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What Is Procurement Policy?

A procurement specialist working with a colleague.
Article Details
  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 09 July 2014
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    Conjecture Corporation
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A procurement policy is simply the rules and regulations that are set in place to govern the process of acquiring goods and services needed by an organization to function efficiently. The exact process will seek to minimize expenses associated with the purchase of those goods and services by using such strategies as volume purchasing, the establishment of a set roster of vendors, and establishing reorder protocols that help to keep inventories low without jeopardizing the function of the operation. Both small and large companies as well as non-profit organizations routinely make use of some sort of procurement policy.

There is no one right way to establish a procurement policy. Factors such as the size of the business, the availability of vendors to supply necessary goods and services, and the cash flow and credit of the company will often influence the purchasing procurement approach. The size of the company is also likely to make a difference in the formation of procurement policy, in that a small company may not be able to command the volume purchase discounts that a large corporation can manage with relative ease.

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In like manner, the circumstances and financial goals of the business or entity influence the selection of procurement systems. Some systems are simple manual processes that make use of older methods such as a flip card system to track purchases, issuance of items to various departments, and a running tally of inventory that is used to plan future purchases. Today, electronic systems make it possible to automatically track all these functions, include automatically generating requisitions and purchase orders when levels of a given inventory item are down to a certain level.

E-procurement is a common way of placing and tracking orders today. Vendors establish network connections with clients that make it possible to interline with any procurement programs used by the client and automatically place orders, using the Internet to establish the connection. Programs of this type also make it possible to quickly track order fulfillment, delivery dates, and even review any procurement contracts that are currently in place.

Whether the procurement policy involves the establishment of construction procurement procedures, or governs purchases made by a manufacturer or a charity, a solid policy will benefit the organization by keeping costs in line and clearly defining how purchases will be made. As the needs of the entity change, there is a good chance that the procurement policy will be adjusted to meet those new circumstances. This is necessary to make sure the policy continues to function in the best interests of the company or non-profit organization and keep the acquisition process simple and orderly.

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Discuss this Article

anon154019
Post 3

Basically, procurement of services or goods have different practices and hence the procedures in the acquiring are quite diverse. The optimum level of a sound procurement policy is to ensure that the least optimum level of costs and are enhanced so that there effective competitive advantage in terms of product pricing. There is a need to look at variable factors that exist within the function core so that there is always value in the drive to achieve minimum cost.

aarons
Post 2

@momtocfd -- This is true, and procurment policy can become procurement policies when there is more than one grant and each one has different procurement requirements.

momtocfd
Post 1

Often the procurement policies of not-for-profit and governmental entities are determined by grant requirements. Certain procurement procedures are required to remain in compliance with some grants.

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