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A procurement division is a department or section that has the responsibility of acquiring the necessary goods and services required to operate a company or municipality. In order to fulfill this responsibility, the division is usually granted authority to negotiate vendor contracts, limit purchase amounts, and generate purchase orders to match approved requisitions. A procurement division may also be authorized to issue Requests for Proposals (RFPs) in order to identify the best vendors for a particular good or service. Thanks to modern communications, there are a number of excellent e-procurement systems that can aid a division in the daily function of ordering, tracking and receiving those goods and services.
One of the main advantages of a procurement division is that centralizing the acquisition function makes it possible to standardize purchasing procedures. This can often lead to better control of the accounting process, since all the ordering is done through a central body, rather than each department or division of the business or other entity ordering goods and services on their own. With procurement taking place through one pipeline, it is much easier to keep track of expenses and keep them within reason.
Another benefit to the procurement division is the ability to make volume purchases on items needed in multiple departments. For example, procurement systems that can track the usage of office supplies in all the departments can help determine how many reams of paper are needed to keep the business operational within a given time frame. Using this data, the individuals engaging in purchasing procurement can usually command a lower unit price by placing a single large order with a vendor, thus saving the company money. This would be hard to accomplish without some sort of central purchasing process.
It is not unusual for a procurement division to also invite vendors to participate in a bidding process for the business of the company. This means that the division has the ability to initiate and oversee procurement contracts that lock in special rates for various goods and services, at least for a given period of time. The division may use this model as part of supplies procurement, or even construction procurement if the company or municipality is engaged in a building project.
In general, procurement programs are structured to operate with integrity and honesty. There are normally a series of checks and balances built into the system to make it more difficult to circumvent established procedures, or for people working within the division to receive special compensation in exchange for a vendor contract. As with any department or division that deals in finances of any type, a procurement division is audited on a regular basis, normally at least once a year. This helps to make sure procedures are being followed and that all transactions are conducted in a manner that is both legal and ethical.
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