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Strategic Procurement is the alignment between sourcing options and the business objectives that lead to more significant and sustainable benefits to the company. It looks at long term sustainable value creation as opposed to a series of tactical operating models that may deliver short term cost benefits that lock in existing inefficiencies and fail to address the root causes of poor performance. It encompasses sourcing and purchasing (buying) besides other fundamental activities such as risk analysis, data analysis, category management, cost management, etc.
Negotiation is an integral part of the job functions of a procurement professional. As buyers, they seldom have a choice of whether to negotiate, but they do have a choice in when and how well they do it. Having to negotiate is inevitable; doing it well is more so. They cannot go through a day without negotiating items such as on-time delivery, quantity, quality, differences between departments, technical support, priorities, price, specification changes, etc.
Successful negotiation culminates in a contract. A contract is a written document that precisely spells out commitments and obligations of each party in a business relationship. Contracts are a complicated and disciplined approach to outline, identify, manage, and control the business relationship for mutual benefits of all parties involved. The document is written in precise language to avoid ambiguity and misinterpretations. Any business relationship will encounter challenging situations that may need immediate solutions. However, not all solutions will benefit everyone involved. A contract, then, must address these and minimize risks and assign responsibilities.
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