more of a strategic function within companies, and as such, it’s important for internal policies to be both simple and clear in order to be effective. Strong policies can streamline procurement plans, reduce errors and requests for additional information, and ultimately achieve a more efficient, accurate, and productive operation.
In this guide, we will explore the essential aspects of procurement policies and procedures, providing finance and procurement professionals with the insights needed to enhance control over procurement activities. We’ll also take a look at how Zip can help establish comprehensive procurement orchestration that increases visibility and collaboration across procurement activities.
Procurement procedures and policies are the backbone of any organization's procurement process. They provide the structure and guidelines necessary for conducting procurement activities efficiently and ethically.
They also allow for more streamlined procurement methods, such as competitive procurement within the selection process, to be more streamlined and clear.
Procurement procedures outline the step-by-step processes involved in procurement, from need identification to the creation of a request for information (RFI), request for quotations (RFQ), purchase orders (PO) and beyond.
These procedures ensure operational efficiency by detailing how tasks should be completed. For example, a procedure might detail the solicitation process, including how to issue a request for proposal (RFP) and manage competitive bidding.
On the other hand, procurement policies set the rules and guidelines that govern procurement activities, ensuring compliance and ethical practices. They define the framework within which procurement procedures operate, providing direction and consistency across all procurement activities. Policies address issues such as conflict of interest, code of conduct, and the use of purchasing cards.
Developing effective procurement procedures and policies requires careful planning and stakeholder engagement. Here are key steps to consider:
These recommendations apply to companies of all sizes, from the largest multinational corporations to any small business who manages accounts payable and issues contract awards.
The procurement process is a relatively standard flow for any company who aligns scale and growth with the purchase of goods and services. An effective procurement procedure includes several fundamental steps:
A procurement policy might include the following key components:
While procurement encompasses the entire process of acquiring goods and services, purchasing focuses on the transactional aspect.
Procurement involves strategic functions such as supplier relationship management, strategic sourcing, and value generation, whereas purchasing deals with the actual buying process. The procurement of goods and services often requires detailed planning and coordination, whereas the purchasing process involves the execution of purchase orders and payment processing.
Well-defined procurement policies offer several advantages:
The relationship between procurement technology and procurement policies is symbiotic. Effective procurement technology supports the adherence to policies by streamlining processes and providing real-time visibility. Conversely, robust procurement policies ensure that technology is used efficiently and ethically.
For example, legacy procurement platforms that do not solve for adoption/intake can lead to employees finding workarounds and circumventing policies.
This is why Zip was built from the ground up as a fully integrated and user-friendly front door for procurement.
Zip offers several features that enable procurement leaders to implement robust procurement policies and procedures:
By leveraging these features, organizations can optimize their procurement processes, enhance accuracy and efficiency, and achieve greater control and visibility over their procurement activities.
To learn more, request a demo today and see firsthand how Zip can enhance procurement policy and employee adoption at your company.