Procurement

 

Most of the people might know What is Procurement, what are its functions...

But also, most people do not know How, When, Why and where it got started.

Generally, procurement is an action of obtaining goods or services and it has a Procure-to-pay(P2P) life cycle and it starts from the Requirement, RFQ, PO Creation, Goods Receipt, Preparation of Goods Receipt, Creation of Payment Invoice, Payment and Reporting.

For procurement that could mean sourcing the material when prices go down or renewing the contract before it lapses. Procurement is of THREE types – Direct, Indirect and Other

1)     Direct Procurement – Raw Material and Production Goods

2)     Indirect Material - Maintenance, repair, and operating supplies, outsourcing

3)     Other - Capital goods and services

Also, Procurement functions in both Public and Private - Private procurement is typically in FP (for-profit) organizations, while public procurement functions to support NFP’s (not-for-profit).

Let us know little background and history of Procurement…

The concept of procurement has always been in existence. Procurement can be seen throughout our ancient history, though there was no fixed procurement function earlier. Egyptians use to make written documents on papers, for this they employed a person to manage and this is how they played a clerical role to record the amounts of material and workers. Although it’s likely that these procurement practices were much simpler, more corrupt and involved slavery. One of the earliest acknowledgements of the procurement function can be found in Charles Babbage’s 1832 book. In 1886, the Pennsylvania Railroad gave departmental status to the procurement function, referring to it as the ‘Supplying Department.’

The origins of e-procurement or “electronic procurement” begin in the 1980s, with the development of electronic data interchange (EDI). During the tech boom of the late 1990s, the first systems dedicated to e-procurement were created. These were enterprise resource planning (ERP) systems. ERP focuses primarily on workflows, catalogues and creating purchase orders.

Third Thursday in June is recognized and celebrated as World Procurement Day and March is Procurement Month.

The procurement function has evolved throughout the past decades from a clerical, order-taking role to a strategic role.

The First World War was an industrial war that demanded large amounts of weapons and ammunition. The outbreak of the war shrank the industrial capacity and led to massive devastation and destruction. To deal with the difficulties arising from a shortage of supplies, the state administered the procurement and rationing of raw materials. To solve it, the belligerent states set up administrations to control, requisition and deliver raw materials to consumers. The struggle for raw materials between the nationals also affected the structure of global markets for these products. Germany was the first aggressive and national country to take steps to control the purchase and distribution of raw materials.