An enterprise is like a living creature, and it can exist if only its all organs ensure harmonious interaction.
Otherwise, the whole individual is at risk of disease and death. All parts of an organization must be commensurate with its size and level of development.
Depending on these indicators, the purchasing department may be in slightly different positions in the company.
The procurement department is, in one way or another, connected with practically all divisions of the company.
To make these relationships as effective as possible, company executives must think carefully about the organizational structure.
There are several levels of “evolution” of the procurement department in a company structure. As the organization develops and grows, the position of the procurement department changes in the company.
1. Passive level.
The procurement department does not participate in the strategic activities of the company, only reflects the needs of other divisions.
In this case, the purchasing staff devotes most of their working time to routine operations and negotiating the lowest price.
2. Independent level.
The procurement department uses efficient procedures and automated tools.
However, its strategic decisions are not related to the company’s strategy. The activities, as in the first case, emphasize the lowest price and the respect of delivery deadlines.
The most productive relationship and cooperation are with the logistics and warehouse department.
Company executives agree with the need for training and motivation of procurement staff and recognize the importance of the procurement department’s contribution to profitability.
3. Supporting level.
With the right procedures and tools in place, the procurement department’s activities align with the company vision and strategy.
The aim is to search the market and supply internal customers with products that increase the company’s competitive advantage.
The procurement department staff is involved in project management teams.
Procurement channels and tools used continually are analyzed, and staff is continuously is searching for optimization opportunities.
4. Integrated Level.
The purchasing strategy is integrated with the company strategy. Systematic training and motivation of procurement staff are ongoing.
The exchange of information between all departments is smooth and automated. The results of the procurement department are widely analyzed and evaluated for its contribution to the company’s profitability.
As the procurement department’s role evolves, the whole company and its each business unit – from the logistic to the accounting department – benefit from the results of the process.