The famous phrase “you need to spend money to make money” couldn’t be more true than in the case of procurement. Every company sets aside a budget to be used in purchasing raw materials to create a product. An effective procurement strategy is essential to success because it helps determine the pricing and quality of goods.
However, this process involves complex networks of supply chains, operations, and infrastructure, especially in a large organization. To deliver high-quality services and products while minimizing production costs requires a wealth of knowledge about managing supply and demand.
So, are you interested in getting a better understanding of how procurement works? Keep reading to find out more about procurement, and discover the best online procurement courses and other resources.
What Is Procurement?
Procurement is the steps a business takes while purchasing goods and services to accomplish its goals. Procurement involves much more than just giving the bank a standing order to pay your suppliers.
This concept is a series of processes that businesses follow to obtain the best products or services from the best suppliers at the best rates, taking into account delivery, market conditions, and product handling. These products might include raw materials, services, office furniture, or technical equipment.
When you are developing an effective procurement strategy, think of how the following practices could improve your business:
- Low production costs
- Reduced risk and uncertainty
- Higher quality goods or services
- Added value to goods or services
- Increased efficiency
- Creativity and innovation
- A safe network of suppliers
What Is Procurement Used For?
Procurement, or the acquiring of goods, services, or work, is an important part of every marketplace. Understanding procurement means you know how companies use certain supply chain models to their advantage.
- Increase profitability. Organizations use procurement to acquire the best resources to create products or services that meet their objectives. Think of it as a strategic means to improve a company’s overall profitability by acquiring raw materials at the best rates.
- Save time and cut back costs. This can also be phrased as maximizing value while minimizing costs. Approximately 65 percent of the costs at a modern company are from raw materials for production. Companies streamline their procurement to keep costs low while maximizing the value of the raw materials procured.
- Improve relationships. Procurement is also used for relationship management. It is often seen as the link between the organization and the outside world. A business will strive to maintain valuable relationships with its best suppliers.
Types of Procurement
Below are the main types of procurement. It would be best to scroll through and identify with one that suits your business strategy the most.
Direct procurement is the process of acquiring raw materials for production. In supply chain management, this concept usually involves acquiring loads of raw material from the best suppliers at the best rates.
This type of procurement involves acquiring goods or services for an organization’s day-to-day activities. Such purchases include maintenance costs, repairs, and supplies. Compared to direct procurement, this form involves purchasing low quantities of goods and services frequently.
This involves the use of procurement software to purchase supplies over the Internet. E-procurement has many benefits, including lower costs, accountability through transparency, and improved inventory management.
To fully understand how e-procurement can help you handle stock, we need to look at inventory management and what it means for your business.
According to the Chartered Institute of Procurement and Supply, inventory management is the practices and processes used to control current and future inventory levels. Methods include minimizing costs, and bottlenecks.
Collecting and processing data on a business’s daily activities is the key to successfully managing inventory. This will ensure that stock is continuously available when needed.
Supply Chain Management
Your business will be more likely to succeed if customers are happy, and one of the best ways to keep them content is by ensuring effective supply chain management (SCM) strategies. The term “supply chain” refers to all of the stakeholders and steps required to transform raw materials into a finished product.
SCM includes all the activities that ensure that raw materials are turned into a finished product for a customer. Supply chain managers work with project management teams to ensure that the entire process flows smoothly.
There are five crucial steps to managing a supply chain, including planning, sourcing, production, delivery, and returning. Like inventory management, SCM is beneficial to an organization because it reduces production costs while increasing revenue. As such, having a master’s degree in supply chain management could help you land a lucrative job in this field.
How do you take full advantage of procurement? The easiest way is to take courses and study the available procurement resources. Fortunately, learning the details of this concept is fairly simple, even if you have no previous training in the field.
How Long Does It Take to Learn Procurement?
How long it takes you to master the skill set necessary for procurement depends on your background and learning style. In addition, each course will have a different completion time. Courses can range anywhere from one day to four years. The one you choose depends on your level of previous exposure in the field, and the certification level you are seeking.
To be successful in the procurement industry, you should consider dedicating quite a bit of time to earning certifications and practicing your craft. Then, it won’t be long before you start reaping the rewards of your efforts.
How to Learn Procurement: Step by Step
Like many professions, there are many different subsectors of procurement. As a result, the learning experience can be overwhelming if you don’t know where to start. Consider adhering to the following steps in order to learn procurement and break into the industry, even if you have no experience.
- Find the right path. As mentioned above, there are a lot of different career paths available within procurement. Possible job titles include procurement analysts, purchasing managers, director of procurement, and vice president of purchasing. Find the area that appeals to you most and look up how you can learn more about that specific career path. If you are already employed in procurement and are looking to improve, you should take the following steps.
- Identify organizational needs or requirements. The first step toward implementing a successful procurement cycle is identifying the needs of a business’s internal departments. Remember, these needs must be in line with the organization’s long-term and short-term objectives.
- Research and evaluate potential suppliers. This stage involves finding suppliers that can deliver on their promise. There are many ways to identify potential supply partners, but the most common way is to attend trade shows or use procurement software featuring a catalog of possible suppliers.
- Negotiate with suppliers. It is common for a company’s procurement department to make direct contact with suppliers. Then, the business and suppliers will start negotiations about the price, delivery or transport logistics, product customization, discounts, and availability. These details will then be included in the purchase order. A purchase order is a document issued to the seller indicating prices, quantities, and the types of products or services bought. Don’t confuse this document with an invoice, which is the next step.
- Make payment. After receiving the payment order, the supplier will issue an official invoice. The procurement team will usually pay exactly what is indicated on the invoice.
- Confirmation and verification. At this point, the supplier is bound by the invoice and purchasing order to adhere to the terms agreed on. This means that the delivery, customization, and transportation of goods should proceed as discussed.
- Keeping Records. Your business should carefully maintain trade records, including contacts with suppliers. Maintaining records is the best way to track expenses and spending at all stages of the procurement process. You should also try to maintain a positive supplier relationship with skilled producers. Supplier relationship management, known as SRM, is all the practices that a business adopts to strategically manage interactions with suppliers and vendors.
The Best Procurement Courses and Training
The vastness of the procurement process means there are many classes, courses, and training resources available to you depending on which part of the purchasing process interests you the most.
Best Online Procurement Courses
You will often find that the best way to learn a new subject is to connect online with the massive network of professionals in the field. Taking these online classes can open up a range of business opportunities.
- Provider: Udemy
- Length: About 5 hours (20 lectures)
- Prerequisites: None
- Cost: $19.99
With over 800 former participants, this course created by procurement expert Dwijaraja Gore from Udemy is a great place to start your procurement journey. The course focuses on mastering the essential skills and the mindset necessary to understand different procurement models.
- Provider: Udemy
- Length: About 6 hours (59 lectures)
- Prerequisites: English competency, diploma or equivalent
- Cost: $79.99
Created by Avik Munshi and those behind the Project Management Professional Certification Exam, this online course provides procurement lessons for all levels, including managers, entrepreneurs, and students. The course has been well received, with over 1,112 people giving it a 4.3 out of a possible 5.
The lessons take a holistic approach to teaching contracts, delivery terms, risk management, procurement activities, buy or build decisions, and other related concepts.
- Provider: Udemy
- Length: About 4 hours (13 lectures)
- Prerequisites: Prior experience, English competency
- Cost: $139
As your understanding of purchasing concepts advances, you will learn more about procurement strategies. This Udemy course is an excellent way to get a better grasp on how cost management works, including strategies, systems used, and how to maintain a positive supplier relationship.
Instructor Robert Freeman has already led more than 1,800 students in the course, the majority of which gave it a 4.3 rating out of a possible 5.
Best Free Procurement Courses
There are also a couple of free purchasing courses available online if paying for one isn’t financially viable for you. If that’s the case, consider the following free options.
- Provider: World Bank
- Length: 13 weeks
- Prerequisites: Prior knowledge
- Cost: Free
The CPPP course is a great way for you to learn what procurement practitioners across the world are doing with regard to public procurement. This course is excellent for those looking to expand their knowledge in this specific area of procurement, or for nonprofessionals who are interested in the industry.
- Provider: E-Learning College
- Length: 20 hours
- Prerequisites: None
- Cost: Free
You have nothing to lose in signing up for this short course on supply chains and logistics, as it’s free and has no entry requirements. The course focuses on the four key concepts of supply chain management, including how it works, its participants, and effective strategies in supply chain management.
Best Procurement Books
Below is a list featuring two books you should consider reading to supplement your procurement coursework.
Procurement, Principles and Management (11th edition), Peter Bailey, David Farmer, Barry Crocker, David Jesson, and David Jones.
This must-read book brings valuable insight that is essential for both students and practitioners. Although it has been around for about five years, it is constantly updated to provide you with ideas and relevant information as a result of new and emerging concepts.
Essentials of Supply Chain Management, Michael H. Hugos.
Supply chains are a fundamental aspect of procurement. This book draws the core concepts and methods of supply chain management as used in the 21st century. In addition, it also features interviews with top executives and new cases to help you understand this concept better.
To help you get started with your journey into procurement, below are two of the best and most rewarding procurement certifications that you should be considering.
Chartered Institute of Procurement and Supply Diploma (CIPS Diploma)
CIPS has the largest professional network when it comes to procurement and purchase. This diploma is classified into six levels with the first level the entry point. After completing all six levels, you will be awarded the Member of CIPS license.
Certified Professional in Supply Management (CPSM)
This certification is issued by the internationally recognized Institute for Supply Management (ISM) that’s based in the USA. The holder of this certificate has achieved mastery of supply management along with its core competencies.
Best Online Procurement Resources
If you are looking for bonus tools and resources to assist you on your journey to learn procurement, consider the following online resources.
Although Select Hub is known for its software solutions, the website has a ton of procurement resources. If there are a few concepts that you don’t understand, this site will offer valuable insight.
The UN Practitioners Handbook (UNGM)
This site offers a ton of excellent resources that both students and practitioners will find useful. From introduction concepts to sustainable procurement solutions, UNMG has a handbook that covers all aspects of procurement. You can also take advantage of the glossary that features all the words and their meanings, as used in procurement.
Should You Study Procurement?
The procurement process is an important part of running a successful business. If it is executed correctly, it can help a company control spending and manage inventory. During these difficult economic times, even the smallest cost reductions can have significant impacts.
Additionally, procurement processes can help organizations become more accountable. If poorly managed, the cost of goods and services can drive a company’s expenditures up. For instance, corruption alone adds 25% to the total costs of procurement, the OECD found. By following a correct procurement strategy, a company can cut back on expenses while also becoming more transparent.
In the real world, learning procurement skills is certain to help you land a job. In the next two years, the US Bureau of Labor Statistics predicts a seven percent growth in the wholesale retail industry. People with a procurement certification are more likely to land a job in buying and selling than those with no training.
You should consider enrolling in an online procurement course to increase your chances of employment as the industry expands. The good news is that there are plenty of online procurement courses for you to choose from. With the help of Career Karma’s guide, you can find the best one for you.
So, what’s stopping you from learning procurement and living out your dreams?