In order for a company to be able to complete large scale industrial tasks such as building renovations, maintenance and the construction of new facilities, it is crucial that the company be in touch with an engineering, procurement and construction (EPC) firm. Many companies, however, often overlook the important role that procurement plays in their operations.
In the world of business, procurement is a term used to refer to a company acquiring goods and services from places outside of itself. For instance, if the administrators of a business decide that it is time to expand and build some new facilities, the act of purchasing any necessary machinery, equipment or lumber as well as hiring a contractor to do the work is known as procurement. Whenever a company brings in external resources in order to perform one of its functions, it is engaging in procurement.
The act of procuring resources for a company falls under two categories: indirect and direct.
- Indirect Procurement – Engaging in indirect procurement involves acquiring resources that are not directly related to the company creating it end product or service. However, these items are nevertheless crucial to the company’s daily operations. Office supplies and furniture are common examples of these kinds of investments.
- Direct Procurement – When a company invests in external resources that are integral in the process of crafting its products, this is known as direct procurement. If a business primarily sells computers to consumers, then it might be part of its regular expenses to acquire components such as circuit boards for use in its products.
The Procurement Process
Even though the fundamental principle of procurement is quite simple, the correct process entails several steps in order for the authorities within a company to craft the best products possible in the most effective amount of time.
- Finding a Need – One of the basic practices of all businesses is to identify a need for something in order to move the business forward, such as raw materials for building or supplies for employees. This can be a bit of a challenge if there isn’t an immediate problem, but enough critical analysis should yield solid predictions.
- Find a Supplier – Once a need has been found, a supplier must also be located. Often, the company first determines whether the items needed are available internally or externally. If the answer is external, then suppliers need to be researched.
- Communication – After narrowing the field down to a few solid prospective suppliers, it’s time to do more in-depth research, asking about quotes, returns, installation and warranties.
- Negotiation – Upon reaching a decision on a supplier, the company talks with the supplier regarding the final price for services.
- Supplier Monitoring – While the company and the supplier conduct their first order of business together, the company usually keeps a file on the supplier to determine whether there will be future interactions.
- Managing Logistics – The company deals with any logistical elements of the transaction.
Polaris has the means to get your business where it needs to be with reliable procurement services. Get in touch with us to find out more.