Procurement Organizational Structure Outline
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The Procurement function purchases products (raw materials, components, large machinery, software, etc.) from vendors to satisfy internal (inside the company) and external (customers) demand. After a need is identified, the Procurement Group is responsible for identifying and screening potential suppliers, selecting a supplier, negotiating terms of payment and arranging any logistical concerns (shipping, delivery, installation, training, etc.). Procurement employees are also tasked with monitoring the performance of company suppliers as it relates to the terms of the contract that governs the relationship with the vendor.
Common Procurement job titles: EVP/SVP of Supply Chain Operations, Chief Procurement Officer, Director of Strategic Sourcing
Logistics Management
The Logistics Management function works with suppliers to facilitate the efficient and timely delivery of purchased goods. They manage distribution channels and delivery methods to reduce "hidden" costs associated with purchasing, including the transportation and storage of purchased goods. Many times, companies use specialized third party logistics firms (brokers) to manage the flow of materials and reduce costs. Once goods arrive at company facilities, logistics staff members inspect the order to ensure completeness (check against purchase order) and quality, then send the invoice to the company's Accounts Payable Department for payment.
Common Logistics Management job titles: Logistics Specialist, Logistics Coordinator, Logistics Analyst
Strategic Sourcing
The Strategic Sourcing function develops overall company procurement policies and standards while constantly striving to improve the performance of purchasing functions. They analyze market conditions to develop criteria for vendor/supplier certification, monitor demand for certain goods or materials to produce forecasts and implement supply structures. They constantly measure results and revise procurement strategies to create a competitive advantage, reduce procurement costs and improve overall supply chain performance.
Common Strategic Sourcing job titles: Strategic Sourcing Analyst, Sourcing Analyst/Specialist, Strategic Sourcing Specialist
Vndor Compliance & Audit
The Vendor Compliance and Audit function assesses vendor performance and standards to ensure that they meet requirements set forth by industry regulatory agencies and/or company management. Vendors, or suppliers, are judged on several criteria, including quality management practices, delivery performance (Is the shipment on-time, complete, in good order? Was advanced shipment notification [ASN] received?), facility productivity and safety, and distance to company facilities/receiving locations. Effective vendor screening can improve materials availability, overall product quality and manufacturing productivity.
Common Vndor Compliance & Audit job titles: Procurement Specialist, Procurement Compliance Specialist, Compliance & Risk Officer
Vendor Contract Management
Vendor Contract Management employees are tasked with creating, negotiating, analyzing and managing contracts with vendors or suppliers in order to maximize performance (financial and operational) and minimize risk. They work to ensure that supplier contracts have well defined performance criteria that can be tracked throughout the life of the contract to determine if the supplier is meeting their end of the bargin. Supplier performance criteria can include on-time deliveries, material quality, consistent pricing levels and request for quote response times.
Common Vendor Contract Management job titles: Vendor Contract Administrator, Vendor Relations Coordinator
Vendor Identification & Management
The Vendor Identification and Management Group identifies and onboards suppliers by comparing the pricing and quality against the goods being purchased, as well as certain criteria set by the company (supplier/vendor certification criteria). Once a vendor is retained, the Vendor Identification and Management Group maintains a working relationship with them, continuously monitoring their performance. Typically, vendor management involves ensuring that prices remain competitive and that the vendor is meeting sevice level agreements (SLAs) and other quality standards set during the initial contract negotiation and onboarding process.
Common Vendor Identification & Management job titles: Vendor Management Analyst, Vendor Management Specialist, Vendor Manager